TRUE/FALSE

Chapter 4
F 1. The packing slip is also known as the shipping notice.
F 2. The bill of lading is a legal contract between the buyer and the seller.
T 3. Another name for the stock release form is the picking ticket.
F 4. Warehouse stock records are the formal accounting records for inventory.
T 5. The purpose of the invoice is to bill the customer.
T 6. In most large organizations, the journal voucher file has replaced the formal general journal.
T 7. The cash receipts journal is a special journal.
F 8. In the revenue cycle, the internal control “limit access” applies to physical assets only.
T 9. In real-time processing systems, routine credit authorizations are automated.
F 10. In a computerized accounting system, segregation of functions refers to inventory control,
accounts receivable, billing, and general ledger tasks.
F 11. A written customer purchase order is required to trigger the sales order system.
F 12. Inventory control has physical custody of inventory.
T 13. The principal source document in the sales order system is the sales order.
T 14. Sales orders should be prenumbered documents.
T 15. Integrated accounting systems automatically transfer data between modules.
F 16. If a customer submits a written purchase order, there is no need to prepare a sales order.
F 17. Sales return involves receiving, sales, credit, and billing departments, but not accounts
receivable.
T 18. A remittance advice is a form of turn-around document.
F 19. A bill of lading is a request for payment for shipping charges.
T 20. In point of sale systems, authorization takes the form of validation of credit card charges.
F 21. The warehouse is responsible for updating the inventory subsidiary ledger.
T 22. In a manual system, the billing department is responsible for recording the sale in the sales
journal.
F 23. The stock release document is prepared by the shipping department to provide evidence that
the goods have been released to the customer.
F 24. The accounts receivable clerk is responsible for updating the AR Control accounts to reflect
each customer sale.
T 25. When customer payments are received, the mailroom clerk sends the checks to the cash
receipts clerk and the remittance advices to the AR clerk.
F 26. Physical controls are imbedded in computer systems to control access to data.
T 27. Process controls are controls over the logic of the application.
T 28. In a basic technology revenue cycle system, a robust passwold control policy should be
implemented.
T 29. In an integrated cash receipts system, the cash receipts clerk reconciles the checks and the
remittance advices and prepares deposit slipS
F 30. Multilevel security employs programmed techniques that permit simultaneous access to a
central system by many users with different access privileges but allows them to obtaining
information for which they lack authorization.
T 31. Application integrity is achieved through the systems development and program change
processes.
 Chapter 5
T 1. Purchasing decisions are authorized by inventory control.
F 2. The blind copy of the purchase order that goes to the receiving department contains no item
descriptions.
T 3. Firms that wish to improve control over cash disbursements use a voucher system.
T 4. In a voucher system, the sum of all unpaid vouchers in the voucher register equals the firm’s
Total voucher payable balance.
F 5. The accounts payable department reconciles the accounts payable subsidiary ledger to the
Control account.
F 6. The use of inventory reorder points suggests the need to obtain specific authorization.
T 7. Proper segregation of duties requires that the responsibility approving a payment be
separated
From posting to the cash disbursements journal.
F 8. A major risk exposure in the expenditure cycle is that accounts payable may be overstated at
the end of the accounting year.
