A special journal for credit purchases of merchandise is called a _____ journal.

ACCOUNTING INFORMATION SYSTEMS

SUMMARY OF QUESTIONS BY OBJECTIVES AND BLOOM’S TAXONOMY

Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT

True-False Statements

1. 1 K 8. 2 C 15. 3 K 22. 4 C sg29. 3 K
2. 1 C 9. 2 K 16. 3 K 23. 4 K sg30. 3 K
3. 1 K 10. 2 C 17. 3 C 24. 4 K sg31. 4 K
4. 1 K 11. 2 K 18. 3 K 25. 4 K
5. 2 K 12. 2 C 19. 3 K sg26. 1 K
6. 2 K 13. 3 K 20. 4 K sg27. 1 K
7. 2 K 14. 3 K 21. 4 K sg28. 2 K

Multiple Choice Questions

32. 1 K 47. 2 K 62. 3 K 77. 4 K 92. 4 C

33. 1 K 48. 3 K 63. 3 K 78. 4 K 93. 4 K

34. 1 K 49. 3 K 64. 3 K 79. 4 K 94. 4 K

1. 1 C 50. 3 K 65. 3 C 80. 4 K st95. 1 K
2. 1 K 51. 3 C 66. 3 C 81. 4 K sg96. 1 C
3. 1 C 52. 3 K 67. 3 C 82. 4 K st97. 2 K
4. 1 K 53. 3 K 68. 4 K 83. 4 C sg98. 2 K
5. 1 C 54. 3 K 69. 4 K 84. 4 K st99. 3 C
6. 1 C 55. 3 C 70. 4 C 85. 4 C sg100. 3 K
7. 2 K 56. 3 K 71. 4 C 86. 4 K sg101. 3 K
8. 2 K 57. 3 K 72. 4 K 87. 4 K st102. 4 K
9. 2 K 58. 3 K 73. 4 K 88. 4 K sg103. 4 K
10. 2 K 59. 3 K 74. 4 K 89. 4 K sg104. 4 K
11. 2 K 60. 3 K 75. 4 K 90. 4 C
12. 2 C 61. 3 C 76. 4 C 91. 4 K

Brief Exercises

105. 1 C 107. 3 C 109. 3 K

106. 2 K 108. 3 C 110. 4 C

Exercises

111. 2 AN 114. 3 AP 117. 3 C 120. 3,4 AP 123. 2,4 AN

112. 2 AP 115. 3 AN 118. 3,4 C 121. 4 C

113. 3 AP 116. 3 C 119. 3,4 AN 122. 4 C

Completion Statements

124. 1 K 126. 3 K 128. 4 K 130. 4 K

125. 2 K 127. 3 K 129. 4 K 131. 4 K

sg This question also appears in the Study Guide. st This question also appears in a self-test at the student companion website. a This question covers a topic in an appendix to the chapter.

Test Bank for Accounting Principles, Eighth Edition 7 - 2

SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE

Item Type Item Type Item Type Item Type Item Type Item Type Item Type Study Objective 1

1. TF 4. TF 32. MC 35. MC 38. MC 95. MC 124. C
2. TF 26. TF 33. MC 36. MC 39. MC 96. MC
3. TF 27. TF 34. MC 37. MC 40. MC 105. BE Study Objective 2
4. TF 9. TF 28. TF 44. MC 97. MC 112. Ex
5. TF 10. TF 41. MC 45. MC 98. MC 123. Ex
6. TF 11. TF 42. MC 46. MC 106. BE 125. C
7. TF 12. TF 43. MC 47. MC 111. Ex Study Objective 3
8. TF 29. TF 53. MC 60. MC 67. MC 113. Ex 120. Ex
9. TF 30. TF 54. MC 61. MC 99. MC 114. Ex 126. C
10. TF 48. MC 55. MC 62. MC 100. MC 115. Ex 127. C
11. TF 49. MC 56. MC 63. MC 101. MC 116. Ex
12. TF 50. MC 57. MC 64. MC 107. BE 117. Ex
13. TF 51. MC 58. MC 65. MC 108. BE 118. Ex
14. TF 52. MC 59. MC 66. MC 109. BE 119. Ex Study Objective 4
15. TF 68. MC 75. MC 82. MC 89. MC 103. MC 122. Ex
16. TF 69. MC 76. MC 83. MC 90. MC 104. MC 123. Ex
17. TF 70. MC 77. MC 84. MC 91. MC 110. BE 128. C
18. TF 71. MC 78. MC 85. MC 92. MC 118. Ex 129. C
19. TF 72. MC 79. MC 86. MC 93. MC 119. Ex 130. C
20. TF 73. MC 80. MC 87. MC 94. MC 120. Ex 131. C
21. TF 74. MC 81. MC 88. MC 102. MC 121. Ex

Note: TF = True-False BE = Brief Exercise C = Completion MC = Multiple Choice Ex = Exercise

The chapter also contains one set of ten Matching questions and four Short-Answer Essay questions.

