Accounting Information Systems, 8e—Test Bank, Chapter 8

Chapter 8—General Ledger, Financial Reporting, and Management Reporting Systems

TRUE/FALSE

1. The most common means of making entries in the general ledger is via the journal voucher.

ANS: T PTS: 1

2. Individuals with access authority to general ledger accounts should not prepare journal
vouchers.

ANS: T PTS: 1

3. The journal voucher is the document that authorizes entries to be made to the general ledger.

ANS: T PTS: 1

4. Each account in the chart of accounts has a separate record in the general ledger master file.

ANS: T PTS: 1

5. The responsibility center file is primarily used by the Financial Reporting System.

ANS: F PTS: 1

6. Management reporting is often called discretionary reporting because it is not mandated as is

financial reporting.

ANS: T PTS: 1

7. Primary recipients of financial statement information are internal management.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
ANS: F PTS: 1

8. The Management Reporting System is a nondiscretionary system.

ANS: F PTS: 1

9. When evaluating decision alternatives, one option is to take no action.

ANS: T PTS: 1

10. In most cases intangible decision criteria can be quantified.

ANS: F PTS: 1

11. One benefit of the Management Reporting System is that it can alert management to delays in
project implementation.

ANS: T PTS: 1

12. Responsibility refers to an individuals obligation to achieve desired results.

ANS: T PTS: 1

13. A firm with a wide span of control tends to have relatively more layers of management.

ANS: F PTS: 1

14. The control function entails evaluating a process against a standard and, if necessary, taking
corrective action.

ANS: T PTS: 1

15. Standards are the basis for evaluating actual performance.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

ANS: T PTS: 1

16. A report is said to have information content if it eliminates uncertainty associated with a
problem facing the decision maker.

ANS: F PTS: 1

17. An inventory out-of-stock report is an example of a programmed, on-demand report.

ANS: T PTS: 1

18. A principle of responsibility accounting is that managers are responsible for controllable and
uncontrollable costs.

ANS: F PTS: 1

19. The manager of a cost center is responsible for cost control and revenue generation.

ANS: F PTS: 1

20. Designing an effective management reporting system does not require an understanding of the
information managers need to deal with the problems they face.

ANS: F PTS: 1

21. The formalization of tasks principle suggests that management should structure the firm
around the unique skills sets of key individuals.

ANS: F PTS: 1

22. If a manager delegates responsibility to a subordinate, he or she must also grant the
subordinate authority to make decisions.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
ANS: T PTS: 1

23. Operational control involves motivating managers at all levels to use resources, including
materials, personnel, and financial assets, as productively as possible.

ANS: F PTS: 1

24. XBRL taxonomies are classification schemes that are compliant with the XBRL

specifications to accomplish a specific information exchange.

ANS: T PTS: 1

25. An income statement is an example of an XBRL instance document.

ANS: T PTS: 1

MULTIPLE CHOICE

1. Which statement is not true/

a. The journal voucher is the only source of input into the general ledger.

b. A journal voucher can be used to represent summaries of similar transactions or a single

unique transaction.

c. Journal vouchers are not used to make adjusting entries and closing entries in the general
ledger.

d. Journal vouchers offer a degree of control against unauthorized general ledger entries.

ANS: C PTS: 1

2. Entries into the General Ledger System (GLS) can be made using information from

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
a. the general journal
b. a journal voucher which represents a summary of similar transactions
c. a journal voucher which represents a single, unusual transaction

d. all of the above

ANS: D PTS: 1

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

3. Which statement is not correct? The general ledger master file

a. is based on the firms chart of account

b. contains a record for control accounts

c. is an output of the Financial Reporting System (FRS)

d. supplies information for management decision making

ANS: C PTS: 1

4. What type of data is found in the general ledger master file?

a. a chronological record of all transactions

b. the balance of each account in the chart of accounts
c. budget records for each account in the chart of accounts

d. subsidiary details supporting a control account

ANS: B PTS: 1

5. Which report is not an output of the Financial Reporting System (FRS)?

a. variance analysis report

b. statement of cash flows
c. tax return
d. comparative balance sheet

ANS: A PTS: 1

6. Which steps in the Financial Accounting Process are in the correct sequence?

a. record the transaction, post to the ledger, prepare the adjusted trial balance, enter

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
adjusting entries, prepare financial statements

b. record the transaction, prepare the unadjusted trial balance, record adjusting
journal entries, record closing entries, prepare financial statements

c. record the transaction, post to the ledger, record adjusting entries, prepare the
unadjusted trial balance, prepare financial statements
d. record the transaction, post to the ledger, prepare the adjusted trial balance, prepare
financial statements, record closing entries