T 9. When a trading partner agreement is in place, the traditional three way match may be
eliminated.
T 10. Authorization of purchases in a merchandising firm occurs in the inventory control
department.
F 11. A three way match involves a purchase order, a purchase requisition, and an invoice.
F 12. Authorization for a cash disbursement occurs in the cash disbursement department upon
receipt of the supplier’s invoice.
T 13. An automated cash disbursements system can yield better cash management since payments
Are made on time.
T 14. Permitting warehouse staff to maintain the only inventory records violates separation of
duties.
F 15. A purchasing system that employs electronic data interchange does not use a purchase order.
F 16. Inventory control should be located in the warehouse.
F 17. Inspection of shipments in the receiving department would be improved if the
documentation showed the value of the inventory.
T 18. One reason for authorizing purchases is to enable efficient inventory management.
T 19. If accounts payable receives an invoice directly from the supplier it needs to be reconciled
with the purchase order and receiving report.
T 20. Supervision in receiving is intended to reduce the theft of assets.
 Chapter 6
F 1.Time cards are used by cost accounting to allocate direct labor charges to work in process.
T 2. The personnel department authorizes changes in employee pay rates.
F 3. Most payroll systems for mid-size firms use real-time data processing.
F 4. To improve internal control, paychecks should be distributed by the employee's supervisor.
T 5. Employee paychecks should be drawn against a special checking account.
F 6. Because a time clock is used, no supervision is required when employees enter and leave the
work place.
F 7. Inventory control performs the formal record keeping function for fixed assets.
T 8. The depreciation schedule shows when assets are fully depreciated.
F 9. Authorization to dispose of fixed assets should be issued by the user of the asset.
F 10. Work-in-process records are updated by payroll personnel.
T 11. Ideally, payroll checks are written on a special bank account used only for payroll.
F 12. The supervisor is the best person to determine the existence of a “phantom employee” and
should distribute paychecks.
F 13. Payroll processing can be automated easily because accounting for payroll is very simple.
F 14. Timekeeping is part of the personnel function.
T 15. Fixed asset accounting systems include cost allocation and matching procedures that are not
part of routine expenditure systems.
F 16. Asset maintenance involves only the recording of depreciation charges. Physical
improvements are always expensed.
T 17. Fixed Asset Systems must keep track of the physical location of each asset to promote
accountability.
F 18. Time cards capture the total time an individual worker spends on each production job.
T 19. Accounting conventions and IRS rules sometime specify the depreciation parameters to be
used.
F 20. The fixed asset disposal report authorizes the user department to dispose of a fixed asset.
F 20. The fixed asset disposal report authorizes the user department to dispose of a fixed asset.
F 21. Work centers provide the personnel action form, which triggers the payroll process.
T 22. The payroll department is responsible for both updating the employee records and writing
paychecks.
F 23. The paymaster distributes paychecks to work center supervisors.
F 24. Inventory control authorizes fixed asset purchases with a purchase requisition.
F 25. When fixed assets are received, the receiving clerk sends copies of the receiving report to the
inventory control clerk and the AP clerk.
Chapter 4
1. The revenue cycle consists of
a. one subsystem–order entry
b. two subsystems–sales order processing and cash receipts
c. two subsystems–order entry and inventory control
d. three subsystems–sales order processing, credit authorization, and cash receipts

