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ACC 2051 #2

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 1. 

The system through which management is given financial information for use in conducting the affairs of the business and in reporting to owners and other interested parties is called the
a.
accounting system
b.
fiduciary system
c.
operations system
d.
auditing system
 

 2. 

The phase of accounting system installation in which the information needs of people in the organization are taken into account is
a.
analysis
b.
design
c.
implementation
d.
installation
 

 3. 

Accounting systems evolve through a three-step process as a business grows; but which one of the following below is not one of those steps?
a.
analysis
b.
design
c.
implementation
d.
feedback
 

 4. 

Which one of the following below is not an element of internal control?
a.
risk assessment
b.
monitoring
c.
information and communication
d.
behavior analysis
 

 5. 

Which one of the following below is not a factor that influences a business's control environment?
a.
management's philosophy and operating style
b.
organizational structure
c.
proofs and security measurers
d.
personnel policies
 

 6. 

A necessary element of internal control is
a.
database
b.
systems design
c.
systems analysis
d.
information and communication
 

 7. 

The individual accounts with customers are included in a subsidiary ledger called the
a.
asset ledger
b.
accounts payable ledger
c.
expense ledger
d.
accounts receivable ledger
 

 8. 

Every controlling account must have its own
a.
revenue ledger
b.
general ledger
c.
subsidiary ledger
d.
journal
 

 9. 

At the end of each month, the total of the amount column of the revenue journal is posted as a
a.
debit to Accounts Receivable and a credit to Cash
b.
debit to Accounts Receivable and a credit to Fees Earned
c.
debit to Cash and a credit to Fees Earned
d.
debit to Cash and a credit to Accounts Payable
 

 10. 

When there are a large number of individual accounts with a common characteristic, it is common to place them in a separate ledger called a(n)
a.
accounts receivable ledger
b.
accounts payable ledger
c.
creditors ledger
d.
subsidiary ledger
 

 11. 

A purchase of supplies for cash is recorded in the
a.
Revenue journal
b.
Purchases journal
c.
Cash Receipts journal
d.
Cash Payments journal
 

 12. 

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?
a.
gross profit
b.
income from operations
c.
net income
d.
gross sales
 

 13. 

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a
a.
multiple-step statement
b.
revenue statement
c.
report-form statement
d.
single-step statement
 

 14. 

Merchandise inventory is classified on the balance sheet as a
a.
Current Liability
b.
Current Asset
c.
Long-Term Asset
d.
Long-Term Liability
 

 15. 

The inventory system employing accounting records that continuously disclose the amount of inventory is called
a.
retail
b.
periodic
c.
physical
d.
perpetual
 

 16. 

When the perpetual inventory system is used, the inventory sold is shown on the income statement as
a.
cost of merchandise sold
b.
purchases
c.
purchases returns and allowances
d.
net purchases
 

 17. 

If the seller is to pay the transportation costs of delivering merchandise, the delivery terms are stated as
a.
FOB shipping point
b.
FOB destination
c.
FOB n/30
d.
FOB seller
 

 18. 

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
a.
n/30
b.
FOB shipping point
c.
FOB destination
d.
consigned
 

 19. 

The net sales to assets ratio measures a company's
a.
working capital
b.
net worth
c.
effective use of sales to support the purchase of new assets
d.
effective use of assets to generate sales
 

 20. 

The notification accompanying a check that indicates the specific invoice being paid is called a
a.
remittance advice
b.
voucher
c.
debit memorandum
d.
credit memorandum
 

 21. 

An example of a preventive control is
a.
the use of a bank account
b.
separation of the Purchasing Department and Accounting Department personnel
c.
bonding employees who handle cash
d.
accepting payment in currency only
 

 22. 

EFT
a.
means Efficient Funds Transfer
b.
can process certain cash transactions at less cost than by using the mail
c.
makes it easier to document purchase and sale transactions
d.
means Effective Funds Transfer
 

 23. 

The type of account and normal balance of Petty Cash is a(n)
a.
revenue, credit
b.
asset, debit
c.
liability, credit
d.
expense, debit
 

 24. 

Cash equivalents include
a.
checks
b.
coins and currency
c.
money market accounts and commercial paper
d.
stocks and short-term bonds
 

 25. 

A minimum cash balance required by a bank is called
a.
cash in bank
b.
cash equivalent
c.
compensating balance
d.
EFT
 

 26. 

Which one of the following below reflects a weak internal control system?
a.
all employees are well supervised
b.
a single employee is responsible for comparing a receiving report to an invoice
c.
all employees must take their vacations
d.
a single employee is responsible for collecting and recording of cash
 

 27. 

A firm's internal control environment is not influenced by
a.
management's operating style
b.
organizational structure
c.
personnel policies
d.
monitoring policies
 

 28. 