Test Bank for Accounting Principles, Eighth Edition 7 - 4

TRUE-FALSE STATEMENTS

1. An accounting information system should be cost effective; that is, the benefits of the information must outweigh the cost of providing it.

2. An accounting system has flexibility if it is able to be used by many different companies at the same time.

3. General ledger accounting systems are software programs that integrate the various accounting functions related to sales, purchases, cash receipts and disbursements, and payroll.

4. Enterprise resource planning systems integrate all aspects of the organization, including accounting, sales, human resource management, and manufacturing.

5. A subsidiary ledger is a group of control accounts which provides information to the managers for controlling the operation of the company.

6. An accounts receivable subsidiary ledger has all the detailed information about the cash sales to individual customers.

7. The accounts payable subsidiary ledger provides detailed information about amounts owed to creditors.

8. The total of the individual account balances in the accounts receivable subsidiary ledger should agree with the total of the individual account balances in the accounts payable subsidiary ledger.

9. Control accounts are always located in the general ledger.

10. A control account and subsidiary ledger can be established for inventory.

11. A subsidiary ledger provides up-to-date information on specific account balances.

12. An advantage of using a subsidiary ledger is that one employee must post to both the subsidiary ledger and the general ledger.

13. Special journals are used to record unique transactions which do not occur very often.

14. A cash receipts journal can be used to record all transactions involving cash coming into the business, regardless of the source.

15. The cash payments journal only has one column because all entries recorded in this journal require a credit to the Cash account.

16. A cash payments journal should not be used to record transactions which require payment by check.

17. If a transaction cannot be recorded in a special journal, it indicates that the company should adopt an electronic accounting system.

Accounting Information Systems 7 - 5

1. A debit column for Sales Returns and Allowances may be found in the cash payments journal.

2. A one-column purchases journal is used to record purchases of merchandise on account.

3. Using special journals can save time in posting because column totals are often posted rather than individual entries.

4. The reference column in a sales journal is used to indicate the general ledger account number when the entry is posted.

5. Postings are generally made more frequently to the general ledger control accounts than to the individual accounts in the subsidiary ledgers.

6. The amounts appearing in the Merchandise Inventory column of the cash payments journal are posted individually to the accounts in the accounts payable subsidiary ledger.

7. Transaction amounts recorded in the general journal are never posted to accounts in the subsidiary ledger.

8. When control and subsidiary accounts are involved, there must be a dual posting.

Additional True-False Questions

1. An accounting information system involves data collection, data processing, and informa- tion dissemination.

2. The basic principles of an accounting information system are cost awareness, usefulness, and fixed structure.

3. Each general ledger control account balance must equal the composite balance of the individual accounts in the related subsidiary ledger at the end of an accounting period.

4. When special journals are employed, all postings must be monthly or daily but cannot be both.

5. Totaling the columns of a journal and proving the equality of the totals is called footing and cross-footing a journal.

6. Only transactions that cannot be entered in a special journal are recorded in the general journal.

Answers to True-False Statements

Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 1. T 6. F 11. T 16. F 21. F 26. T 31. T 2. F 7. T 12. F 17. F 22. F 27. F 3. T 8. F 13. F 18. T 23. F 28. T 4. T 9. T 14. T 19. T 24. F 29. F 5. F 10. T 15. F 20. T 25. T 30. T

Accounting Information Systems 7 - 7

1. A student should recognize a need to study manual accounting systems because a. the structure of electronic systems differs greatly from manual systems. b. all small companies only use manual accounting systems. c. the software and hardware of electronic systems vary greatly, which makes manual procedures more practical to study. d. companies that use manual systems hire more accountants.

2. Which of the following is a true statement about manual and electronic accounting systems? a. Few small companies begin with manual systems. b. The design and structure of manual and electronic systems are essentially the same. c. Many companies convert from electronic to manual systems. d. The design and structure of manual and electronic systems are fundamentally different.

3. Postings to the control accounts in the general ledger are made a. annually. b. daily. c. monthly. d. weekly.

4. The balance of a control account in the general ledger a. must always be zero. b. must equal the amount of total assets. c. is always greater than the composite balance of individual accounts in a related subsidiary ledger. d. must equal the composite balance of individual accounts in a related subsidiary ledger.

