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Answers For All C Chapter 1—The Information System: An Accountant’s Perspective MULTIPLE CHOICE1. Which of the following is not a business resource?a. raw materialb. laborc. informationd. all are business resourcesANS: D2. Which level of management is responsible for short-term planning and coordination of activities necessary to accomplish organizational objectives?a. operations managementb. middle managementc. top managementd. line managementANS: B3. Which level of management is responsible for controlling day-to-day operations?a. top managementb. middle managementc. operations managementd. executive managementANS: C4. The ability to achieve the goals of a system depends upon the effective functioning and harmonious interaction between its subsystems. This is calleda. system decompositionb. system redundancyc. backup systemd. subsystem interdependencyANS: D5. The value of information for users is determined by all of the following but a. reliabilityb. relevancec. convenienced. completeness ANS: C6. An example of a nonfinancial transaction isa. sale of productsb. cash disbursementc. log of customer callsd. purchase of inventoryANS: C7. An example of a financial transaction isa. the purchase of computerb. a supplier’s price listc. a delivery scheduled. an employee benefit brochureANS: A8. Which subsystem is not part of the Accounting Information System?a. Transaction Processing Systemb. Expert Systemc. General Ledger/Financial Reporting Systemd. Management Reporting SystemANS: B9. The major difference between the Financial Reporting System (FRS) and the Management Reporting System (MRS) is thea. FRS provides information to internal and external users; the MRS provides information to internal usersb. FRS provides discretionary information; the MRS provides nondiscretionary informationc. FRS reports are prepared using information provided by the General Ledger System; theMRS provides information to the General Ledger Systemd. FRS reports are prepared in flexible, nonstandardized formats; the MRS reports areprepared in standardized, formal formatsANS: A10. The purpose of the Transaction Processing System includes all of the following excepta. converting economic events into financial transactionsb. recording financial transactions in the accounting recordsc. distributing essential information to operations personnel to support their daily operationsd. measuring and reporting the status of financial resources and the changes in thoseresourcesANS: D11. The Transaction Processing System includes all of the following cycles excepta. the revenue cycleb. the administrative cyclec. the expenditure cycled. the conversion cycleANS: B12. The primary input to the Transaction Processing System isa. a financial transactionb. an accounting recordc. an accounting reportd. a nonfinancial transactionANS: A13. When designing the data collection activity, which type of data should be avoided?a. data that is relevantb. data that is efficientc. data that is redundantd. data that is accurateANS: C14. The most basic element of useful data in the database isa. the recordb. the keyc. the filed. the attributeANS: D15. In a database, a complete set of attributes for a single occurrence of an entity class is called a. a keyb. a filec. a recordd. a character ANS: C16. Effective information has all of the following characteristics except a. relevanceb. completeness c. summarization d. structureANS: D17. Database management tasks do not includea. summarizationb. storage c. retrieval d. deletionANS: A18. The author distinguishes between the Accounting Information System and the management Information System based ona. whether the transactions are financial or nonfinancialb. whether discretionary or nondiscretionary reports are preparedc. the end users of the reportsd. the organizational structure of the businessANS: A19. Which activity is not part of the finance function?a. cash receiptsb. portfolio managementc. creditd. general ledgerANS: D20. Market research and advertising are part of which business function?a. materials managementb. financec. marketingd. productionANS: C21. Which function manages the financial resources of the firm through portfolio management, banking, credit evaluation, and cash receipts and disbursements?a. accountingb. financec. materials management d. distributionANS: B22. Which of the following is not part of the accounting function?a. managing the financial information resource of the firmb. capturing and recording transactions in the databasec. distributing transaction information to operations personneld. managing the physical information system of the firmANS: D23. The term “accounting independence” refers toa. data integrityb. separation of duties, such as record keeping and custody of physical resourcesc. generation of accurate and timely informationd. business segmentation by functionANS: B24. In the distributed data processing approacha. computer services are consolidated and managed as a shared organization resourceb. the computer service function is a cost centerc. the end users are billed using a charge-back systemd. computer services are organized into small information processing units under thecontrol of end usersANS: D25. The data control group is responsible fora. performing the day-to-day processing of transactionsb. security and integrity of the databasec. liaison between the end user and data processingd. providing safe storage for off-line data filesANS: C26. Data processing does not involvea. data controlb. computer operationsc. system maintenanced. data conversionANS: C27. Independent auditing is performed bya. external auditorsb. internal accountantsc. licensed auditorsd. third-party accountantsANS: A28. Which individual is least involved in new systems development?a. systems analystb. external auditorc. end userd. data librarianANS: D29. The objectives of all information systems include all of the following excepta. support for the stewardship function of managementb. evaluating transaction datac. support for the day-to-day operations of the firmd. support for management decision makingANS: B30. Which individuals may be involved in the Systems Development Life Cycle?a. accountantsb. systems professionalsc. end usersd. all of the aboveANS: D31. An appraisal function housed within the organization that performs a wide range of services for management isa. internal auditingb. data control groupc. external auditingd. database administrationANS: A32. Advantages of a database system include all of the following excepta. elimination of data redundancyb. open access to all data by all usersc. single update for changes in datad. confidence that all data is currentANS: B33. Disadvantages of distributed data processing include all of the following excepta. mismanagement of organizationwide resourcesb. hardware and software incompatibilityc. cost reductionsd. difficulty in hiring qualified IT professionalsANS: C34. Advantages of distributed data processing include each of the following excepta. cost reductionsb. better management of organization resourcesc. improved operational efficiencyd. increased user satisfactionANS: B35. Disadvantages of the distributed data processing approach include all of the following excepta. possible mismanagement of organization resourcesb. redundancy of tasksc. software incompatibilityd. system is not responsive to the user’s situationANS: D36. ERP packages include all of the following modules excepta. human resourcesb. general ledgerc. inventory managementd. they include all of the aboveANS: D37. All of the following are external end users excepta. cost accountantsb. creditorsc. stockholdersd. tax authoritiesANS: A38. Useful information must possess all of the following characteristics except a. relevanceb. timelessnessc. accuracyd. completenessANS: B39. The objectives