2. The reconciliation that occurs in the shipping department is intended to ensure that
a. credit has been approved
b. the customer is billed for the exact quantity shipped
c. the goods shipped match the goods ordered
d. inventory records are reduced for the goods shipped

3. The adjustment to accounting records to reflect the decrease in inventory due to a sale occurs in
the
a. warehouse
b. shipping department
c. billing department
d. inventory control department

4. Which document triggers the revenue cycle?

a. the sales order
b. the customer purchase order
c. the sales invoice
d. the journal voucher

5. Copies of the sales order can be used for all of the following except
a. purchase order
b. credit authorization
c. shipping notice
d. packing slip
6. The purpose of the sales invoice is to
a. record reduction of inventory
b. transfer goods from seller to shipper
c. bill the customer
d. select items from inventory for shipment

7. The customer open order file is used to

a. respond to customer queries
b. fill the customer order
c. ship the customer order
d. authorize customer credit
e.

8. The stock release copy of the sales order is not used to

a. locate and pick the items from the warehouse shelves
b. record any out-of-stock items
c. authorize the warehouse clerk to release custody of the inventory to shipping
d. record the reduction of inventory

9. The shipping notice

a. is mailed to the customer
b. is a formal contract between the seller and the shipping company
c. is always prepared by the shipping clerk
d. informs the billing department of the quantities shipped

10. The billing department is not responsible for

a. updating the inventory subsidiary records
b. recording the sale in the sales journal
c. notifying accounts receivable of the sale
d. sending the invoice to the customer

11. Customers should be billed for backorders when

a. the customer purchase order is received
b. the backordered goods are shipped
c. the original goods are shipped
d. customers are not billed for backorders because a backorder is a lost sale

12. Usually specific authorization is required for all of the following except
a. sales on account which exceed the credit limit
b. sales of goods at the list price
c. a cash refund for goods returned without a receipt
d. write off of an uncollectible account receivable

13. Which of following functions should be segregated?

a. opening the mail and making the journal entry to record cash receipts
b. authorizing credit and determining reorder quantities
c. maintaining the subsidiary ledgers and handling customer queries
d. providing information on inventory levels and reconciling the bank statement

14. Which situation indicates a weak internal control structure?

a. the mailroom clerk authorizes credit memos
b. the record keeping clerk maintains both accounts receivable and accounts payable
subsidiary ledgers
c. the warehouse clerk obtains a signature before releasing goods for shipment
d. the accounts receivable clerk prepares customer statements every month

15. The most effective internal control procedure to prevent or detect the creation of fictitious
credit
memoranda for sales returns is to
a. supervise the accounts receivable department
b. limit access to credit memoranda
c. prenumber and sequence check all credit memoranda
d. require management approval for all credit memoranda
16. The accounts receivable clerk destroys all invoices for sales made to members of her family and
does
not record the sale in the accounts receivable subsidiary ledger. Which procedure will not detect
this
fraud?
a. prenumber and sequence check all invoices
b. reconcile the accounts receivable control to the accounts receivable subsidiary ledger
c. prepare monthly customer statements
d. reconcile total sales on account to the debits in the accounts receivable subsidiary ledger

17. Which department is least likely to be involved in the revenue cycle?

a. credit
b. accounts payable
c. billing
d. shipping

18. Which document is included with a shipment sent to a customer?

a. sales invoice
b. stock release form
c. packing slip
d. shipping notice

19. Good internal controls in the revenue cycle should ensure all of the following except
a. all sales are profitable
b. all sales are recorded
c. credit is authorized
d. inventory to be shipped is not stolen

20. Which control does not help to ensure that accurate records are kept of customer accounts and
inventory?
a. reconcile accounts receivable control to accounts receivable subsidiary
b. authorize credit
c. segregate custody of inventory from record keeping
d. segregate record keeping duties of general ledger from accounts receivable
21. Internal controls for handling sales returns and allowances do not include
a. computing bad debt expense using the percentage of credit sales
b. verifying that the goods have been returned
c. authorizing the credit memo by management
d. using the original sales invoice to prepare the sales returns slip

22. The printer ran out of preprinted sales invoice forms and several sales invoices were not
printed. The
best internal control to detect this error is
a. a batch total of sales invoices to be prepared compared to the actual number of sales
invoices prepared
b. sequentially numbered sales invoices
c. visual verification that all sales invoices were prepared
d. none of the above will detect this error

23. Which department prepares the bill of lading?

a. sales
b. warehouse
c. shipping
d. credit

24. A remittance advice is

a. used to increase (debit) an account receivable by the cash received
b. is a turn-around document
c. is retained by the customer to show proof of payment
d. none of the above

25. A weekly reconciliation of cash receipts would include comparing

a. the cash prelist with bank deposit slips
b. the cash prelist with remittance advices
c. bank deposit slips with remittance advices
d. journal vouchers from accounts receivable and general ledger

26. At which point is supervision most critical in the cash receipts system?
a. accounts receivable
b. general ledger
c. mail room
d. cash receipts

27. EDI trading partner agreements specify all of the following except
a. selling price
b. quantities to be sold
c. payment terms
d. person to authorize transactions

28. A cash prelist is

a. a document that records sales returns and allowances
b. a document returned by customers with their payments
c. the source of information used to prepare monthly statements
d. none of the above