5. A subsidiary ledger is a. used in place of the general ledger if the general ledger is destroyed or stolen. b. a group of accounts used by branches and subsidiaries of a corporate business. c. a group of accounts with a common characteristic that provides detailed information about a control account in the general ledger. d. used to post excess transactions if a general ledger account becomes full during an accounting period.

6. Postings are made daily to the a. Accounts Receivable control account. b. Accounts Payable control account. c. Accounts Receivable subsidiary ledger. d. control accounts in the general ledger.

7. A subsidiary ledger frees the general ledger from details of a. individual balances. b. external transactions. c. internal transactions. d. the control account.

Test Bank for Accounting Principles, Eighth Edition 7 - 8

1. A company would not likely use subsidiary ledgers for a. inventory. b. owner's capital. c. equipment. d. accounts receivable.

2. Postings are made daily to subsidiary ledgers so that a. employees are kept busy. b. debits equal credits. c. individual account information is kept current. d. the control account will balance to the subsidiary ledger.

3. The individual amounts in the sales journal are posted to the accounts receivable subsidiary ledger a. daily. b. weekly. c. monthly. d. yearly.

4. A sales journal is used to record a. only cash sales of merchandise. b. sales of all assets on credit and for cash. c. only credit sales of merchandise. d. credit sales of merchandise, sales returns and allowances, and sales discounts.

5. If a transaction cannot be recorded in a special journal a. the company must refuse to enter into the transaction. b. it is recorded in the general journal. c. it is recorded directly in the accounts in the general ledger. d. it is recorded as an adjustment on the work sheet.

6. The one characteristic that all entries recorded in a cash receipts journal have in common is a. a credit to the Cash account. b. that they all represent collections from customers. c. that they originate from the sales of merchandise. d. a debit to the Cash account.

7. A one column purchases journal indicates that a. only purchases of merchandise on account can be recorded. b. all purchases of merchandise can be recorded. c. all acquisitions on account can be recorded. d. another column must be added so that debits and credits can be recorded.

8. The one characteristic that all entries recorded in a multi-column purchases journal have in common is a a. credit to the Cash account. b. debit to the Cash account. c. debit to the Accounts Payable account. d. credit to the Accounts Payable account.

Test Bank for Accounting Principles, Eighth Edition 7 - 10

1. The entries in a sales journal will show a. all sales of merchandise. b. the cash sales of the company. c. the credit sales of merchandise. d. all sales of the company.

2. Entries in a sales journal a. are made from sales invoices. b. will indicate the invoice number in the reference column of the sales journal. c. will occupy two lines of the sales journal. d. indicate either a cash debit or accounts receivable debit.

3. Journalizing in a sales journal will not a. require a debit to Accounts Receivable. b. show a sales invoice number. c. affect the reference column of the journal. d. include a credit to the Sales account.

4. If an owner withdraws cash for personal use, the transaction should be recorded in the a. sales journal. b. cash receipts journal. c. general journal. d. cash payments journal.

5. If a company purchases merchandise for cash, the transaction should be recorded in the a. purchases journal. b. general journal. c. cash payments journal. d. sales journal.

6. Cash from sales of merchandise will be recorded in the a. purchases journal. b. sales journal. c. cash receipts journal. d. general journal.

7. Postings from the purchases journal to the general ledger are made a. daily. b. monthly. c. weekly. d. yearly.

8. The individual amounts in the Accounts Payable column in the cash payments journal are posted to the subsidiary ledger a. daily. b. monthly. c. weekly. d. yearly.

Accounting Information Systems 7 - 11

1. Debit postings to the individual accounts in an accounts receivable subsidiary ledger generally come from the a. sales journal. b. cash receipts journal. c. purchases journal. d. cash payments journal.

2. Entries in a sales journal are a. posted only to accounts in an accounts receivable subsidiary ledger. b. posted only to accounts in the general ledger. c. posted to accounts in an accounts receivable subsidiary ledger and to accounts in the general ledger. d. never posted.

3. Which one of the following columns in a cash receipts journal is not posted in total to an account in the general ledger? a. Cash column b. Sales Discount column c. Accounts Receivable column d. Other Accounts column

4. The use of special journals to record transactions a. eliminates the need for a general ledger. b. can save time in the posting process. c. eliminates the need for a general journal. d. should only be used if the volume of transactions is small.

5. Posting a sales journal to the accounts in the general ledger requires a a. debit to Cash and a credit to Sales. b. debit to Sales and a credit to Inventory. c. debit to Accounts Receivable and a credit to Inventory. d. debit to Accounts Receivable and a credit to Sales.