When posting a column total in the purchases journal, a credit should be posted to
a.
Merchandise Inventory
b.
Accounts Payable
c.
Sales Returns and Allowances
d.
Cash
 

 29. 

A company returns defective supplies that were purchased for cash and receives a cash refund.  This transaction should be recorded in the
a.
Purchases journal
b.
Cash Receipts journal
c.
General journal
d.
Revenue journal
 

 30. 

When posting the column totals of a cash payments journal, a debit should be posted to
a.
Cash
b.
Accounts Payable
c.
Sales Discounts
d.
Unearned Revenue
 

 31. 

Which of the following is not an advantage of a computerized system over a manual system?
a.
transactions are recorded and posted at the same time
b.
accuracy is usually better with a computerized system
c.
current balances are always available
d.
internal controls are optional to the computerized system
 

 32. 

Which one of the following is not a difference between a retail business and a service business?
a.
in what is sold
b.
greater number of new accounts
c.
specialized journals
d.
changes in financial statements
 

 33. 

Which account is not classified as a selling expense?
a.
Sales Salaries
b.
Transportation-Out
c.
Sales Discounts
d.
Advertising Expense
 

 34. 

When comparing a retail business to a service business, the financial statement that changes the most is the
a.
Balance Sheet
b.
Income Statement
c.
Statement of Owner's Equity
d.
Statement of Cash Flow
 

 35. 

Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a
a.
debit to Sales
b.
debit to Merchandise Inventory
c.
credit to Merchandise Inventory
d.
credit to Accounts Receivable
 

 36. 

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a
a.
credit to Sales Returns and Allowances
b.
debit to Merchandise Inventory
c.
credit to Merchandise Inventory
d.
debit to Cost of Merchandise Sold
 

 37. 

If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a
a.
sales invoice
b.
purchase invoice
c.
credit memorandum
d.
debit memorandum
 

 38. 

Merchandise with a sales price of $500 is sold on account with term 2/10, n/30.  The journal entry to record the sale would include a
a.
debit to Cash for $500
b.
Debit to Sales Discounts for $10
c.
Credit to Sales for $500
d.
Debit to Accounts Receivable for $490
 

 39. 

The entry to record the return of merchandise from a customer would include a
a.
debit to Sales
b.
credit to Sales
c.
debit to Sales Returns and Allowances
d.
credit to Sales returns and Allowances
 

 40. 

Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a
a.
debit to Cost of Goods Sold
b.
credit to Accounts Payable
c.
credit to Merchandise Inventory
d.
credit to Sales
 

 41. 

A retailer purchases merchandise with a catalog list price of $10,000.  The retailer receives a 25% trade discount and credit terms of 2/10, n/30.  What amount should the retailer debit to the Merchandise Inventory account?
a.
$7,500
b.
$10,000
c.
$9,800
d.
$7,350
 

 42. 

When goods are shipped FOB destination and the seller pays the transportation charges, the buyer
a.
journalizes a reduction for the cost of the merchandise.
b.
journalizes a reimbursement to the seller.
c.
does not take a discount.
d.
makes no journal entry for the transportation.
 

 43. 

Which of the following should not be considered cash by an accountant?
a.
money orders
b.
bank checking accounts
c.
postage stamps
d.
travelers' checks
 

 44. 

A voucher
a.
is received from customers to explain the purpose of a payment
b.
is normally prepared in the Accounting Department
c.
system is used to control cash receipts
d.
system is an internal control procedure to verify that the assets in the ledger are the ones the company owns
 

 45. 

A voucher is usually supported by
a.
a supplier's invoice
b.
a purchase order
c.
a receiving report
d.
all of the above
 

 46. 

On the bank's accounting records, customers' accounts are normally shown as
a.
debit balances
b.
expenses
c.
an asset
d.
a liability
 

 47. 

A debit or credit memorandum describing entries in the depositor's bank account may be enclosed with the bank statement.  An example of a credit memorandum is
a.
deposited checks returned for insufficient funds
b.
a promissory note left for collection
c.
a service charge
d.
notification that a customer's check for $375 was recorded by the depositor as $735 on the deposit ticket
 

 48. 

Accompanying the bank statement was a debit memorandum for bank service charges.  On the bank reconciliation, the item is
a.
a deduction from the balance per depositor's records
b.
an addition to the balance per bank statement
c.
a deduction from the balance per bank statement
d.
an addition to the balance per depositor's records
 

 49. 

The amount of deposits in transit is included on the bank statement as a(n)
a.
deduction from the balance per the depositor's books
b.
deduction from the balance per bank statement
c.
addition to the balance per bank statement
d.
addition to the balance per depositor books
 

 50. 

Which of the following items that appeared on the bank reconciliation did not require an adjusting entry?
a.
bank service charges
b.
deposits in transit
c.
NSF checks
d.
A  check for $520, recorded in the check register for $250.
 



 
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