CHAPTER 3 - EXPENDITURE CYCLE B.

Statement 2 is correct
True or False C. Both statements are correct
D. Both statements are false
1​. Statement 1: In computer-based systems,
computer programs perform these clerical tasks, 5. ​Statement 1. Purchasing decisions are
which is expensive r and far less prone to error​. authorized by inventory control.
Although the classic department structure may still Statement 2.The blind copy of the purchase order
exist in computer-base environments, personnel that goes to the receiving department contains no
responsibilities are refocused. item descriptions.
Statement 2: Rather than being involved in A. Statement 1 is correct
day-to-day transaction processing, these B. Statement 2 is correct
departments are now involved with financial C. Statement 1 & 2 are correct
analysis and exception-based problem solving. As D. Statement 1 & 2 are incorrect
a result, these departments are smaller and more 6. ​Statement 1: Firms that wish to improve control
efficient than their manual system counterpart. over cash disbursements use a voucher system.
A. Statement 1 is correct Statement 2: In a voucher system, the sum of all
B. Statement 2 is correct unpaid vouchers in the voucher register equals the
C. Statement 1 & 2 are correct firm’s total voucher payable balance.
D. Statement 1 & 2 are incorrect
A. Statement 1 is correct
2​. Statement 1: The general ledger clerk is the one B. Statement 2 is correct
who posts the journal voucher and the account C. Statement 1 & 2 are correct
summary to the general ledger control accounts. D. Statement 1 & 2 are incorrect
Statement 2: The journal voucher was from the AP 7. ​Statement 1: The accounts payable department
department and the account summary was reconciles the accounts payable subsidiary ledger
produced by the cash disbursement department. to the control account.
A. Statement 1 is correct Statement 2: The use of inventory reorder points
B. Statement 2 is correct suggests the need to obtain specific authorization.
C. Statement 1 & 2 are correct
D. Statement 1 & 2 are incorrect A. Statement 1 is correct
B. Statement 2 is correct
3. ​Statement 1 There are 5 controls in the C. Statement 1 & 2 are correct
Expenditure Cycle. D. Statement 1 & 2 are incorrect
Statement 2. The Expenditure Cycle Controls are 8. ​Statement 1: The receiving department receives
applied in the Two systems that are used by a firm. the purchase requisitions, sorts them by vendor,
These Two systems are: Product Processing and prepares a multipart PO for each vendor.
System and Cash Disbursement System.
Statement 2: Under vouchers payable system, the
A. Statement 1 is correct AP department uses cash disbursement vouchers
B. Statement 2 is correct and maintains unregistered vouchers
C. Statement 1 & 2 are correct
D. Statement 1 & 2 are incorrect A. Statement 1 is correct
B. Statement 2 is correct
4. ​Statement 1: AP department uses cash C. Statement 1 & 2 are correct
disbursement vouchers and maintains voucher D. Statement 1 & 2 are incorrect
register.
9. ​Statement 1: When a trading partner agreement
Statement 2: AP clerk performs the two-way match, is in place, the traditional three way match may be
a cash disbursement voucher is prepared to eliminated.
approve payment.
A. Statement 1 is correct
Statement 2: Authorization of purchases in a B. Purchasing decision authorize with the
merchandising firm occurs in the inventory control inventory control function
department. C. Purchasing decisions authorize with the
a. Statement 1 is correct production planning and control function.
b. Statement 2 is correct D. Uses components, parts of raw materials to
c. Statement 1 & 2 are correct make finished goods.
d. Statement 1 & 2 are incorrect 3. ​Which of the following is not a Purchases
10. ​Statement 1 Proper segregation of duties Processing Subsystem?
requires that the responsibility approving a payment A. Monitor Inventory Record
be separated from posting to the cash B. Receive Goods
disbursements journal. C. Prepare Cash Disbursement
Statement 2 A major risk exposure in the D. Update Inventory Record
expenditure cycle is that accounts payable may be 4.​The one who receives the voucher packets and
overstated at the end of reviews the document for completeness and
the accounting year. clerical accuracy.

a. Statement 1 is correct A. Cash disbursement clerk

b. Statement 2 is correct B. General ledger clerk
c. Statement 1 & 2 are correct C. AP clerk
d. Statement 1 & 2 are incorrect D. Voucher packet clerk

11. ​A three way match involves a purchase order 5.​ What is a voucher package?
