Chapter 13: Transaction cycle - the general ledger and financial

reporting cycle

True/False

1. The sole function of the general ledger and the financial reporting cycle is to prepare financial
statements to the shareholders of the company. F

2. XBRL is becoming the standard for corporate filing and reporting in Australia. True. XBRL
(eXtensible Business Reporting Language) has been increasingly adopted as a standard for corporate filing and
reporting in various countries, including Australia

3. Detailed budgeting, although more difficult than aggregate budgeting, provides better monitoring of
performance. T . Detailed budgeting involves breaking down budgets into specific categories or items,
which can offer better insight and control over spending and performance compared to broader,
aggregate budgeting.

4. The general ledger and financial reporting cycle starts with the updating of the general ledger. F
( bắt đầu bằng prepare budget)

5. The only output of the general ledger and financial reporting cycle is the set of financial statements.

6. Historical transactions and prior results must be used in the budgeting process to produce more
accurate estimates. F. ( not must )

7. The primary risk related to determining budget values are data entry errors. F. ( under/overestimate
revenue and expenditure.)

8. The primary risk when preparing adjusting journals are data entry errors. T.

9. Management reports produced by the general ledger and financial reporting cycle should be
protected against unauthorised distribution.

10. Separation of duties need not be specified for the general ledger and financial reporting cycle
because there is no physical asset involved. T.
Multiple choice

11. The general ledger and financial reporting cycle ________.

a. Summarises, adjusts, and reports on data from all previous operational cycles
b. Summarises, adjusts, and reports on data from all current operational cycles
c. Creates, adjusts, and summarises on data from all previous operational cycles
d. Creates, adjusts, and summarises on data from all current operational cycles

12. During the general ledger and financial reporting cycle:

a. Budgets are created and agreed upon

b. Transactional level data is accumulated, summarised, adjusted and reported to internal users
c. Transactional level data is accumulated, summarised, adjusted and reported to external users
d. All of the above.

13. Financial reports generated in the general ledger and financial reporting cycle is not used by:

a. Managers within the organisation

b. Investors
c. External regulators
d. None of the above

14. Which of the following statements is correct?

a. Budgets created for a particular financial year should not be altered until the next financial
year.
b. Assuring the timeliness, validity, accuracy and completeness of reported data has nothing to
do with the organisation success's.
c. Final budgets are used as a forecast rather than a control measure.
d. To motivate desirable behaviour by managers within the organisation, budgets should be
framed so that activity targets are achievable but challenging.

15. The purpose of budgeting is to:

a. Get a forecast of resource usage for the next financial year only
b. Facilitate organisational planning and control
c. Request more funding.
d. None of the above.

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16. An unfavourable variance between budgeted and actual data does not indicate

a. Poor performance
b. Budget estimates were set at an unrealistic or unachievable level
c. The estimation of future activity levels and the associated potential costs and revenues is
incorrect and inaccurate.
d. None of the above.

17. In terms of the general ledger and financial reporting cycle, which of the following sequences is in
the correct order?

a. create trial balance, perform bank reconciliation, prepare adjusting journal entries, conduct
financial reporting
b. prepare adjusting journal entries, create trial balance, perform bank reconciliation, conduct
financial reporting
c. perform bank reconciliation, create trial balance, prepare adjusting journal entries, conduct
financial reporting
d. create trial balance, prepare adjusting journal entries, perform bank reconciliation, conduct
financial reporting

18. Which of the following statements is true?

a. Financial reports are more detailed than management reports.

b. Financial reports have an internal focus.
c. Management reports can be distributed externally.
d. Basic reports contain even more detailed information than financial reports and management
reports.

19. Which of the following statements is not true?

a. Decision making performance may be compromised due to poor quality outputs of the
general ledger and financial reporting cycle.
b. Decision making performance may be compromised due to poorly formatted and designed
reports.
c. Decision making performance may be compromised due to too many data being presented
in the reports.
d. None of the above.

20. Which of the following is not a problem that can be caused directly by errors in financial
statements?

a. Inability to improve business process efficiencies

b. Inability to access capital markets
c. Inequitable increases in the cost of capital
d. Incorrect market pricing of company shares
21. Which of the following technologies can be used in the general ledger and financial reporting
cycle?

a. ERP
b. XBRL
c. Both of a and b
d. None of the above

22. An internet-based banking facility that allows organisations to manage and view their bank
accounts online and conduct transactions such as transfer from those accounts is called:

a. Online reconciliation
b. Online payment
c. Online banking
d. Online financial management

23. XBRL allows semantics to be embedded within strings of financial data. This does not mean:

a. It is easier to build a database for accounting information systems

b. More in-depth analysis can be conducted by users or recipients of the data
c. Embedded tags that identify where separate pieces of data start and end within strings of
data is inserted
d. It is easier to exchange financial data.

24. Which of the following statements is incorrect?

a. Access to financial data can occur by means of paper

b. External reporting must be paper based
c. Access to financial data can occur by means of electronic reports
d. External reporting can be done electronically

25. Which of the following statements is incorrect?

a. If an annual budget is set, month-by-month monitoring could be misleading when variances

are considered.
b. Not all revenue and expenses divide evenly into 12 over a fiscal year.
c. The degree of granularity at which the budget set determines how useful the budget targets
will be during performance monitoring.
d. None of the above

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26. Setting budget targets requires balance between:

a. the current financial situation of the organisation and the forecasted cash flow
b. what is desired in terms of performance and what is thought to be possible
c. the expenditure and the revenue of the organisation
d. All of the above.

27. Which of the following is not required during the process of updating the general ledger?

a. journal voucher
b. accounts receivable data
c. manufacturing overheads
d. direct labour costs

28. To minimise the risk of under or over estimating revenue and expenditure amounts, which of the
following controls can be applied?

a. Independent approval of budget estimates

b. Ask operational managers to prepare budget estimates
c. Link budget values to performance monitoring
d. All of the above.

29. Which of the following statements is true?

a. The finalisation of budges is a nondiscretionary process involving senior management only.

b. The finalisation of budgets is an interactive process involving both senior management and
operational staff.
c. The finalisation of budges is a nondiscretionary process involving both senior management
and operational staff.
d. The finalisation of budgets is an interactive process involving both senior management and
middle management.

30. A warning message is produced if budget estimate varies by more than a fixed percentage from
last year's budget is an example of controlling for:

a. fraud
b. data entry errors when recording budgets
c. underestimation of revenue and expenditure amounts
d. None of the above.

31. To reduce the risks of incomplete and inaccurate data during data extraction and validation in the
process of updating the general ledger, which of the following controls can be used?
 a. Batch totals
b. Hash totals
c. Use ledger control accounts
d. All of the above

32. Which of the following is not helpful in reducing the risk of journal entries errors during the
preparation of adjusting journals?

a. Independent approval of journal entries by senior accounting staff

b. Attach full working papers to support journal entry calculations
c. Document assumptions and algorithms relied on when calculating journal amounts
d. Perform reasonableness check.

33. Unauthorised distribution of financial data cannot be controlled by:

a. using the XBRL technology

b. applying secure privacy settings on electronic reports
c. using a document management system for reports containing sensitive data
d. maintaining security profiles allowing read-only access to financial data at the individual
level

34. The main risk attached to producing financial reports is:

a. unauthorised distribution of financial reports

b. unauthorised access of financial reports
c. reporting incorrect data
d. All of the above

35. Which of the following KPIs is not suitable for measuring how accurate and complete the budget
estimates are determined and recorded?

a. Number of budget variances reported

b. Operational manager complaints received regarding budget errors
c. Cycle time to create budgets
d. Degree of compliance with accounting policy