ANS: D PTS: 1

7. Which statement is not correct?

a. the post-closing trial balance reports the ending balance of each account in the
general ledger
b. one purpose of preparing the unadjusted trial balance is to ensure that debits equal
credits

c. financial statements are prepared based on the unadjusted trial balance

d. the unadjusted trial balance reports control account balances but omits subsidiary
ledger detail

ANS: C PTS: 1

8. What account appears on the post closing trial balance?

a. income summary

b. machinery
c. rent expense
d. interest income

ANS: B PTS: 1

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
9. Financial statements are prepared from the

a. trial balance
b. adjusted trial balance
c. general ledger
d. general journal

ANS: B PTS: 1

10. Risk exposures in the General Ledger and Financial Reporting Systems include all of the
following except

a. loss of the audit trail

b. unauthorized access to the general ledger
c. loss of physical assets

d. general ledger account out of balance with the subsidiary account

ANS: C PTS: 1

11. Which situation indicates an internal control risk in the General Ledger/Financial Reporting
Systems (GL/FRS)?

a. the employee who maintains the cash journal computes depreciation expense
b. the cash receipts journal voucher is approved by the Treasurer

c. the cash receipts journal vouchers are prenumbered and stored in a locked safe
d. the employee who maintains the cash receipts journal records transactions in the
accounts receivable subsidiary ledger

ANS: D PTS: 1

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

12. With a limited work force and a desire to maintain strong internal control, which combination
of duties performed by a single individual presents the least risk exposure?

a. maintaining the inventory ledger and recording the inventory journal voucher in
the general ledger
b. recording the inventory journal voucher in the general ledger and maintaining
custody of inventory
c. maintaining the cash disbursements journal and recording direct labor costs
applied to specific jobs
d. preparing the accounts payable journal voucher and recording it in the general
ledger

ANS: C PTS: 1

13. Which best describes a batch process General Ledger System (GLS)

a. paper documents are eliminated

b. the general ledger master file is updated each night
c. there is a time lag between transaction processing and posting to the general ledger
d. no direct access or querying of the General Ledger is possible

ANS: C PTS: 1

14. An advantage of a batch General Ledger System (GLS) is that

a. separation between authorization and transaction processing is strictly enforced

b. the general ledger master file is recreated with each update
c. updates and reconciliation of transactions occur as a step within the transaction
cycle

d. errors and out-of-balance conditions are identified at the end of the month

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
ANS: C PTS: 1

15. XBRL

a. is the basic protocol that permits communication between Internet sites.

b. controls Web browsers that access the Web.

c. is the document format used to produce Web pages.

d. was designed to provide the financial community with a standardized method for
preparing
e. is a low-level encryption scheme used to secure transmissions in higher-level
(HTTP) format.

ANS: D PTS: 1

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

16. An XBRL taxonomy:

a. is the document format used to produce web pages.

b. is the final product (report).
c. is a classification scheme.
d. is a tag stored in each database record.

e. none of the above is true.

ANS: C PTS: 1

17. A characteristic of the Management Reporting System (MRS) is

a. the MRS operates in conformity with generally accepted accounting principles

b. it is a legal requirement that the MRS be installed and functioning properly
c. the MRS is developed by implementing SEC requirements
d. the MRS focuses on internal decision-making information

ANS: D PTS: 1

18. Which statement is not true?

a. authority refers to an individuals obligation to achieve desired results

b. if an employee is given the responsibility for a task, that employee should be given
authority to make decisions within the limits of that task
c. the level of detail provided to an employee is a function of the employees position
with the firm
d. all of the above are true

ANS: A PTS: 1

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

19. Which statement is not true? The managers span of control

a. is narrow for routine and repetitive tasks

b. is related to the number of layers of management

c. affects the amount of detail provided to a manager

d. can affect employee morale and motivation

ANS: A PTS: 1

20. Short-range planning involves

a. setting goals and objectives of the firm

b. planning the production schedule for the next quarter
c. planning the growth of the firm

d. deciding on the degree of diversification among the firms products

ANS: B PTS: 1

21. Long-range planning involves

a. planning the marketing and promotion for a product

b. presenting department heads with budgetary goals for the next year
c. preparing a work force utilization budget for the next quarter
d. deciding the optimum size of the firm

ANS: D PTS: 1

22. The level of management that makes tactical planning decisions is

a. top management

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
b. middle management

c. operations management
d. front-line management

ANS: B PTS: 1

23. The decision to enter a new market is an example of

a. strategic planning
b. tactical planning

c. management control
d. operational control

ANS: A PTS: 1

24. All of the following are elements of operational control decisions except

a. determining the scope of the activity

b. setting operating standards

c. evaluating performance
d. taking corrective action when necessary

ANS: A PTS: 1

25. In contrast to tactical planning decisions, management control decisions, and operational
control decisions, strategic planning decisions usually

a. are more focused

b. have a shorter time frame
c. are unstructured

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
d. have a high degree of certainty

