Exam (elaborations) ACCT 1080 EXAM 3 (ACCT1080) ACCT 1080 EXAM 3 STUDY GUIDE 2022/ACCT 1080 EXAM 3 STUDY GUIDE. Latest 2022

ACCT 1080 EXAM 3 STUDY GUIDE Key Terms & Definitions: • Direct Write-off Method and Allowance Method. Which does GAAP require? • Cash Ratio. What does a higher number indicate? • Maturity Value of a Note is.. • Acid Test Ratio • Days Sales in Receivables • A/R Turnover Ratio SAMPLE PROBLEMS: Chapter 7 Accounting Information Systems Learning Objective 7-1 An accounting information system (AIS) collects, records, stores, and processes accounting data to produce information that is useful for decision makers. Answer: TRUE An effective accounting information system with adequate internal controls can safeguard a business's assets and reduce the likelihood of fraud and errors. Answer: TRUE An accounting information system has three basic components: source documents and input devices, processing and storage, and outputs. Answer: TRUE Pre-numbered source documents provide necessary control in a system by automatically assigning a sequential number to each new transaction. Answer: TRUE A source document provides the evidence and data for accounting transactions. Answer: TRUE Which of the following is true of data processing and storage in a computerized information system? A) In a computerized accounting information system, processing includes manually journalizing transactions and posting to the accounts. B) In a computerized accounting information system, there will be a main centralized computer where data is stored, which cannot be accessed from any other computers. C) In both manual and computerized systems, all data are contained in paper documents and are often stored in filing cabinets and off-site document warehouses. D) In a computerized accounting information system, companies need to spend large amounts of cash to ensure that their data and information are secure. Answer: D The main computer where data is stored, which can be accessed from many different computers is known as a(n) . A) internet protocol B) RAM C) server D) router Answer: C Which of the following is an example of a storage device in an accounting information system? A) monitor B) network C) printer D) server Answer: D Which of the following is an input device in an accounting information system? A) keyboard B) internet protocol C) printer D) router Answer: A Which of the following is an output device in an accounting information system? A) keyboard B) internet protocol C) printer D) mouse Answer: C Which of the following is true of outputs in an accounting information system? A) In a manual system, reports and financial statements must be created using Word documents, Excel spreadsheets, or PowerPoint. B) In a computerized system, the software can generate reports instantaneously that can never be manipulated. C) Examples of outputs in an accounting information system include purchase invoices, bank checks, and sales invoices. D) Since the output in an accounting information system are audited and error-free, it provides the evidence and data for accounting transactions. Answer: A Which of the following is true of the comparison between a manual and a computerized accounting information system? A) In both manual and computerized systems, reports and financial statements must be created using Word documents, Excel spreadsheets, or PowerPoint. B) In a computerized system, the software can generate financial reports instantaneously that can never be manipulated. C) In a manual system, data are contained in paper documents that are often stored in filing cabinets and off-site document warehouses; whereas in a computerized system, data are stored on a main computer called a server. D) In both manual and computerized systems, processing data includes manually journalizing transactions and posting to the accounts. Answer: C Learning Objective 7-2 A subsidiary ledger is a record of accounts that provides supporting details on individual balances, the total of which appears in a general ledger account. Answer: TRUE The accounts payable subsidiary ledger lists each vendor along with amounts paid to the vendors and the remaining amounts owed to them. Answer: TRUE The Accounts Receivable balance in the general ledger may or may not equal the sum of the accounts in the accounts receivable subsidiary ledger. Answer: FALSE After posting entries in a sales journal to the general ledger, the Accounts Receivable balance in the general ledger should equal the sum of the individual customer balances in the accounts receivable subsidiary ledger. Answer: TRUE A special journal is: A) an accounting journal designed to record a specific type of transaction. B) an accounting journal that holds individual accounts that support a specific general ledger