29. An advantage of real-time processing of sales is

a. the cash cycle is lengthened
b. current inventory information is available
c. hard copy documents provide a permanent record of the transaction
d. data entry errors are corrected at the end of each batch

30. Commercial accounting systems have fully integrated modules. The word “integrated” means
that
a. segregation of duties is not possible
b. transfer of information among modules occurs automatically
c. batch processing is not an option
d. separate entries are made in the general ledger accounts and the subsidiary ledgers
31. The data processing method that can shorten the cash cycle is
a. batch, sequential file processing
b. batch, direct access file processing
c. real-time file processing
d. none of the above

32. Which of the following is not a risk exposure in a microcomputer accounting system?
a. reliance on paper documentation is increased
b. functions that are segregated in a manual environment may be combined in a
microcomputer accounting system
c. backup procedures require human intervention
d. data are easily accessible

33. Which journal is not used in the revenue cycle?

a. cash receipts journal
b. sales journal
c. purchases journal
d. general journal

34. Periodically, the general ledger department receives all of the following except
a. total increases to accounts receivable
b. total of all sales backorders
c. total of all sales
d. total decreases in inventory

35. The credit department

a. prepares credit memos when goods are returned
b. approves credits to accounts receivable when payments are received
c. authorizes the granting of credit to customers
d. none of the above

36. Adjustments to accounts receivable for payments received from customers is based upon
a. the customer’s check
b. the cash prelist
c. the remittance advice that accompanies payment
d. a memo prepared in the mailroom

37. The revenue cycle utilizes all of the following files except
a. credit memo file
b. sales history file
c. shipping report file
d. cost data reference file

38. All of the following are advantages of real-time processing of sales except
a. The cash cycle is shortened
b. Paper work is reduced
c. Incorrect data entry is difficult to detect
d. Up-to-date information can provide a competitive advantage in the marketplace
39. Which document is NOT prepared by the sales department?
a. packing slip
b. shipping notice
c. bill of lading
d. stock release

40. Which type of control is considered a compensating control?

a. segregation of duties
b. access control
c. supervision
d. accounting records

41. Which of the following is NOT a common method for achieving multilevel security?
a. Access control list
b. Application integrity
c. Role based access control
d. All of the above

42. In an integrated cash receipts system, which of the following is not a task of the mail room clerk?
a. Prepare deposit slips
b. Open envelopes
c. Prepare remittance list
d. Make bank deposit

43. Which document triggers the update of the inventory subsidiary ledger?
a. bill of lading
b. stock release
c. sales order
d. shipping notice

44. Which function should the billing department NOT perform?

a. record the sales in the sales journal
b. send the ledger copy of the sales order to
c. send the stock release document and the
shipping notice to the billing department as proof of shipment
d. send the stock release document to inventory control

45. When will a credit check approval most likely

require specific authorization by the credit department?
a. when verifying that the current transaction does not exceed the customer’s credit limit
b. when verifying that the current transaction is with a valid customer
c. when a valid customer places a materially large order
d. when a valid customer returns goods

46. Which type of control is considered a compensating control?

a. segregation of duties
b. access control
c. supervision
d. accounting records
47. Which of the following is NOT an independent verification control?
a. The shipping department verifies that the goods sent from the warehouse are correct in type and
quantity.
b. General ledger clerks reconcile journal vouchers that were independently prepared in various
departments.
c. The use of prenumbered sales orders.
d. The billing department reconciles the shippingnotice with the sales invoice to ensure that customers are
billed for only the quantitiesshipped.