of an information system include each of the following excepta. support for the stewardship responsibilities of managementb. furthering the financial interests of shareholdersc. support for management decision makingd. support for the firm’s day-to-day operationsANS: B40. Accountants play many roles relating to the accounting information system, including all of the following excepta. system usersb. system designersc. system auditorsd. system convertersANS: DChapter 2—Introduction to Transaction Processing MULTIPLE CHOICE1. Which system is not part of the expenditure cycle?a. cash disbursementsb. payrollc. production planning/controld. purchases/accounts payableANS: C2. Which system produces information used for inventory valuation, budgeting, cost control, performance reporting, and make-buy decisions?a. sales order processingb. purchases/accounts payablec. cash disbursementsd. cost accountingANS: D3. Which of the following is a turn-around document?a. remittance adviceb. sales orderc. purchase orderd. payroll checkANS: A4. The order of the entries made in the ledger is bya. transaction numberb. account numberc. dated. userANS: B5. The order of the entries made in the general journal is bya. dateb. account numberc. userd. customer numberANS: A6. In general a special journal would not be used to recorda. salesb. cash disbursementsc. depreciationd. purchasesANS: C7. Which account is least likely to have a subsidiary ledger?a. salesb. accounts receivablec. fixed assetsd. inventoryANS: A8. Subsidiary ledgers are used in manual accounting environments. What file is comparable to a subsidiary ledger in a computerized environment?a. archive fileb. reference filec. transaction filed. master fileANS: D9. A journal is used in manual accounting environments. What file is comparable to a journal in a computerized environment?a. archive fileb. reference filec. transaction filed. master file ANS: C10. In a computerized environment, a list of authorized suppliers would be found in the a. master fileb. transaction filec. reference filed. archive file ANS: C11. Which of the following is an archive file?a. an accounts payable subsidiary ledgerb. a cash receipts filec. a sales journald. a file of accounts receivable that have been written offANS: D12. Which document is not a type of source document?a. a sales orderb. an employee time cardc. a paycheckd. a sales return receiptANS: C13. The most important purpose of a turn-around document is toa. serve as a source documentb. inform a customer of the outstanding amount payablec. provide an audit trail for the external auditord. inform the bank of electronic funds depositsANS: A14. Which type of graphical documentation represents systems at different levels of detail?a. data flow diagramb. document flowchartc. system flowchartd. program flowchartANS: A15. Data flow diagramsa. depict logical tasks that are being performed, but not who is performing themb. illustrate the relationship between processes, and the documents that flow between them and trigger activitiesc. represent relationships between key elements of the computer systemd. describe in detail the logic of the processANS: A16. Document flowchartsa. depict logical tasks that are being performed, but not who is performing themb. illustrate the relationship between processes, and the documents that flow betweenthem and trigger activitiesc. represent relationships between key elements of the computer systemd. describe the logic of the processANS: B17. When determining the batch size, which consideration is the least important?a. achieving economies by grouping together large numbers of transactionsb. complying with legal mandatesc. providing control over the transaction processd. balancing the trade off between batch size and error detectionANS: B18. In contrast to a real-time system, in a batch processing systema. there is a lag between the time when the economic event occurs and the financial records are updatedb. relatively more resources are requiredc. a greater resource commitment per unit of output is requiredd. processing takes place when the economic event occursANS: A19. In contrast to a batch processing system, in a real-time systema. a lag occurs between the time of the economic event and when the transaction is recorded b. relatively fewer hardware, programming, and training resources are requiredc. a lesser resource commitment per unit of output is requiredd. processing takes place when the economic event occursANS: D20. The type of transaction most suitable for batch processing isa. airline reservationsb. credit authorizationc. payroll processingd. adjustments to perpetual inventoryANS: C21. The type of transaction most suitable for real-time processing isa. recording fixed asset purchasesb. recording interest earned on long-term bondsc. adjusting prepaid insuranced. recording a sale on accountANS: D22. Which step is not found in batch processing using sequential files?a. control totalsb. sort runsc. edit runsd. immediate feedback of data entry errorsANS: D23. Both the revenue and the expenditure cycle can be viewed as having two key parts. These area. manual and computerizedb. physical and financialc. input and outputd. batch and real-timeANS: B24. All of the following can provide evidence of an economic event excepta. source documentb. turn-around documentc. master documentd. product documentANS: C25. Which method of processing does not use the destructive update approach?a. batch processing using direct access filesb. real-time processingc. batch processing using sequential filesd. all of the above use the destructive update approachANS: C26. Which symbol represents a data store? a.b.c. d.ANS: B27. Which symbol represents a manual operation? a.b. c. d.ANS: D28. Which symbol represents accounting records?a.b.c. d.ANS: A29. Which symbol represents a document? a.b.c. d.ANS: B30. Which symbol represents a magnetic tape (sequential storage device)? a.b.c.d.ANS: D31. Which symbol represents a decision?a.b. c.d.ANS: A32. The characteristics that distinguish between batch and real-time systems include all of the following excepta. time frameb. resources usedc. file formatd. efficiency of processingANS: C33. A file that stores data used as a standard when processing transactions isa. a reference fileb. a master filec. a transaction filed. an archive fileANS: A34. Sequential storage meansa. data is stored on tapeb. access is achieved through an indexc. access is directd. reading record 100 requires first reading records 1 to 99ANS: D35. Real-time processing would be most beneficial in handling a firm’sa. fixed asset recordsb. retained earning informationc. merchandise inventoryd. depreciation recordsANS: C36. Which accounting application is least suited for batch processing?a. general ledgerb. vendor paymentsc. sales order processingd. payrollANS: C37. Which accounting application is best suited for batch processing?a. general ledgerb. vendor paymentsc. sales order processingd. payrollANS: D38. Operational inefficiencies occur becausea. accounts both common and unique to many concurrent transactions need to be updated inreal time.b. accounts common to many concurrent transactions need to be updated in real time.c. accounts unique to many concurrent transactions need to be updated in real time.d. None of the above are true statementsANS: B39. Operational efficiencies can be improved bya. updating accounts both common and unique to many concurrent transactions in real time.b. updating accounts both common and unique to many concurrent transactions in batchmode.c. updating accounts unique to many concurrent transactions in real time and updating common accounts in batch mode.d. None of the above are true statementsANS: CChapter 3—Ethics, Fraud, and Internal Control MULTIPLE CHOICE1. Which ethical principle states that the benefit from a decision must outweigh the