account. C) a record of accounts that provides supporting details on individual balances, the total of which appears in a general ledger account. D) a created list of the accounts used by a business entity to define each class of items for which cash is spent or received. Answer: A Adjusting entries are recorded in the . A) cash payments journal B) purchases journal C) cash receipts journal D) general journal Answer: D A subsidiary ledger is: A) an accounting journal designed to record a specific type of transaction. B) a created list of the accounts used by a business entity to define each class of items for which cash is spent or received. C) a complete record of business transactions recorded in a ledger over the life of a company. D) a record of accounts that provide supporting details on individual balances, the total of which appears in a general ledger account. Answer: D Which of the following is true of an accounts payable subsidiary ledger? A) It does not indicate the amount owed to each vendor. B) It shows only a single total for the amount owed on account. C) It lists vendors in alphabetical order, along with amounts paid to the vendors and the remaining amounts owed to them. D) Its format is entirely different from an accounts receivable subsidiary ledger. Answer: C Which of the following is true of a control account? A) It is a valuation account from which balances are added to another account. B) Its balance equals the sum of the balances in a group of related accounts in a subsidiary ledger. C) It is equivalent to a contra account and represents the offsetting nature of debits and credits on a firm's financial statements. D) It holds individual accounts that support a general ledger account. Answer: B Which of the following is true of an accounts receivable subsidiary ledger? A) It does not include a receivable account for each customer, but includes a cumulative account for all customers. B) It contains information about the amount each customer purchased on credit, but excludes the customer name. C) The total of the accounts in the accounts receivable subsidiary ledger must equal the accounts receivable balance in the general ledger. D) Companies keep an accounts payable subsidiary ledger that is entirely different than the accounts receivable subsidiary ledger. Answer: C Assume that a company has only four customers: A, B, C, and D. The accounts receivable balance in the general ledger is $7,983 and the accounts receivable subsidiary ledger of customers A, C, and D have $1,246, $2,596 and $3,240 respectively. Calculate the amount in the accounts receivable subsidiary ledger account of customer B. A) $7,082 B) $2,147 C) $1,391 D) $901 Answer: D Explanation: D) The accounts receivable balance of $7,983 in the general ledger equals the sum of the accounts in the accounts receivable subsidiary ledger ($1,246 + $2,596 + ? + $3,240). Therefore, the amount in the accounts receivable subsidiary ledger account of customer B = $7,983 - ($1,246 + $2,596 + $3,240) = $901 A company has four vendors and the accounts payable subsidiary ledger shows the following balances. Alpha $275,821 Beta 143,474 Gamma 78,943 Delta 34,187 Calculate the accounts payable balance in the general ledger. A) $419,295 B) $532,425 C) $275,821 D) $256,604 Answer: B Which of the following is true of a sales journal? A) It is a special journal used to record all the cash sales. B) It is used to record the sales of capital assets, such as buildings. C) It is a special journal used to record credit sales. D) It is a general journal that is used to record the adjustments in revenue account. Answer: C Tangent Corporation sold a product for $7,150 to Michael on credit. The cost of goods sold is $5,650.Assuming that the firm is following a perpetual inventory system and using a sales journal, it will record $5,650 in the: A) Accounts Receivable DR, Sales Revenue CR column. B) Cost of Goods Sold DR, Merchandise Inventory CR column. C) Merchandise Inventory DR, Cost of Goods Sold CR column. D) Sales Revenue DR, Accounts Receivable CR column. Answer: B Which of the following is true of a sales journal prepared under the perpetual inventory system? A) It includes a Cost of Goods Sold DR, Merchandise Inventory CR column. B) It records both cash and credit sales transactions. C) All transactions recorded in a sales journal are also entered in the general journal. D) It cannot be used with a perpetual inventory system. Answer: A If a business uses the periodic inventory system, the sales journal: A) will record both the cash and credit sales. B) will include a Purchase DR and Account Receivable CR column. C) will exclude the Accounts Receivable DR and Sales Revenue CR column. D) will not include the Cost of Goods Sold DR and Merchandise Inventory CR column. Answer: D