ANS: C PTS: 1

26. Which of the following management principles affects the management reporting system?

a. formalization of tasks
b. authorization
c. span of control
d. all of the above

ANS: D PTS: 1

27. All of the following are elements of problem structure except

a. certainty
b. data
c. procedures

d. objectives

ANS: A PTS: 1

28. All of the following are examples of programmed reports except

a. cash flow reports for Division B

b. year-to-date local income tax payments made by all employees living in City X
and working in City Y

c. inventory exception reports for Division G

d. equipment utilization reports for Plant M

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

ANS: B PTS: 1

29. A fundamental principle of responsibility accounting is that

a. managers are accountable only for items they control

b. a managers span of control should not exceed eight people

c. structured reports should be prepared weekly
d. the information flow is in one direction, top-down

ANS: A PTS: 1

30. Which statement is not true? Responsibility accounting

a. involves both a top-down and bottom-up flow of information

b. acknowledges that some economic events cannot be traced to any manager

c. creates a budget
d. compares actual performance with budget

ANS: B PTS: 1

31. What mechanism is used to convey to managers the standards by which their performance
will be measured?

a. the responsibility report

b. the scheduled report
c. the budget
d. all of the above

ANS: C PTS: 1

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

32. All of the following concepts encourage goal congruence except

a. detailed information reporting at all management levels

b. authority and responsibility

c. formalization of tasks

d. responsibility accounting

ANS: A PTS: 1

33. Which of the following statements is NOT true?

a. XML stands for eXperimental Markup Language.

b. XML is a is a meta-language for describing markup languages.
c. Unlike HTML, XML is capable of storing data in relational form.

d. Any markup language can be created using XML

ANS: A PTS: 1

34. Which file has as its primary purpose to present comparative financial reports on a historic
basis?

a. journal voucher history file

b. budget master file

c. responsibility file
d. general ledger history file

ANS: D PTS: 1

35. All of the following are characteristics of the strategic planning process except the

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
a. emphasis on both the short and long run.

b. review of the attributes and behavior of the organizations competition.

c. analysis of external economic factors.

d. analysis of consumer demand.

ANS: A PTS: 1

36. Which of the following performance measures cannot result in dysfunctional behavior?

a. price variance
b. quotas
c. ROI

d. net income
e. all of the above can result in dysfunctional behavior

ANS: E PTS: 1

37. Which of the following best describes a profit center:

a. authority to make decisions affecting the major determinants of profit, including

the power to choose its markets and sources of supply.

b. authority to make decisions affecting the major determinants of profit, including

the power to choose its markets and sources of supply, and significant control over
the amount of invested capital.
c. authority to make decisions over the most significant costs of operations, including
the power to choose the sources of supply.
d. authority to provide specialized support to other units within the organization.

e. responsibility for combining the raw materials, direct labor, and other factors of
production into a final product.

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
ANS: A PTS: 1

38. Which of the following budgeting processes is least likely to motivate managers toward
organizational goals?

a. setting budget targets at attainable levels

b. participation by subordinates in the budgetary process

c. use of management by exception

d. holding subordinates accountable for the items they control

e. having top management set budget levels

ANS: A PTS: 1

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

SHORT ANSWER

1. List, in order, the steps in the Financial Accounting Process.

1.

2.

3.

4.

5.

6.
7.
8.
9.

10.

11.

ANS:

1. Capture the transaction on source documents.

2. Record in special journals.

3. Post to subsidiary ledger.

4. Post to general ledger (using journal vouchers).

5. Prepare the unadjusted trial balance.

6. Make adjusting entries.

7. Journalize and post adjusting entries.

8. Prepare adjusted trial balance.

9. Prepare financial statements.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
10. Journalize and post closing entries.