risks, and that there is no alternative decision that provides the same or greater benefit with less risk?a. minimize riskb. justicec. informed consentd. proportionalityANS: D2. Individuals who acquire some level of skill and knowledge in the field of computer ethics are involved in which level of computer ethics?a. para computer ethicsb. pop computer ethicsc. theoretical computer ethicsd. practical computer ethicsANS: A3. All of the following are issues of computer security excepta. releasing incorrect data to authorized individualsb. permitting computer operators unlimited access to the computer roomc. permitting access to data by unauthorized individualsd. providing correct data to unauthorized individualsANS: B4. Which characteristic is not associated with software as intellectual property?a. uniqueness of the productb. possibility of exact replicationc. automated monitoring to detect intrudersd. ease of disseminationANS: C5. For an action to be called fraudulent, all of the following conditions are required excepta. poor judgmentb. false representationc. intent to deceived. injury or lossANS: A6. One characteristic of employee fraud is that the frauda. is perpetrated at a level to which internal controls do not applyb. involves misstating financial statementsc. involves the direct conversion of cash or other assets to the employee’s personalbenefitd. involves misappropriating assets in a series of complex transactions involving third partiesANS: C7. Forces which may permit fraud to occur do not includea. a gambling addictionb. lack of segregation of dutiesc. centralized decision making environmentd. questionable integrity of employeesANS: C8. Which of the following best describes lapping?a. applying cash receipts to a different customer’s account in an attempt to conceal previous thefts of fundsb. inflating bank balances by transferring money among different bank accountsc. expensing an asset that has been stolend. creating a false transactionANS: A9. Operations fraud includesa. altering program logic to cause the application to process data incorrectlyb. misusing the firm’s computer resourcesc. destroying or corrupting a program’s logic using a computer virusd. creating illegal programs that can access data files to alter, delete, or insert valuesANS: B10. Who is responsible for establishing and maintaining the internal control system?a. the internal auditorb. the accountantc. managementd. the external auditorANS: C11. The concept of reasonable assurance suggests thata. the cost of an internal control should be less than the benefit it providesb. a well-designed system of internal controls will detect all fraudulent activityc. the objectives achieved by an internal control system vary depending on the dataprocessing methodd. the effectiveness of internal controls is a function of the industry environmentANS: A12. Which of the following is not a limitation of the internal control system?a. errors are made due to employee fatigueb. fraud occurs because of collusion between two employeesc. the industry is inherently riskyd. management instructs the bookkeeper to make fraudulent journal entriesANS: C13. The most cost-effective type of internal control isa. preventive controlb. accounting controlc. detective controld. corrective controlANS: A14. Which of the following is a preventive control?a. credit check before approving a sale on accountb. bank reconciliationc. physical inventory countd. comparing the accounts receivable subsidiary ledger to the control accountANS: A15. A well-designed purchase order is an example of aa. preventive controlb. detective controlc. corrective controld. none of the aboveANS: A16. A physical inventory count is an example of a a. preventive controlb. detective controlc. corrective controld. feedforward control ANS: B17. The bank reconciliation uncovered a transposition error in the books. This is an example of aa. preventive controlb. detective controlc. corrective controld. none of the aboveANS: B18. In balancing the risks and benefits that are part of every ethical decision, managers receive guidance from each of the following excepta. justiceb. self interestc. risk minimizationd. proportionalityANS: B19. Which of the following is not an element of the internal control environment?a. management philosophy and operating styleb. organizational structure of the firmc. well-designed documents and recordsd. the functioning of the board of directors and the audit committeeANS: C20. Which of the following suggests a weakness in the internal control environment?a. the firm has an up-to-date organizational chartb. monthly reports comparing actual performance to budget are distributed to managersc. performance evaluations are prepared every three yearsd. the audit committee meets quarterly with the external auditorsANS: C21. Which of the following indicates a strong internal control environment?a. the internal audit group reports to the audit committee of the board of directorsb. there is no segregation of duties between organization functionsc. there are questions about the integrity of managementd. adverse business conditions exist in the industryANS: A22. According to SAS 78, an effective accounting system performs all of the following excepta. identifies and records all valid financial transactionsb. records financial transactions in the appropriate accounting periodc. separates the duties of data entry and report generationd. records all financial transactions promptlyANS: C23. Which of the following is the best reason to separate duties in a manual system?a. to avoid collusion between the programmer and the computer operatorb. to ensure that supervision is not requiredc. to prevent the record keeper from authorizing transactionsd. to enable the firm to function more efficientlyANS: C24. Segregation of duties in the computer-based information system includesa. separating the programmer from the computer operatorb. preventing management overridec. separating the inventory process from the billing processd. performing independent verifications by the computer operatorANS: A25. Which of the following is not an internal control procedure? a. authorizationb. management’s operating stylec. independent verificationd. accounting recordsANS: B26. The decision to extend credit beyond the normal credit limit is an example ofa. independent verificationb. authorizationc. segregation of functionsd. supervisionANS: B27. When duties cannot be segregated, the most important internal control procedure isa. supervisionb. independent verificationc. access controlsd. accounting recordsANS: A28. An accounting system that maintains an adequate audit trail is implementing which internal control procedure?a. access controlsb. segregation of functionsc. independent verificationd. accounting recordsANS: D29. Employee fraud involves three steps. Of the following, which is not involved?a. concealing the crime to avoid detectionb. stealing something of valuec. misstating financial statementsd. converting the asset to a usable formANS: C30. Which of the following is not an example of independent verification?a. comparing fixed assets on hand to the accounting recordsb. performing a bank reconciliationc. comparing the accounts payable subsidiary ledger to the control accountd. permitting authorized users only to access the accounting systemANS: D31. The importance to the accounting profession of the Foreign Corrupt Practices Act of 1977 is thata. bribery will be eliminatedb. management will not override the company’s internal controlsc. firms are required to have an effective internal control systemd. firms will not be exposed to lawsuitsANS: C32. The board of directors consists entirely of personal friends of the chief executive officer. This indicates a weakness ina. the accounting systemb. the control environmentc. control proceduresd. this is not a weaknessANS: B33. Computer fraud can take on many forms, including each of the following excepta. theft or illegal use of computer-readable informationb. theft, misuse, or misappropriation of computer equipmentc. theft, misuse, or misappropriation of assets by altering computer-readable records and filesd. theft, misuse, or misappropriation of printer suppliesANS: D34. When certain customers made cash payments to reduce their accounts receivable, the bookkeeper embezzled the cash and wrote off the accounts as uncollectible. Which control procedure would most likely prevent this irregularity?a. segregation of dutiesb. accounting recordsc. accounting systemd. access controlsANS: A35. The office manager forgot to record in the accounting records the daily bank deposit. Which control procedure would most likely prevent or detect this error?a. segregation of dutiesb. independent verificationc. accounting recordsd. supervisionANS: B36. Business ethics involvesa. how managers decide on what is right in conducting businessb. how managers achieve what they decide is right for the businessc. both a and bd. none of the aboveANS: C37. All of the following are conditions for fraud excepta. false representationb. injury or lossc. intentd. material relianceANS: D38. The four principal types of fraud include all of the following excepta. briberyb. gratuitiesc. conflict of interestd. economic extortionANS: B39. The characteristics of useful information includea. summarization, relevance, timeliness, accuracy, and completenessb. relevance, summarization, accuracy, timelessness, and completenessc. timeliness, relevance, summarization, accuracy, and concisenessd. disaggregation, relevance, timeliness, accuracy, and completenessANS: A40. Internal control system have limitations. These includea. possibility of honest errorb. circumventionc. management overrided. stability of systemsANS: D41. Management can expect various benefits to follow from implementing a system of strong internal control. Which of the following benefits is least likely to occur?a. reduced cost of an external audit.b. prevents employee collusion to commit fraud.c. availability of reliable data for decision-making purposes.d. some assurance of compliance with the Foreign Corrupt Practices Act of 1977.e. some assurance that important documents and records are protected.ANS: B42. Which of the following situations is not a segregation of duties violation?a. The treasurer has the authority to sign checks but gives the signature block to the assistanttreasurer to run the check-signing machine.b. The warehouse clerk, who has the custodial responsibility over inventory in the warehouse, selects the vendor and authorizes purchases when inventories are low.c. The sales manager has the responsibility to approve credit and the authority to write offaccounts.d. The department time clerk is given the undistributed payroll checks to mail to absentemployees.e. The accounting clerk who shares the record keeping responsibility for the accountsreceivable subsidiary ledger performs the monthly reconciliation of the subsidiary ledger and the control account.ANS: B43. Which of the following is not an issue to be addressed in a business code of ethics required by the SEC?a. Conflicts of interestb. Full and Fair Disclosuresc. Legal Complianced. Internal Reporting of Code Violationse. All of the above are issues to be addressedANS: EChapter 4—The Revenue Cycle MULTIPLE CHOICE1. The revenue cycle consists ofa. one subsystem–order entryb. two subsystems–sales order processing and cash receiptsc. two subsystems–order entry and inventory controld. three subsystems–sales order processing, credit authorization, and cash receiptsANS: B2. The reconciliation that occurs in the shipping department is intended to ensure thata. credit has been approvedb. the customer is billed for the exact quantity shippedc. the goods shipped match the goods orderedd. inventory records are reduced for the goods shippedANS: C3. The adjustment to accounting records to reflect the decrease in inventory due to a sale occurs in thea. warehouseb. shipping departmentc. billing departmentd. inventory control departmentANS: D4. Which document triggers the revenue cycle?a. the sales orderb. the customer purchase orderc. the sales invoiced. the journal voucherANS: B5. Copies of the sales order can be used for all of the following excepta. purchase orderb. credit authorizationc. shipping noticed. packing slipANS: A6. The purpose of the sales invoice is toa. record reduction of inventoryb. transfer goods from seller to shipperc. bill the customerd. select items from inventory for shipmentANS: C7. The customer open order file is used toa. respond to customer queriesb. fill the customer orderc. ship the customer orderd. authorize customer creditANS: A8. The stock release copy of the sales order is not used toa. locate and pick the items from the warehouse shelvesb. record any out-of-stock itemsc. authorize the warehouse clerk to release custody of the inventory to shippingd. record the reduction of inventoryANS: D9. The shipping noticea. is mailed to the customerb. is a formal contract between the seller and the shipping companyc. is always prepared by the shipping clerkd. informs the billing department of the quantities shippedANS: D10. The billing department is not responsible fora. updating the inventory subsidiary recordsb. recording the sale in the sales journalc. notifying accounts receivable of the saled. sending the invoice to the customerANS: A11. Customers should be billed for backorders whena. the customer purchase order is receivedb. the backordered goods are shippedc. the original goods are shippedd. customers are not billed for backorders because a backorder is a lost saleANS: B12. Usually specific authorization is required for all of the following excepta. sales on account which exceed the credit limitb. sales of goods at the list pricec. a cash refund for goods returned without a receiptd. write off of an uncollectible account receivableANS: B13. Which of following functions should be segregated?a. opening the mail and making the journal entry to record cash receiptsb. authorizing credit and determining reorder quantitiesc. maintaining the subsidiary ledgers and handling customer queriesd. providing information on inventory levels and reconciling the bank statementANS: A14. Which situation indicates a weak internal control structure?a. the mailroom clerk authorizes credit memosb. the record keeping clerk maintains both accounts receivable and accounts payable subsidiary ledgersc. the warehouse clerk obtains a signature before releasing goods for shipmentd. the accounts receivable clerk prepares customer statements every monthANS: A15. The most effective internal control procedure to prevent or detect the creation of fictitious credit memoranda for sales returns is toa. supervise the accounts receivable departmentb. limit access to credit memorandac. prenumber and sequence check all credit memorandad. require management approval for all credit memorandaANS: D16. 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 invoicesb. reconcile the accounts receivable control to the accounts receivable subsidiary ledgerc. prepare monthly customer statementsd. reconcile total sales on account to the debits in the accounts receivable subsidiary ledger ANS: C17. Which department is least likely to be involved in the revenue cycle?a. creditb. accounts payablec. billingd. shippingANS: B18. Which document is included with a shipment sent to a customer?a. sales invoiceb. stock release formc. packing slipd. shipping noticeANS: C19. Good internal controls in the revenue cycle should ensure all of the following excepta. all sales are profitableb. all sales are recordedc. credit is authorizedd. inventory to be shipped is not stolenANS: A20. 