-​FALSE A. Documents details about each delivery,
12. ​Authorization for a cash disbursement occurs including the date received, shipper,
in the cash disbursement department upon receipt supplier and purchase order number.
of the supplier’s invoice. -​FALSE B. The combination of the supplier invoices
and associated supporting
13. ​An automated cash disbursements system can documentation.
yield better cash management since payments are C. Stealing payroll checks made out in the
made on time. -​TRUE name of former employees.
14. ​A purchasing system that employs electronic D. A document that identifies the vendor, list of
data interchange does not use a purchase order. outstanding invoices and indicates the net
-​FALSE amount to be paid after deducting any
applicable discounts and allowances
15. ​If accounts payable receives an invoice directly
from the supplier it needs to be reconciled with the 6. ​Which of the following is not the advantages of
purchase order and receiving report. -​TRUE the Automated System
Multiple Choice A. Improved Inventory Control
1. ​It is a document that contains no quantity or price B. Better Cash Management
information about the product being received​. C. Time Lag
D. Insufficient Paper Documents
A. Blind copy Purchase Order
7. ​Which of the following is ​NOT a source
B. Receiving Report
C. Purchase Order document in determining whether there is an
D. Purchase Requisition obligation or none under the Independent
Verification Control?
2. Which of the following is not true about the
Manufacturing Firm. A. The Purchase Order
B. Cash Disbursement Voucher
A. Purchasing raw materials for production C. Receiving Report
D. Supplier's Invoice
8.​In a real-time processing system with a high
number of transactions, the best and most practical
control over cash disbursements is to have
A. all checks manually signed by the treasurer
B. all checks signed by check-signing
equipment
C. checks over a certain dollar amount
manually signed by the treasurer
D. checks over a certain dollar amount
manually signed by the cash disbursements
clerk.
9. ​In regards to the accounts payable department,
which statement is not true?
A. The purchase requisition shows that the
transaction wa authorized
B. The purchase order proves that the
purchased was required
C. The receiving report provides evidence of
the physical receipts of the goods
D. The supplier’s invoice indicates the financial
value of the transaction
10. ​This system helps you envision the relationship
between organizational units, the segregation of
duties, and the information flows essential to
operations and effective internal control.
A. Physical System
B. Cash Disbursements System
C. Manual System
D. Respiratory System
11.​The open purchase order file in the purchasing
department is used to determine
a. the quality of items a vendor ships
b. the best vendor for a specific item
c. the orders that have not been received
d. the quantity of items received
12. ​The financial value of a purchase is determined
by reviewing the
A. packing slip
B. purchase requisition
C. receiving report
D. supplier’s invoice
13. ​Which of the following statements is not
correct?
A. the voucher system is used to improve
control over cash disbursements
B. the sum of the paid vouchers represents
the voucher payable liability of the firm
C. the voucher system permits the firm to
consolidate payments of several invoices on
one voucher
D. many firms replace accounts payable with a
voucher payable system
14. ​When purchasing inventory, which document
usually triggers the recording of a liability?
A. purchase requisition
B. purchase order
C. receiving report
D. supplier’s invoice
15. ​When a cash disbursement in payment of an
accounts payable is recorded
A. the liability account is increased
B. the income statement is changed
C. the cash account is unchanged
D. the liability account is decreased
CHAPTER 4 - PAYROLL AND FIXED ASSETS
True or False
1. Department managers have the authority to
approve capital expenditures that are above
a certain materiality limit. ​False - Higher
management levels
2. There are ​two areas of principal difference
between the fixed asset system:
authorization and supervision controls.
False - three areas; independent
verification is also included.
3. Time cards are used to capture the time the
individual workers spend on each
production job and used by cost accounting
by allocating direct labor charges to WIP
accounts. ​False - Time cards are used to
capture the time the employee is at work
4. One of the specific objectives of the fixed
asset system is to maintain adequate
accounting records of asset acquisition,
cost, description, and physical location in
the organization.​ ​True
 5. When an asset has reached the end of its
useful life or when management decides to
dispose of it, the asset must be disclosed
from the fixed asset subsidiary ledger.
(False, it must be removed )
6. Paymaster is independent of the payroll
process—not involved in payroll
authorization or preparation tasks. ​True
7. The cost accounting department makes
changes to the employee file in real time via
terminals. ​False - Personnel Department
8. Asset acquisition usually begins with the
accounting department recognizing the
need to obtain a new asset or replace an
existing one. ​False - department manager
(user)
9. Cash disbursements are responsible for
reconciling the labor distribution summary
and the payroll disbursement voucher.