48. Which function or department below records the decrease in inventory due to a sale?
a. warehouse
b. sales department
c. billing department
d. inventory control

49. Which situation indicates a weak internal control structure?

a. the AR clerk authorizes the write off of bad debts
b. the record-keeping clerk maintains both AR and AP subsidiary ledgers
c. the inventory con trol clerk authorizes inventory purchases
d. the AR clerk prepares customer statements every month

50. The bill of lading is prepared by the

a. sales clerk.
b. warehouse clerk.
c. shipping clerk.
d. billing clerk.
Chapter 5

1. The purpose of the purchase requisition is to

a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. bill for goods delivered

2. The purpose of the receiving report is to

a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. bill for goods delivered ANS: B

3. All of the following departments have a copy of the purchase order except
a. the purchasing department
b. the receiving department
c. accounts payable
d. general ledger

4. The purpose of the purchase order is to

a. order goods from vendors
b. record receipt of goods from vendors
c. authorize the purchasing department to order goods
d. approve payment for goods received

5. 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

6. The purchase order

a. is the source document to make an entry into the accounting records
b. indicates item description, quantity, and price
c. is prepared by the inventory control department
d. is approved by the end-user department

7. The reason that a blind copy of the purchase order is sent to receiving is to
a. inform receiving when a shipment is due
b. force a count of the items delivered
c. inform receiving of the type, quantity, and price of items to be delivered
d. require that the goods delivered are inspected

8. The receiving report is used to

a. accompany physical inventories to the storeroom or warehouse
b. advise the purchasing department of the dollar value of the goods delivered
c. advise general ledger of the accounting entry to be made
d. advise the vendor that the goods arrived safely

9. When a copy of the receiving report arrives in the purchasing department, it is used to
d. recognize the purchase order as closed

10. The financial value of a purchase is determined by reviewing the

a. packing slip
b. purchase requisition
c. receiving report
d. supplier’s invoice

11. Which document is least important in determining the financial value of a purchase?
a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice

12. In a merchandising firm, authorization for the payment of inventory is the responsibility of
a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements

13. In a merchandising firm, authorization for the purchase of inventory is the responsibility of
a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements

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. Because of time delays between receiving inventory and making the journal entry
a. liabilities are usually understated
b. liabilities are usually overstated
c. liabilities are usually correctly stated
d. none of the above

16. Usually the open voucher payable file is organized by

a. vendor
b. payment due date
c. purchase order number
d. transaction date

17. 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

18. In the expenditure cycle, general ledger does not

a. post the journal voucher from the accounts payable department
b. post the account summary from inventory control
c. post the journal voucher from the purchasing department
d. reconcile the inventory control account with the inventory subsidiary summary

19. The documents in a voucher packet include all of the following except
a. a check
b. a purchase order
c. a receiving report
d. a supplier’s invoice

20. To maintain a good credit rating and to optimize cash management, cash disbursements
should arrive at the vendor’s place of business
a. as soon as possible
b. on the due date
c. on the discount date
d. by the end of the month

21. The cash disbursement clerk performs all of the following tasks except
a. reviews the supporting documents for completeness and accuracy
b. prepares checks
c. signs checks
d. marks the supporting documents paid

22. 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

23. Authorization for payment of an accounts payable liability is the responsibility of

a. inventory control
b. purchasing
c. accounts payable
d. cash disbursements

24. Of the following duties, it is most important to separate

a. warehouse from stores
b. warehouse from inventory control
c. accounts payable and accounts receivable
d. purchasing and accounts receivable

25. In a firm with proper segregation of duties, adequate supervision is most critical in
a. purchasing
b. receiving
c. accounts payable
d. general ledger

26. The receiving department is not responsible to

a. inspect shipments received
b. count items received from vendors
c. order goods from vendors
d. safeguard goods until they are transferred to the warehouse

27. The major risk exposures associated with the receiving department include all of the following
except
a. goods are accepted without a physical count
b. there is no inspection for goods damaged in shipment
c. inventories are not secured on the receiving dock
d. the audit trail is destroyed

28. When searching for unrecorded liabilities at the end of an accounting period, the accountant
would search all of the files except
a. the purchase requisition file
b. the cash receipts file
c. the purchase order file
d. the receiving report file