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 subsidiaryb. authorize creditc. segregate custody of inventory from record keepingd. segregate record keeping duties of general ledger from accounts receivableANS: B21. Internal controls for handling sales returns and allowances do not includea. computing bad debt expense using the percentage of credit salesb. verifying that the goods have been returnedc. authorizing the credit memo by managementd. using the original sales invoice to prepare the sales returns slipANS: A22. The printer ran out of preprinted sales invoice forms and several sales invoices were not printed. The best internal control to detect this error isa. a batch total of sales invoices to be prepared compared to the actual number of sales invoices preparedb. sequentially numbered sales invoicesc. visual verification that all sales invoices were preparedd. none of the above will detect this errorANS: A23. Which department prepares the bill of lading? a. salesb. warehousec. shippingd. credit ANS: C24. A remittance advice isa. used to increase (debit) an account receivable by the cash received b. is a turn-around documentc. is retained by the customer to show proof of paymentd. none of the aboveANS: B25. A weekly reconciliation of cash receipts would include comparinga. the cash prelist with bank deposit slipsb. the cash prelist with remittance advicesc. bank deposit slips with remittance advicesd. journal vouchers from accounts receivable and general ledgerANS: A26. At which point is supervision most critical in the cash receipts system?a. accounts receivableb. general ledgerc. mail roomd. cash receiptsANS: C27. EDI trading partner agreements specify all of the following excepta. selling priceb. quantities to be soldc. payment termsd. person to authorize transactionsANS: D28. A cash prelist isa. a document that records sales returns and allowancesb. a document returned by customers with their paymentsc. the source of information used to prepare monthly statements d. none of the aboveANS: D29. An advantage of real-time processing of sales isa. the cash cycle is lengthenedb. current inventory information is availablec. hard copy documents provide a permanent record of the transactiond. data entry errors are corrected at the end of each batchANS: B30. Commercial accounting systems have fully integrated modules. The word “integrated” means thata. segregation of duties is not possibleb. transfer of information among modules occurs automaticallyc. batch processing is not an optiond. separate entries are made in the general ledger accounts and the subsidiary ledgersANS: B31. The data processing method that can shorten the cash cycle isa. batch, sequential file processingb. batch, direct access file processingc. real-time file processingd. none of the aboveANS: C32. Which of the following is not a risk exposure in a microcomputer accounting system?a. reliance on paper documentation is increasedb. functions that are segregated in a manual environment may be combined in a microcomputer accounting systemc. backup procedures require human interventiond. data are easily accessibleANS: A33. Which journal is not used in the revenue cycle?a. cash receipts journalb. sales journalc. purchases journald. general journalANS: C34. Periodically, the general ledger department receives all of the following excepta. total increases to accounts receivableb. total of all sales backordersc. total of all salesd. total decreases in inventoryANS: B35. The credit departmenta. prepares credit memos when goods are returnedb. approves credits to accounts receivable when payments are receivedc. authorizes the granting of credit to customersd. none of the aboveANS: C36. Adjustments to accounts receivable for payments received from customers is based upona. the customer’s checkb. the cash prelistc. the remittance advice that accompanies paymentd. a memo prepared in the mailroomANS: C37. The revenue cycle utilizes all of the following files excepta. credit memo fileb. sales history filec. shipping report filed. cost data reference fileANS: D38. All of the following are advantages of real-time processing of sales excepta. The cash cycle is shortenedb. Paper work is reducedc. Incorrect data entry is difficult to detectd. Up-to-date information can provide a competitive advantage in the marketplaceANS: CChapter 5—The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures MULTIPLE CHOICE1. The purpose of the purchase requisition is toa. order goods from vendorsb. record receipt of goods from vendorsc. authorize the purchasing department to order goodsd. bill for goods deliveredANS: C2. The purpose of the receiving report is toa. order goods from vendorsb. record receipt of goods from vendorsc. authorize the purchasing department to order goodsd. bill for goods deliveredANS: B3. All of the following departments have a copy of the purchase order excepta. the purchasing departmentb. the receiving departmentc. accounts payabled. general ledgerANS: D4. The purpose of the purchase order is toa. order goods from vendorsb. record receipt of goods from vendorsc. authorize the purchasing department to order goodsd. approve payment for goods receivedANS: A5. The open purchase order file in the purchasing department is used to determinea. the quality of items a vendor shipsb. the best vendor for a specific itemc. the orders that have not been receivedd. the quantity of items receivedANS: C6. The purchase ordera. is the source document to make an entry into the accounting recordsb. indicates item description, quantity, and pricec. is prepared by the inventory control departmentd. is approved by the end-user departmentANS: B7. The reason that a blind copy of the purchase order is sent to receiving is toa. inform receiving when a shipment is dueb. force a count of the items deliveredc. inform receiving of the type, quantity, and price of items to be deliveredd. require that the goods delivered are inspectedANS: B8. The receiving report is used toa. accompany physical inventories to the storeroom or warehouseb. advise the purchasing department of the dollar value of the goods deliveredc. advise general ledger of the accounting entry to be maded. advise the vendor that the goods arrived safelyANS: A9. When a copy of the receiving report arrives in the purchasing department, it is used toa. adjust perpetual inventory recordsb. record the physical transfer of inventory from receiving to the warehousec. analyze the receiving department’s processd. recognize the purchase order as closedANS: D10. The financial value of a purchase is determined by reviewing thea. packing slipb. purchase requisitionc. receiving reportd. supplier’s invoiceANS: D11. Which document is least important in determining the financial value of a purchase?a. purchase requisitionb. purchase orderc. receiving reportd. supplier’s invoiceANS: A12. In a merchandising firm, authorization for the payment of inventory is the responsibility ofa. inventory controlb. purchasingc. accounts payabled. cash disbursementsANS: C13. In a merchandising firm, authorization for the purchase of inventory is the responsibility ofa. inventory controlb. purchasingc. accounts payabled. cash disbursementsANS: A14. When purchasing inventory, which document usually triggers the recording of a liability?a. purchase requisitionb. purchase orderc. receiving reportd. supplier’s invoiceANS: D15. Because of time delays between receiving inventory and making the journal entrya. liabilities are usually understatedb. liabilities are usually overstatedc. liabilities are usually correctly statedd. none of the aboveANS: A16. Usually the open voucher payable file is organized bya. vendorb. payment due datec. purchase order numberd. transaction dateANS: B17. Which of the following statements is not correct?a. the voucher system is used to improve control over cash disbursementsb. the sum of the paid vouchers represents