6. The entries recorded in the Other Accounts column of a cash payments journal a. are posted to the accounts payable subsidiary ledger daily. b. are posted individually to accounts in the general ledger. c. are not posted individually but are posted as a column total to the general ledger. d. do not require posting.

7. The entry to record the granting of credit to a customer for a sales return is posted to a. the accounts receivable subsidiary ledger only. b. the general ledger only. c. both the accounts receivable subsidiary ledger and the general ledger. d. both the accounts payable subsidiary ledger and the general ledger.

8. Proving the equality of the totals in the columns of multiple-column special journals is called a. posting to the subsidiary. b. debiting and crediting. c. footing and crossfooting. d. updating the master file.

Accounting Information Systems 7 - 13

1. The process of totaling the columns of a journal is termed a. ruling. b. columnizing. c. sizing. d. footing.

2. An (x) below the "Other Accounts" column in a cash receipts journal indicates the a. total has been posted to the general ledger. b. total is not posted to the general ledger. c. column has been footed. d. column has been cross-footed.

3. Cross-footing a cash receipts journal means a. the equality of debits and credits in the journal have been proved. b. each line of the journal has a horizontal total. c. the columns of the journal have been cross-referenced. d. all necessary postings have been completed.

4. Which of the following would not be an appropriate heading for a column in the cash receipts journal? a. Cash b. Accounts Payable c. Sales Discounts d. Sales

5. Entries in the purchases journal are made a. from sales invoices. b. from the general journal. c. without supporting documentation. d. from purchase invoices.

6. Proving the postings of a one-column purchases journal would involve comparing the a. general ledger posting to Accounts Payable to the debit postings of the accounts receivable subsidiary ledger. b. general ledger debit posting to Accounts Payable to the general ledger credit posting to Merchandise Inventory. c. general ledger credit posting to Accounts Payable to the general ledger debit posting to Merchandise Inventory. d. debit postings to the accounts receivable subsidiary ledger to the credit postings to the accounts payable subsidiary ledger.

7. If a company uses a multi-column purchases journal, which of the following possible headings for debit columns of the journal would not be appropriate? a. Accounts Payable b. Merchandise Inventory c. Store Supplies d. Office Supplies

Test Bank for Accounting Principles, Eighth Edition 7 - 14

1. The reference column of a multi-column cash payments journal after posting a. will only contain check marks. b. will be blank. c. will only contain account numbers. d. may contain either account numbers or check marks.

2. The reference column of the accounts in the accounts payable subsidiary ledger after posting may show a. only P references. b. CP, P, or G references. c. G, P, or S references. d. only CP references.

Additional Multiple Choice Questions

1. Principles of an efficient and effective accounting information system include all of the following except a. cost effectiveness. b. flexibility. c. useful output. d. All of these options are principles.

2. Which of the following statements is incorrect? a. A major consideration in developing an accounting system is cost effectiveness. b. When an accounting system is designed, no consideration needs to be given to the needs and knowledge of the various users. c. The accounting system should be able to accommodate a variety of users and changing information needs. d. To be useful, information must be understandable, relevant, reliable, timely, and accurate.

3. All of the following are advantages of using subsidiary ledgers except they a. eliminate errors in individual accounts. b. free the general ledger of excessive details. c. show, in a single account, transactions affecting one customer or one creditor. d. make possible a division of labor.

4. Which of the following is not an advantage of a subsidiary ledger? a. Shows transactions affecting one customer or one creditor in a single account. b. Helps locate errors in individual accounts. c. Puts greater detail in the general ledger. d. Makes possible a division of labor.

5. Credit sales of assets other than merchandise are recorded in the a. cash payments journal. b. cash receipts journal. c. general journal. d. sales journal.

Test Bank for Accounting Principles, Eighth Edition 7 - 16

BRIEF EXERCISES

BE 105

Match each of the principles and phases in the development of an accounting system with the statement that best describes them.

a. Cost effectiveness b. Flexibility c. Useful output

_____ 1. Information must be understandable, relevant, reliable, timely, and accurate.

_____ 2. Benefits of information must outweigh the cost of providing it.

_____ 3. The system should accommodate a variety of users and changing information needs.

_____ 4. The accounting system must consider the needs and knowledge of various users.

_____ 5. The system should be capable of meeting the changes in the demands made upon it.

Solution 105 (3 min.)

1. c 3. b 5. b
2. a 4. c

BE 106

Indicate whether each of the following accounts would be shown in the general ledger or subsidiary ledger.