29. In regards to the accounts payable department, which statement is not true?
a. the purchase requisition shows that the transaction was authorized
b. the purchase order proves that the purchase was required
c. the receiving report provides evidence of the physical receipt of the goods
d. the supplier's invoice indicates the financial value of the transaction

30. In a computerized system that uses an economic order quantity (EOQ) model and the perpetual
inventory method, who determines when to reorder inventory?
a. the inventory control clerk
b. the purchasing department
c. the vendor
d. the computer system

31. Firms can expect that proper use of a valid vendor file will result in all of the following benefits
except
a. purchasing agents will be discouraged from improperly ordering inventory from related parties
b. purchases from fictitious vendors will be detected
c. the most competitive price will be obtained
d. the risk of purchasing agents receiving kickbacks and bribes will be reduced

32. 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

33. The document which will close the open purchase requisition file is the
a. purchase order
b. vendor invoice
c. receiving report
d. none of the above

34. Goods received are inspected and counted to

a. determine that the goods are in good condition
b. determine the quantity of goods received
c. preclude payment for goods not received or received in poor condition
d. all of the above

35. If a company uses a standard cost system, inventory records can be updated from the
a. vendor invoice
b. purchase order
c. receiving report
d. purchase requisition

36. If a company uses an actual cost system, inventory records can first be updated from the
a. vendor invoice
b. purchase order
c. receiving report
d. purchase requisition

37. Copies of a purchase order are sent to all of the following except
a. inventory control
b. receiving
c. general ledger
d. accounts payable

38. The receiving report

a. is used to update the actual cost inventory ledger
b. accompanies the goods to the storeroom
c. is sent to general ledger
d. is returned to the vendor to acknowledge receipt of the goods

39. A supplier invoice

a. is included with the goods
b. shows what was ordered even if all was not shipped
c. is sent by vendor to accounts payable
d. none of the above
 40. The cash disbursement function is
a. part of accounts payable
b. an independent accounting function
c. a treasury function
d. part of the general ledger department

41. Which document helps to ensure that the receiving clerks actually count the number of goods received?
a. packing list
b. blind copy of purchase order
c. shipping notice
d. invoice

42. When the goods are received and the receiving report has been prepared, which ledger may be
updated?
a. standard cost inventory ledger
b. inventory subsidiary ledger
c. general ledger
d. accounts payable subsidiary ledger

43. Which statement is NOT correct for anexpenditure system with proper internalcontrols?
a. Cash disbursements maintain the check register.
b. Accounts payable maintains the accounts payable subsidiary ledger.
c. Accounts payable is responsible for paying invoices.
d. Accounts payable is responsible for authorizing invoices.

44. Which duties should be segregated?

a. matching purchase requisitions, receiving reports, and invoices and authorizing payment
b. authorizing payment and maintaining the check register
c. writing checks and maintaining the check register
d. authorizing payment and maintaining the accounts payable subsidiary ledger

45. Which documents would an auditor most likely choose to examine closely to ascertain that all
expenditures incurred during the accounting period have been recorded as a liability?
a. invoices
b. purchase orders
c. purchase requisitions
d. receiving reports

46. Which task must still require human intervention in an automated purchases/cash disbursements
system?
a. determination
of inventory requirements
b. preparation of a purchase order
c. preparation of a receiving report
d. preparation of a check register

47. Which one of the following departments does not have a copy of the purchase order?
a. the purchasing department
b. the receiving department
c. accounts payable
d. general ledger
48. Which document typically triggers the process of recording a liability?
a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice

49. Which of the following tasks should the cash disbursement clerk NOT perform?
a. review the supporting documents for completenessand accuracy
b. prepare checks
c. approve the liability
d. mark the supporting documents paid

50. Which of the following is true?

a. The cash disbursement function is part of
accounts payable.
b. Cash disbursements is an independent
accounting function.
c. Cash disbursements is a treasury function.
d. The cash disbursement function is part of the
general ledger department.