the voucher payable liability of the firmc. the voucher system permits the firm to consolidate payments of several invoices on onevoucherd. many firms replace accounts payable with a voucher payable systemANS: B18. In the expenditure cycle, general ledger does nota. post the journal voucher from the accounts payable departmentb. post the account summary from inventory controlc. post the journal voucher from the purchasing departmentd. reconcile the inventory control account with the inventory subsidiary summaryANS: C19. The documents in a voucher packet include all of the following excepta. a checkb. a purchase orderc. a receiving reportd. a supplier’s invoiceANS: A20. To maintain a good credit rating and to optimize cash management, cash disbursements should arrive at the vendor’s placeof businessa. as soon as possibleb. on the due datec. on the discount dated. by the end of the monthANS: C21. The cash disbursement clerk performs all of the following tasks except a. reviews the supporting documents for completeness and accuracyb. prepares checksc. signs checksd. marks the supporting documents paidANS: C22. When a cash disbursement in payment of an accounts payable is recordeda. the liability account is increasedb. the income statement is changedc. the cash account is unchangedd. the liability account is decreasedANS: D23. Authorization for payment of an accounts payable liability is the responsibility ofa. inventory controlb. purchasingc. accounts payabled. cash disbursementsANS: C24. Of the following duties, it is most important to separatea. warehouse from storesb. warehouse from inventory controlc. accounts payable and accounts receivabled. purchasing and accounts receivableANS: B25. In a firm with proper segregation of duties, adequate supervision is most critical ina. purchasingb. receivingc. accounts payabled. general ledgerANS: B26. The receiving department is not responsible toa. inspect shipments receivedb. count items received from vendorsc. order goods from vendorsd. safeguard goods until they are transferred to the warehouseANS: C27. The major risk exposures associated with the receiving department include all of the following excepta. goods are accepted without a physical countb. there is no inspection for goods damaged in shipmentc. inventories are not secured on the receiving dockd. the audit trail is destroyedANS: D28. When searching for unrecorded liabilities at the end of an accounting period, the accountant would search all of the files excepta. the purchase requisition fileb. the cash receipts filec. the purchase order filed. the receiving report file ANS: B29. In regards to the accounts payable department, which statement is not true?a. the purchase requisition shows that the transaction was authorizedb. the purchase order proves that the purchase was requiredc. the receiving report provides evidence of the physical receipt of the goods d. the supplier’s invoice indicates the financial value of the transactionANS: B30. 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 clerkb. the purchasing departmentc. the vendord. the computer systemANS: D31. Firms can expect that proper use of a valid vendor file will result in all of the following benefits excepta. purchasing agents will be discouraged from improperly ordering inventory from relatedpartiesb. purchases from fictitious vendors will be detectedc. the most competitive price will be obtainedd. the risk of purchasing agents receiving kickbacks and bribes will be reducedANS: C32. In a real-time processing system with a high number of transactions, the best and most practical control over cash disbursements is to havea. all checks manually signed by the treasurerb. all checks signed by check-signing equipmentc. checks over a certain dollar amount manually signed by the treasurerd. checks over a certain dollar amount manually signed by the cash disbursements clerkANS: C33. The document which will close the open purchase requisition file is thea. purchase orderb. vendor invoicec. receiving reportd. none of the aboveANS: C34. Goods received are inspected and counted toa. determine that the goods are in good conditionb. determine the quantity of goods receivedc. preclude payment for goods not received or received in poor conditiond. all of the aboveANS: D35. If a company uses a standard cost system, inventory records can be updated from thea. vendor invoiceb. purchase orderc. receiving reportd. purchase requisition ANS: C36. If a company uses an actual cost system, inventory records can first be updated from thea. vendor invoiceb. purchase orderc. receiving reportd. purchase requisitionANS: A37. Copies of a purchase order are sent to all of the following excepta. inventory controlb. receivingc. general ledgerd. accounts payableANS: C38. The receiving reporta. is used to update the actual cost inventory ledgerb. accompanies the goods to the storeroomc. is sent to general ledgerd. is returned to the vendor to acknowledge receipt of the goodsANS: B39. A supplier invoicea. is included with the goodsb. shows what was ordered even if all was not shipped c. is sent by vendor to accounts payabled. none of the aboveANS: C40. The cash disbursement function isa. part of accounts payableb. an independent accounting functionc. a treasury functiond. part of the general ledger departmentANS: CChapter 6—The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures MULTIPLE CHOICE1. The document that captures the total amount of time that individual workers spend on each production job is called aa. time cardb. job ticketc. personnel action formd. labor distribution formANS: B2. An important reconciliation in the payroll system isa. general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payableb. personnel compares the number of employees authorized to receive a paycheck to the number of paychecks preparedc. production compares the number of hours reported on job tickets to the number of hours reported on time cardsd. payroll compares the labor distribution summary to the hours reported on time cardsANS: A3. 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 transferringpayroll funds to the general checking accounting.d. General ledger reconciles the labor distribution summary and the payroll disbursement voucher.ANS: C4. Which transaction is not processed in the Fixed Asset System?a. purchase of buildingb. improvement of equipmentc. purchase of raw materialsd. sale of company vanANS: C5. Depreciationa. is calculated by the department that uses the fixed assetb. allocates the cost of the asset over its useful lifec. is recorded weeklyd. results in book value approximating fair market valueANS: B6. Depreciation records include all of the following information about fixed assets excepta. the economic benefit of purchasing the assetb. the cost of the assetc. the depreciation method being usedd. the location of the assetANS: A7. Which control is not a part of the Fixed Asset System?a. formal analysis of the purchase requestb. review of the assumptions used in the capital budgeting modelc. development of an economic order quantity modeld. estimates of anticipated cost savingsANS: C8. Objectives of the Fixed Asset System do not includea. authorizing the acquisition of fixed assetsb. recording depreciation expensec. computing gain and/or loss on disposal of fixed assetsd. maintaining a record of the fair market value of all fixed assetsANS: D9. 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 subsidiaryledger.ANS: A10. In the payroll subsystem, which function should distribute paychecks? a. personnelb. timekeepingc. paymasterd. payroll ANS: C11. Where does the responsibility lie for reconciling the labor distribution summary and the payroll disbursement voucher?a. cash disbursementsb. cost accountingc. personneld. general ledgerANS: D12. 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.ANS: B13. 