False - General ledger
10. A Manual payroll system automatically
calculates and prints paychecks based on a
variety of rates, deductions and taxes work
that used to take a small army of
bookkeepers to do by hand. False -
Computer-based payroll system
11. Only two copy of the voucher is sent to the
general ledger department, and the final
copy is sent to AP.​False- One copy
12. The voucher packet includes a voucher and
payroll. ​True​.
13. Payroll authorization and hours worked
enter the payroll department from two
different sources: personnel and production.
– ​True
14. The disposal report formally authorizes the
fixed asset department to remove from the
ledger an asset disposed of by the user
department. ​True
15. ​For a given pay period, the complete listing
of paychecks for the pay period is a payroll
journal - ​False ​payroll register
Multiple Choice
1. Which of the following is ​not a task done by
an internal auditor in terms of independently
verifying the fixed asset system?
a. Verify the location, condition, and
fair value of the organization's fixed
assets against the fixed asset
records in the subsidiary ledger.
b. Review the automatic depreciation
charges calculated by the fixed
asset system.
c. Supervise the employees to
ensure that the fixed assets are
being used in accordance with the
company's policies and business
practices.
d. Review the asset acquisition and
approval procedures periodically to
determine the reasonableness of
factors used in the analysis.
2. ___________ are the property, plant, and
equipment used in the operation of a
business. These are relatively permanent
items that often collectively represent the
largest financial investment by the
organization.
a. Intangible assets
b. Fixed assets
c. Operating assets
d. Non-operating assets
e. Current assets or short-term assets
3. Should be used each time there is an action
that should be recorded in the individuals
personnel file or that requires payroll action.
a. Labor Cost Distribution Report
b. Payroll Function
c. Personal Action Form
d. Job tickets
4. It involves adjusting the fixed asset
subsidiary account balances as the assets
(excluding land) depreciate over time or with
usage.
a. Asset Acquisition
b. Asset Maintenance
c. Asset Disposal
d. Depreciation Schedule
5. The ______________________ enters job
cost data (real time or daily) to create the
labor usage file.
a. Personnel Department
b. Cost Accounting Department
c. Marketing Department
d. Production Department
 6. To prevent a form of payroll fraud involves
submitting time cards for nonexistent
employees many companies use a
________ to distribute the paychecks to
employees.
a. Paymath
b. PayMaya
c. Paymaster
d. Payroll System
7​. ​Statement 1: the disposal option to the firm
are to sell, scrap, donate, or retire the asset in
place
Statement 2: A ​ disposal report describing the
final disposition of the asset is sent to the fixed
asset accounting department to authorize its
removal from the ledger.
a. Only Statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.
8​. Statement I: Fixed asset acquisitions could
be formal or informal.
Statement II: HRM systems need to provide
real-time access to personnel files for purposes
of direct inquiries and recording changes in
employee status as they occur.
a. Only Statement I is true
b. Only Statement II is true
c. Both statements are true
d. Both statements are false
9​. Which Internal Control is not an important part of
the payroll system?
a. Supervisors verify the accuracy of employee
time cards.
b. Paycheck is distributed by an independent
paymaster.
c. Accounts payable verifies the accuracy
of the payroll register before transferring
payroll funds to the general checking
accounting.
d. General ledger reconciles the labor
distribution summary and the payroll
disbursement voucher.
10​. This system promotes accounting accuracy and
reduces check-writing errors.
a. Computer-based payroll system
b. The Conceptual Fixed Asset System
c. Manual payroll system
d. Reengineering the Payroll System
11​. The one who makes changes to the employee
file in real time via terminals.
a. The Personnel Department
b. The Time-Keeping Department
c. The Personnel Department
d. The Time-keep Department
12​. The employee paychecks are drawn on this
account, which is used only for payroll.
a. Imperial Account
b. Imprest Account
c. Macao Imperial
d. Imprest Department
13. It’s a payroll system that requires one to
manage the entire payroll process without using
any systems, it depends entirely on human effort.
a. Manual payroll system
b. The Conceptual Fixed Asset System
c. Computer based payroll system
d. Reengineering the Payroll System
14​. The fixed asset system uses the depreciation
schedules to record end-of-period depreciation
transaction automatically
a. Asset Acquisition
b. Physical fixed asset
c. Asset Maintenance
d. Asset Disposal
15​. ​Which of the following departments or positions
most likely would approve changes in pay rates and
deductions from employee salaries?
a. Human Resources
b. Treasurer
c. Controller
d. Payroll