Hall 5e TB Ch08

Chapter 8

桮

eneral 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

2.

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

ANS:

T

3.

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

ANS:

T

4.

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

ANS:

T

5.

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

ANS:

F

6.

Management reporting is often called discretionary reporting because it is not mandated as is financial

reporting.

ANS:

T

7.

Primary recipients of financial statement information are internal management.

ANS:

F

8.

The Management Reporting System is a nondiscretionary system.

ANS:

F

9.

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

ANS:

T

10.

In most cases intangible decision criteria can be quantified.

ANS:

F

11.

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

implementation.

ANS:

T

12.

Responsibility refers to an individual

抯

obligation to achieve desired results.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

ANS:

T

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

ANS:

F

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

action.

ANS:

T

Standards are the basis for evaluating actual performance.

ANS:

T

A report is said to have information content if it eliminates uncertainty associated with a problem

facing the decision maker.

ANS:

F

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

ANS:

T

A principle of responsibility accounting is that managers are responsible for controllable and

uncontrollable costs.

ANS:

F

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

ANS:

F

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

The formalization of tasks

principle suggests that management should structure the firm around the

unique skills sets of key individuals.

ANS:

F

If a manager delegates responsibility to a subordinate, he or she must also grant the subordinate

authority to make decisions.

ANS:

T

Operational control involves motivating managers at all levels to use resources, including materials,

personnel, and financial assets, as productively as possible.

ANS:

F

The block code is the coding scheme most appropriate for a chart of accounts.

ANS:

T

MULTIPLE CHOICE

1.

The coding scheme most appropriate for a chart of accounts is

a.

sequential code

b.

block code

c.

group code

d.

mnemonic code

ANS:

B

2.

A common use for sequential coding is

a.

creating the chart of accounts

b.

identifying inventory items

c.

identifying documents

d.

identifying fixed assets

ANS:

C

3.

The most important advantage of sequential coding is that

a.

missing or unrecorded documents can be identified

b.

the code itself lacks informational content

c.

items cannot be inserted

d.

deletions affect the sequence

ANS:

A

4.

When a firm wants its coding system to convey meaning without reference to any other document, it

would choose

a.

an alphabetic code

b.

a mnemonic code

c.

a group code

d.

a block code

ANS:

B

5.

The most important advantage of an alphabetic code is that

a.

meaning is readily conveyed to users

b.

sorting is simplified

c.

the capacity to represent items is increased

d.

missing documents can be identified

ANS:

C

6.

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

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

7.

Which statement is not correct? The general ledger master file

a.

b.

c.

d.

is based on the firm

抯

chart of account

contains a record for control accounts

is an output of the Financial Reporting System (FRS)

supplies information for management decision making

ANS:

C

8.

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

9.

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

10.

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 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

11.

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

12.

What account appears on the postclosing trial balance?

a.

income summary

b.

machinery

c.

rent expense

d.

interest income

ANS:

B

13.

Financial statements are prepared from the

a.

trial balance

b.

adjusted trial balance

c.

general ledger

d.

general journal

ANS:

B

14.

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

15.

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

16.

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

17.

The audit trail fulfills all of the following purposes except

a.

provides the ability to answer inquiries

b.

ensures the accuracy of the application software

c.

fulfills governmental regulations

d.

offers a means for preventing, detecting, and correcting errors

ANS:

B

18.

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

19.

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

ANS:

C

20.

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

21.

Which statement is not true?

a.

authority refers to an individual

抯

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 employee

抯

position with

the firm

d.

all of the above are true

ANS:

A

22.

Which statement is not true? The manager

抯

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

23.

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 firm

抯

products

ANS:

B

24.

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

25.

The level of management that makes tactical planning decisions is

a.

top management

b.

middle management

c.

operations management

d.

front-line management

ANS:

B

26.

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

27.

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

28.

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

d.

have a high degree of certainty

ANS:

C

29.

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

30.

All of the following are elements of problem structure except

a.

certainty

b.

data

c.

procedures

d.

objectives

ANS:

A

31.

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

ANS:

B

32.

A fundamental principle of responsibility accounting is that

a.

managers are accountable only for items they control

b.

a manager

抯

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