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 havemore 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.ANS: D14. Which department is responsible for approving changes in pay rates for employees?a. payrollb. treasurerc. personneld. cash disbursementsANS: C15. 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.ANS: B16. 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 producedb. to prevent an absent employee’s check from being lostc. to avoid paying absent employees for paydayd. to prevent the paymaster from cashing unclaimed checksANS: A17. 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.ANS: C18. Cost accounting updates work-in-process accounts froma. time cardsb. the labor distribution summaryc. job ticketsd. personnel action formsANS: C19. Payroll uses time card data to do all of the following excepta. prepare the payroll registerb. update employee payroll recordsc. prepare the labor distribution summaryd. prepare paychecksANS: C20. Payroll checks are typically drawn ona. the regular checking accountb. a payroll imprest accountc. a wages payable accountd. petty cashANS: B21. The personnel action form provides authorization control bya. preventing paychecks for terminated employeesb. verifying pay rates for employeesc. informing payroll of new hiresd. all of the aboveANS: D22. Accounting records that provide the audit trail for payroll include all of the following excepta. time cardsb. job ticketsc. payroll registerd. accounts payable registerANS: D23. Personnel actions forms are used to do all of the following excepta. activate new employeesb. terminate employeesc. record hours workedd. change pay ratesANS: C24. The payroll department performs all of the following excepta. prepares the payroll registerb. distributes paychecksc. updates employee payroll recordsd. prepares paychecksANS: B25. The document that records the total amount of time spent on a production job is thea. time cardb. job ticketc. labor distribution summaryd. personnel action formANS: C26. A control technique that can reduce the risk of a terminated employee being paid is a. a security camera viewing the time clockb. the supervisor taking role during the shiftc. paychecks being distributed by an independent paymasterd. reconciliation of time cards and job tickets ANS: C27. Accounts payablea. signs paychecksb. prepares the payroll voucherc. reconciles time cards and employee recordsd. distributes paychecks to employeesANS: B28. All of the following are processed by the Fixed Asset System excepta. sale of unneeded equipmentb. purchase of raw materialsc. repair of production equipmentd. purchase of a new plantANS: B29. The Fixed Asset System performs all of the following excepta. determines the need for new assetsb. maintains depreciation recordsc. records retirement and disposal of assetsd. tracks the physical location of fixed assetsANS: A30. The payroll department performs all of the following excepta. prepares paychecksb. transfers adequate funds to the payroll imprest accountc. updates employee payroll recordsd. prepares the payroll registerANS: B31. Depreciationa. assures that assets are reported at fair market valueb. is discretionary for many firmsc. allocates the cost of an asset over its useful lifed. is the responsibility of the department using the assetANS: C32. The Fixed Asset System is similar to the expenditure cycle excepta. fixed asset transactions are non-routine and require special authorization and controlsb. fixed assets are capitalized, not expensedc. both a and bd. none of the aboveANS: C33. Asset maintenance involvesa. the recording of periodic depreciationb. adjusting the asset records to reflect the cost of physical improvementsc. keeping track of the physical location of the assetsd. all of the aboveANS: D34. The Fixed Asset Systems does all of the following excepta. records acquisition of assetsb. records improvements to assetsc. estimates the fair market value of assets in serviced. records the disposal of assetsANS: C35. Asset disposala. occurs as soon as an asset is fully depreciatedb. requires no special authorizationc. automatically initiates the purchase of a replacement assetd. must follow formal authorization proceduresANS: DChapter 7—The Conversion Cycle MULTIPLE CHOICE1. Which item does not describe a world-class company?a. the goal of a world-class company is to delight its customersb. customers in a world-class company are external departments onlyc. world-class companies work in cross-functional teamsd. a world-class company has a flat organizational structureANS: B2. Which subsystem is not a part of the production system?a. directing the movement of work through the processb. determining raw material requirementsc. authorizing work to be performedd. monitoring the flow of cost information related to productionANS: D3. The purpose of the cost accounting system is toa. produce information for inventory valuationb. authorize release of raw materialsc. direct the movement of work-in-processd. determine material requirementsANS: A4. Which process creates a homogeneous product through a continuous series of standard procedures?a. batch processb. make-to-order processc. continuous processd. none of the aboveANS: C5. An example of a continuous process is the production ofa. wedding invitationsb. milk productsc. jet aircraftd. all of the aboveANS: B6. All of the following are characteristics of batch processing excepta. each item in the batch is similarb. batches are produced in accordance with detailed customer specificationsc. batches are produced to replenish depleted inventory levelsd. setting up and retooling is required for different batchesANS: B7. When determining which items to produce, a firm must knowa. last year’s production levelb. raw material inventory levelsc. the standard cost of the itemd. the sales forecastANS: D8. The production schedule isa. the expected demand for the firm’s finished goods for a given yearb. the formal plan and authority to begin productionc. a description of the type and quantity of raw materials and subassemblies used to producea single unit of finished productd. the sequence of operations during manufacturingANS: B9. A move ticketa. is the formal plan and authority to begin productionb. specifies the materials and production required for each batchc. records the work done in each work centerd. authorizes the storekeeper to release materials to work centers ANS: C10. The internal control significance of the excess materials requisition is that ita. indicates the amount of material released to work centersb. identifies materials used in production that exceed the standard amount allowedc. indicates the standard quantities required for productiond. documents the return to raw materials inventory of unused production materialsANS: B11. Inventory control performs all of the following tasks except ita. provides production planning and control with the inventory status report of finishedgoodsb. updates the raw material inventory recordsc. prepares a materials requisition for each production batchd. records the completed production as an increase to finished goods inventoryANS: C12. The storekeeper releases raw materials based on thea. production scheduleb. materials requisitionc. work orderd. bill of materialsANS: B13. Which of the following is not an assumption of the Economic Order Quantity model?a. demand for the product is known with certaintyb. total cost per year of placing orders is fixedc. lead time is known and is constantd. there are no quantity discountsANS: B14. Firms hold safety stock to compensate fora. mathematical weaknesses of the Economic Order Quantity modelb. variations in lead time or daily demandc. fluctuations in carrying costsd. uncertainty in the estimation of ordering costsANS: B15. What is the economic order quantity if the annual demand is 10,000 units, set up cost of placing each order is $3 and the holding cost per unit per year is $2?a. 174b. 123c. 245d. none of the aboveANS: A16. If the daily demand is 40 units and the lead time is 12 days, the reorder point isa. 52 unitsb. 