Chapter 6

1. The document that captures the total amount of time that individual workers spend on each
production job is called a
a. time card
b. job ticket
c. personnel action form
d. labor distribution form

2. An important reconciliation in the payroll system is

a. general ledger compares the labor distribution summary from cost accounting
to the disbursement voucher from accounts payable
b. personnel compares the number of employees authorized to receive a paycheck to
the number of paychecks prepared
c. production compares the number of hours reported on job tickets to the number of
hours reported on time cards
d. payroll compares the labor distribution summary to the hours reported on time
cards
3. Which internal control is not an important part of the payroll system?
a. Supervisors verify the accuracy of employee time cards.
b. Paychecks are 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.

4. Which transaction is not processed in the Fixed Asset System?

a. purchase of building
b. improvement of equipment
c. purchase of raw materials
d. sale of company van

5. Depreciation
a. is calculated by the department that uses the fixed asset
b. allocates the cost of the asset over its useful life
c. is recorded weekly
d. results in book value approximating fair market value
 6. Depreciation records include all of the following information about fixed assets except
a. the economic benefit of purchasing the
asset
b. the cost of the asset
c. the depreciation method being used
d. the location of the asset

7. Which control is not a part of the Fixed Asset System?

a. formal analysis of the purchase request
b. review of the assumptions used in the capital budgeting model
c. development of an economic order quantity model
d. estimates of anticipated cost savings

8. Objectives of the Fixed Asset System do not include

a. authorizing the acquisition of fixed assets
b. recording depreciation expense
c. computing gain and/or loss on disposal of fixed assets
d. maintaining a record of the fair market value of all fixed
assets

9. Which of the following is not a characteristic of the Fixed Asset System?

a. Acquisitions are routine transactions requiring general authorization.
b. Retirements are reported on an authorized disposal report form.
c. Acquisition cost is allocated over the expected life of the asset.
d. Transfer of fixed assets among departments is recorded in the fixed asset subsidiary
ledger.

10. In the payroll subsystem, which function should distribute paychecks?

a. personnel
b. timekeeping
c. paymaster
d. payroll
11. Where does the responsibility lie for reconciling the labor distribution summary and the payroll
disbursement voucher?
a. cash disbursements
b. cost accounting
c. personnel
d. general ledger

12. Which of the following statements is not true?

a. Routine payroll processing begins with the submission of time cards.
b. Payroll clerks must verify the hours reported on the time cards.
c. Payroll reconciles personnel action forms with time cards and prepares paychecks.
d. Cash disbursements signs paychecks and forwards them to the paymaster for
distribution.

13. In a manufacturing firm, employees use time cards and job tickets. Which of the following
statements is not correct?
a. Job tickets are prepared by employees for each job worked on, so an employee may
have more that one job ticket on a given day.
b. An individual employee will have only one time card.
c. The time reported on job tickets should reconcile with the time reported on time
cards.
d. Paychecks should be prepared from the job tickets.

14. Which department is responsible for approving changes in pay rates for employees?
a. payroll
b. treasurer
c. personnel
d. cash disbursements
15. Which of the following situations represents a serious control weakness?
a. Timekeeping is independent of the payroll department.
b. Paychecks are distributed by the employees immediate
supervisor.
c. Time cards are reconciled with job tickets.
d. Personnel is responsible for updating employee records, including creation of
records for new hires.
16. Why would an organization require the paymaster to deliver all unclaimed paychecks to the
internal audit department?
a. to detect a “phantom employee” for whom a check was
produced
b. to prevent an absent employee’s check from being lost
c. to avoid paying absent employees for payday
d. to prevent the paymaster from cashing unclaimed checks

17. Which of the following is not a reasonable control for fixed assets?
a. Proper authorization is required for acquisition and disposal of fixed assets.
b. Fixed asset records show the location of each asset.
c. Fully depreciated assets are immediately disposed of.
d. Depreciation policies are in writing.