1. Cash ____________________

2. Accounts Receivable—Jones ____________________

3. Equipment ____________________

4. Accounts Payable—Smith ____________________

5. Common Stock ____________________

6. Sales ____________________

Solution 106 (3 min.)

1. General ledger 4. Subsidiary ledger
2. Subsidiary ledger 5. General ledger
3. General ledger 6. General ledger

Accounting Information Systems 7 - 17

BE 107

Dexter Company maintains four special journals and a general journal to record its transactions. Using the code below, indicate in the space provided the appropriate journal for recording the transactions listed.

Code Journals S Sales journal CR Cash receipts journal CP Cash payments journal P Single-column purchases journal G General journal

____ 1. Mr. Dexter invested cash in the business.

____ 2. Purchased store supplies on account.

____ 3. Sold merchandise to customer on account.

____ 4. Purchased a 2-year fire insurance policy for cash.

____ 5. Received a check from a customer as payment on account.

____ 6. Paid for store supplies purchased in transaction 2.

____ 7. Purchased merchandise on account.

____ 8. Issued a credit memorandum to a customer who returned defective merchandise previously sold on account.

____ 9. Purchased office equipment for cash.

____ 10. Made an adjusting entry for store supplies used during the period.

Solution 107 (5 min.)

1. CR 6. CP
2. G 7. P
3. S 8. G
4. CP 9. CP
5. CR 10. G

Accounting Information Systems 7 - 19

BE 110

Indicate which of the following cash payments journal columns are posted only in total, only daily, or both in total and daily.

1. Other Accounts _______________________

2. Accounts Payable _______________________

3. Merchandise Inventory _______________________

4. Cash _______________________

Solution 110 (3 min.)

1. Only daily 3. In total
2. Both in total and daily 4. In total

EXERCISES

Ex. 111

After Shaw Company had completed all posting for the month of December, the sum of the balances in the following accounts payable subsidiary ledger did not agree with the balance of the control account in the general ledger.

Name Austin's Address 286 Buck Avenue ——————————————————————————————————————————— Date Item Post. Ref. Debit Credit Balance ——————————————————————————————————————————— Dec. 2 P25 2,400 2,

Name Beeman Company Address 818 Western Avenue ——————————————————————————————————————————— Date Item Post. Ref. Debit Credit Balance ——————————————————————————————————————————— Dec. 1 Balance 7, 10 CP23 7,600 — 20 P32 3,300 3, 29 J15 500 3,

Name Fryar Company Address 90210 Baker Boulevard ——————————————————————————————————————————— Date Item Post. Ref. Debit Credit Balance ——————————————————————————————————————————— Dec. 1 Balance 9, 18 CP28 9,900 — 29 P34 10,600 700

Test Bank for Accounting Principles, Eighth Edition 7 - 20

Ex. 111 (cont.)

Name Maria Lopez Address 2720 Sommers Avenue ——————————————————————————————————————————— Date Item Post. Ref. Debit Credit Balance ——————————————————————————————————————————— Dec. 8 P27 6,000 6, 27 P33 8,000 14,

Name Reed Supplies Address 1560 Puckett Street ——————————————————————————————————————————— Date Item Post. Ref. Debit Credit Balance ——————————————————————————————————————————— Dec. 1 Balance 8, 7 P26 5,600 13, 12 J11 420 12, 20 CP29 6,000 18,

The balance in the Accounts Payable control account of $37,180 has been verified as correct. Also assume that the journals references in the Post Ref. columns of the accounts payable subsidiary ledger have been verified as correct.

Instructions Determine the errors in the preceding accounts payable subsidiary accounts and prepare a corrected schedule of accounts payable.

Solution 111 (20 min.)

IDENTIFICATION OF ERRORS:

Beeman Company The $500 represents merchandise returned and should be subtracted from the balance owed. Correct balance is $2,800.

Fryar Company The $10,600 represents new purchases on account and should be added to the previous balance of zero. The correct balance is $10,600.

Reed Supplies There is an addition error. Adding $5,600 to the beginning balance of $8,200 yields a balance of $13,800. Subtracting merchandise returned of $420 leaves a balance of $13,380. The $6,000 is a payment on account, not an increase. The correct balance is $7,380.

ACCOUNTS PAYABLE SUBSIDIARY LEDGER ACCOUNT BALANCES

Austin's $ 2, Beeman Company 2, Fryar Company 10, Maria Lopez 14, Reed Supplies 7, Total $37,

Which journal is used to record credit purchases?

Is purchases journal A special journal?

What are the 4 types of journals?

What is a special journal quizlet?