48 unitsc. 480 unitsd. none of the above ANS: C17. Which statement is not correct?a. general ledger creates a new cost record upon receipt of a work order from production planning and controlb. cost accounting updates the cost record with data gathered from the materials requisitionc. general ledger posts summary information about the manufacturing process based on ajournal voucher prepared by cost accountingd. cost accounting computes variances and applies overhead to individual cost recordsANS: A18. Which of the following is not a category of critical success factors in most manufacturing companies?a. product qualityb. customer servicec. revenue generationd. resource managementANS: C19. Computer integrated manufacturing groups all of the following technologies excepta. roboticsb. materials requirements planningc. automated storage and retrieval systemsd. computer aided designANS: B20. The SAP R/3 system provides pre-defined modules to support business processes in the all of the following categories excepta. human resourcesb. business process supportc. strategicd. financialANS: C21. Which situation violates the segregation of functions control procedure?a. production planning and control is located apart from the work centersb. inventory control maintains custody of inventory itemsc. cost accounting has custody of and makes entries on cost recordsd. work centers record direct labor on job ticketsANS: B22. All of the following are internal control procedures that should be in place in the conversion cycle excepta. calculation and analysis of direct material and direct labor variancesb. retention of excess materials by work centersc. physical count of inventory items on handd. limited access to raw material and finished goods inventoriesANS: B23. Process simplification focuses ona. using Computer Numerical Controlled machines which stand alone within a traditionalsettingb. completely automating the manufacturing environmentc. reducing the complexity of the physical manufacturing layout of the shop floord. organizing the process into functional departments ANS: C24. A manufacturing process that is organized into group technology cells utilizing no human labor is called a. islands of technologyb. process simplificationc. Computer Integrated Manufacturingd. traditional manufacturing ANS: C25. An example of automation of manufacturing design isa. Computer Aided Engineeringb. Automated Storage and Retrieval Systemsc. Computer Numerical Controld. roboticsANS: A26. An example of automation of manufacturing planning isa. Computer Aided Engineeringb. Automated Storage and Retrieval Systemsc. Materials Requirements Planningd. Computer Numerical ControlANS: C27. Firms implement a Just-In-Time inventory approach toa. reduce investment in inventoriesb. determine the optimum inventory level using the EOQ modelc. camouflage production problemsd. ensure overproduction of inventoryANS: A28. Characteristics of Just-In-Time manufacturing include all of the following excepta. push manufacturingb. zero defectsc. reduced setup time and small lot sizesd. reliable vendorsANS: A29. The cost of poor quality includes all of the following excepta. cost of reworkb. warranty claimsc. scheduling delaysd. proceeds from the sale of scrapANS: D30. A flexible manufacturing systema. creates bottlenecks in the processb. leads to an “us” versus “them” attitude among workers c. shortens the physical distance between activitiesd. is organized along functional linesANS: C31. Deficiencies of the traditional cost accounting information system include all of the following excepta. an emphasis on financial performanceb. inaccurate cost allocationsc. an emphasis on standard costsd. immediate feedback about deviations from the normANS: D32. Which statement is not correct?a. an activity driver is a means to measure the activity used by the cost objectb. cost object describes the work performed in a firmc. activities cause costsd. cost objects create a demand for activitiesANS: B33. Firms are adopting Activity Based Costing (ABC) becausea. it facilitates the analysis of variancesb. it more accurately allocates costs to productsc. it recognizes the importance of direct labor as a component of total manufacturing costd. the financial nature of the reports permits comparisons to be made among different typesof productsANS: B34. In traditional firms, information reportinga. provides financially oriented information relating to operationsb. presents detailed information about activitiesc. shows the allocation of costs first to activities and then to cost objectsd. identifies nonessential activitiesANS: A35. Types of information provided by Activity Based Costing includea. a description of the single activity driver used for overhead applicationb. the dollar value of the direct material usage variancec. identification of cost driversd. details of the components of the single overhead cost poolANS: C36. Which statement is not correct?a. the benchmark approach compares key activities with similar activities in other firmsb. critical success factors include product and process qualityc. the ABC model includes two perspectives: an allocation of cost perspective and a processperspectived. in world-class manufacturing firms, quality control activities at the end of the process are essentialANS: D37. All of the following are documents in batch process production systems excepta. production scheduleb. route sheetc. materials requisitiond. purchase orderANS: D38. Transaction authorization occurs in a traditional manufacturing environment in all of the following ways excepta. production planning and control initiates production with a work orderb. movement of the work through the production process follows the move ticketc. the sales department modifies work orders to match changes in demandd. the materials requisition authorizes the storekeeper to release materials to the work centersANS: C39. Manufacturing flexibility incorporates four characteristics. These include all of the following excepta. high product qualityb. high inventory levelsc. automation of manufacturing processesd. physical reorganization of production facilitiesANS: B40. The stages of the automation continuum are (in order)a. traditional, computer-integrated manufacturing, islands of technology, processsimplificationb. process simplification, traditional, islands of technology, computer-integratedmanufacturingc. traditional, islands of technology, process simplification, computer-integrated manufacturingd. traditional, process simplification, computer-integrated manufacturing, islands of technologyANS: CChapter 8—General Ledger, Financial Reporting, and Management Reporting Systems MULTIPLE CHOICE1. The coding scheme most appropriate for a chart of accounts isa. sequential codeb. block codec. group coded. mnemonic codeANS: B2. A common use for sequential coding is a. creating the chart of accountsb. identifying inventory itemsc. identifying documentsd. identifying fixed assets ANS: C3. The most important advantage of sequential coding is thata. missing or unrecorded documents can be identifiedb. the code itself lacks informational contentc. items cannot be insertedd. deletions affect the sequenceANS: A4. When a firm wants its coding system to convey meaning without reference to any other document, it would choosea. an alphabetic codeb. a mnemonic codec. a group coded. a block codeANS: B5. The most important advantage of an alphabetic code is thata. meaning is readily conveyed to usersb. sorting is simplifiedc. the capacity to represent items is increasedd. missing documents can be

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