18. Cost accounting updates work-in-process accounts from

a. time cards
b. the labor distribution summary
c. job tickets
d. personnel action forms

19. Payroll uses time card data to do all of the following except
a. prepare the payroll register
b. update employee payroll records
c. prepare the labor distribution
summary
d. prepare paychecks

20. Payroll checks are typically drawn on

a. the regular checking account
b. a payroll imprest account
c. a wages payable account
d. petty cash
21. The personnel action form provides authorization control by
a. preventing paychecks for terminated employees
b. verifying pay rates for employees
c. informing payroll of new hires
d. all of the above

22. Accounting records that provide the audit trail for payroll include all of the following except
a. time cards
b. job tickets
c. payroll register
d. accounts payable register

23. Personnel actions forms are used to do all of the following except
a. activate new employees
b. terminate employees
c. record hours worked
d. change pay rates

24. The payroll department performs all of the following except

a. prepares the payroll register
b. distributes paychecks
c. updates employee payroll records
d. prepares paychecks

25. The document that records the total amount of time spent on a production job is the
a. time card
b. job ticket
c. labor distribution
summary
d. personnel action form

26. A control technique that can reduce the risk of a terminated employee being paid is
a. a security camera viewing the time clock
b. the supervisor taking role during the shift
 c. paychecks being distributed by an independent
paymaster
d. reconciliation of time cards and job tickets

27. Accounts payable

a. signs paychecks
b. prepares the payroll voucher
c. reconciles time cards and employee records
d. distributes paychecks to employees

28. All of the following are processed by the Fixed Asset System except
a. sale of unneeded equipment
b. purchase of raw materials
c. repair of production equipment
d. purchase of a new plant

29. The Fixed Asset System performs all of the following except
a. determines the need for new assets
b. maintains depreciation records
c. records retirement and disposal of assets
d. tracks the physical location of fixed assets

30. The payroll department performs all of the following except

a. prepares paychecks
b. transfers adequate funds to the payroll imprest
account
c. updates employee payroll records
d. prepares the payroll register

31. Depreciation
a. assures that assets are reported at fair market value
b. is discretionary for many firms
c. allocates the cost of an asset over its useful life
d. is the responsibility of the department using the asset
 32. The Fixed Asset System is similar to the expenditure cycle except
a. fixed asset transactions are non-routine and require special authorization and
controls
b. fixed assets are capitalized, not expensed
c. both a and b
d. none of the above

33. Asset maintenance involves

a. the recording of periodic depreciation
b. adjusting the asset records to reflect the cost of physical improvements
c. keeping track of the physical location of the assets
d. all of the above

34. The Fixed Asset Systems does all of the following except
a. records acquisition of assets
b. records improvements to assets
c. estimates the fair market value of assets in
service
d. records the disposal of assets

35. Asset disposal

a. occurs as soon as an asset is fully depreciated
b. requires no special authorization
c. automatically initiates the purchase of a replacement asset
d. must follow formal authorization procedures

36. Which of the following uses fingerprint or hand-vein scan technology to produce the time and
attendance file?
a. Biometric time clocks
b. Magnetic swipe ID cards
c. Mobile remote devices
d. Proximity cards

37. Which of the following works like a credit card with the time clock?
a. Biometric time clocks
b. Magnetic swipe ID cards
c. Mobile remote devices
d. Proximity cards

38. Which of the following works through wallets, purses and card holders?
a. Biometric time clocks
b. Magnetic swipe ID cards
c. Mobile remote devices
d. Proximity cards
39. Which of the following is popular among businesses with employees in the field who travel
between clients and companies with foreign-based employees?
a. Biometric time clocks
b. Magnetic swipe ID cards
c. Mobile remote devices
d. Proximity cards

40. Which of the following is NOT an input control to reduce the risks of data entry errors and payroll
fraud for a company with a mobile or distributed work force?
a. Limit tests that detect excessive hours
b. Check digits that detect transcription errors in employee identification
c. Biometric scanners, swipe cards, and PINS
d. Multilevel security that achieves segregation of duties