11. Prepare the post-closing trial balance.

PTS: 1

2. List two duties that the general ledger clerk should not perform.

ANS:

make entries in special journals or subsidiary ledgers;

prepare journal vouchers; maintain custody of physical assets

PTS: 1

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
b. middle management

c. operations management
d. front-line management

ANS: B PTS: 1

23. The decision to enter a new market is an example of

a. strategic planning
b. tactical planning
c. management control
d. operational control

ANS: A PTS: 1
1 0

24. All of the following are elements of operational control decisions except
24. All of the following are elements of operational control decisions except

a. determining the scope of the activity

b. setting operating standards

c. evaluating performance
d. taking corrective action when necessary

ANS: A PTS: 1

25. In contrast to tactical planning decisions, management control decisions, and operational
control decisions, strategic planning decisions usually

a. are more focused

b. have a shorter time frame

c. are unstructured

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
d. have a high degree of certainty

ANS: C PTS: 1

26. Which of the following management principles affects the management reporting system?

a. formalization of tasks
b. authorization

c. span of control
d. all of the above

ANS: D PTS: 1

27. All of the following are elements of problem structure except

a. certainty

b. data
c. procedures
d. objectives

ANS: A PTS: 1

28. All of the following are examples of programmed reports except

a. cash flow reports for Division B

b. year-to-date local income tax 1payments
0
made by all employees living in City X
and working in City Y
c. inventory exception reports for Division G
d. equipment utilization reports for Plant M

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.

Accounting Information Systems, 8e—Test Bank, Chapter 8

1 0

ANS: B PTS: 1
29. A fundamental principle of responsibility accounting is that

a. managers are accountable only for items they control

b. a managers span of control should not exceed eight people

c. structured reports should be prepared weekly
d. the information flow is in one direction, top-down

ANS: A PTS: 1

30. Which statement is not true? Responsibility accounting

a. involves both a top-down and bottom-up flow of information

b. acknowledges that some economic events cannot be traced to any manager
c. creates a budget
d. compares actual performance with budget

ANS: B PTS: 1

31. What mechanism is used to convey to managers the standards by which their performance
will be measured?

a. the responsibility report

b. the scheduled report
c. the budget
d. all of the above

ANS: C PTS: 1

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8

32. All of the following concepts encourage goal congruence except

a. detailed information reporting at all management levels

b. authority and responsibility
c. formalization of tasks

d. responsibility accounting

ANS: A PTS: 1

33. Which of the following statements is NOT true?

1 0
a. XML stands for eXperimental Markup Language.
 b. XML is a is a meta-language for describing markup languages.
c. Unlike HTML, XML is capable of storing data in relational form.

d. Any markup language can be created using XML

ANS: A PTS: 1

34. Which file has as its primary purpose to present comparative financial reports on a historic
basis?

a. journal voucher history file

b. budget master file
c. responsibility file
d. general ledger history file

ANS: D PTS: 1

35. All of the following are characteristics of the strategic planning process except the

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
a. emphasis on both the short and long run.

b. review of the attributes and behavior of the organizations competition.

c. analysis of external economic factors.

d. analysis of consumer demand.

ANS: A PTS: 1

36. Which of the following performance measures cannot result in dysfunctional behavior?

a. price variance
b. quotas
c. ROI

d. net income
e. all of the above can result in dysfunctional behavior

ANS: E PTS: 1

37. Which of the following best describes a profit center:

a. authority to make decisions affecting the major determinants of profit, including

the power to choose its markets and sources of supply.
1 0
b. authority to make decisions affecting the major determinants of profit, including
the power to choose its markets and sources of supply, and significant control over
 the amount of invested capital.
c. authority to make decisions over the most significant costs of operations, including
the power to choose the sources of supply.
d. authority to provide specialized support to other units within the organization.

e. responsibility for combining the raw materials, direct labor, and other factors of
production into a final product.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.

1 0
 Accounting Information Systems, 8e—Test Bank, Chapter 8
ANS: A PTS: 1

38. Which of the following budgeting processes is least likely to motivate managers toward
organizational goals?

a. setting budget targets at attainable levels

b. participation by subordinates in the budgetary process

c. use of management by exception

d. holding subordinates accountable for the items they control

e. having top management set budget levels

ANS: A PTS: 1

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1 0
duplicated, or posted to a publicly accessible website, in whole or in part.
 Accounting Information Systems, 8e—Test Bank, Chapter 8

SHORT ANSWER

1. List, in order, the steps in the Financial Accounting Process.

1.
1 0
2.
 3.
4.

5.

6.

7.
8.

9.
10.

11.

ANS:

1. Capture the transaction on source documents.

2. Record in special journals.

3. Post to subsidiary ledger.

4. Post to general ledger (using journal vouchers).

5. Prepare the unadjusted trial balance.

6. Make adjusting entries.

7. Journalize and post adjusting entries.

8. Prepare adjusted trial balance.

9. Prepare financial statements.

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duplicated, or posted to a publicly accessible website, in whole or in part.

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 Accounting Information Systems, 8e—Test Bank, Chapter 8
10. Journalize and post closing entries.

11. Prepare the post-closing trial balance.

PTS: 1

2. List two duties that the general ledger clerk should not perform.

ANS:

make entries in special journals or subsidiary ledgers;

prepare journal vouchers; maintain custody of physical assets

PTS: 1

1 0