Accounting Information Systems: False L.O. 1 Moderate
Accounting Information Systems: False L.O. 1 Moderate
Accounting Information Systems: False L.O. 1 Moderate
LEARNING OBJECTIVES
TRUE/FALSE
2. The three components of a computerized accounting information system are the hardware, software, and
the network.
3. The combination of personnel, records, and procedures that a business uses to provide financial data is the
accounting information system.
4. In a manual system, processing includes journalizing transactions, posting the accounts, and preparing the
financial statements.
5. The three stages of data processing are inputs, processing, and outputs.
7. Spreadsheets, or electronic work sheets, are computer programs that link data by means of formulas and
functions.
181
True L.O. 3 Moderate Page: 287
11. The general journal is used to record all transactions that do not fit one of the special journals.
12. A subsidiary ledger is a group of accounts that provides supporting details on individual balances, the total
of which appears in a general ledger account.
13. Transactions in the sales journal are posted both to the general ledger and the accounts receivable
subsidiary ledger.
14. The sum of the account balances in the accounts receivable subsidiary ledger should equal the balance in
the accounts payable account in the general ledger.
15. The seller would record the return of merchandise sold on account in the sales journal.
16. A control account is an account whose balance equals the sum of the balances in a group of related
accounts in a subsidiary ledger.
17. The purchases journal is designed to account for purchases of inventory, supplies, and other assets on
account.
18. Credit postings to the accounts receivable general ledger account come from the cash receipts journal and
the purchases journal.
19. The column total for Other Accounts in the cash payments journal is not posted to the general ledger.
20. The accounts payable account in the general ledger controls the accounts payable ledger.
183
MULTIPLE CHOICE
21. A combination of personnel, records, and procedures that a business uses to provide financial data is known as
a(n):
a) processing
b) input
c) output
d) accounting information system
23. Accounting information systems cope with heavy transaction loads by:
a) hiring temporary personnel
b) specialization
c) computerization
d) both b and c are correct
24. The set of programs that drive the computer is referred to as:
a) the server
b) software
c) input
d) output
25. Keeping accurate records of accounts receivable is an example of which feature of a good accounting information
system?
a) favorable cost/benefit relationship
b) compatibility
c) control
d) flexibility
26. The Hide and Seek Company has retail outlets at both large malls and small strip malls throughout the U.S. Its
accounting information system is able to track total revenues by store, by type of mall, by size of the store, by
state, and by region. This is an example of which feature of a good information accounting system?
a) flexibility
b) favorable cost/benefit relationship
c) control
d) compatibility
29. The main computer in a network, where the program and data are stored is called the:
a) database
b) hardware
c) server
d) software
30. The system of electronic linkages that allows different computers to share the same information is known as the:
a) network
b) database
c) management system
d) input system
185
33. Inputs would include:
a) sales receipts
b) an income statement
c) a balance sheet
d) none of the above
37. Computerized accounting for similar transactions in a group or batch is referred to as:
a) hardware
b) batch processing
c) software
d) unit processing
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39. Computerized accounting systems are organized by:
a) outputs
b) inputs
c) function
d) networks
43. Computer programs that link data by means of formulas and functions are referred to as:
a) inputs
b) menus
c) spreadsheets
d) networks
187
45. Each cell in a spreadsheet is defined by:
a) a row number and a column letter
b) a row number and a label
c) a formula and a column number
d) formulas and labels
46. Posting the entries in the sales journal to the accounts receivable subsidiary ledger should be done:
a) on a weekly basis
b) only at the end of the accounting period
c) at the end of each month
d) on a daily basis
47. Customers’ individual accounts are included in a subsidiary ledger referred to as the:
a) accounts payable ledger
b) controlling ledger
c) accounts receivable ledger
d) general ledger
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51. The total of the customer accounts receivable ledger at the end of the accounting period must equal the:
a) total of the creditors’ accounts payable ledger
b) total of the accounts payable account in the general ledger
c) total of the accounts receivable account in the general ledger
d) total of the accounts receivable credit column in the cash receipts journal
52. In which journal would the receipt of a note receivable plus accrued interest be recorded:
a) sales journal
b) purchases journal
c) cash receipts journal
d) cash payments journal
53. The accounts receivable credit column of the cash receipts journal is:
a) posted in summary at the end of the month and by individual amounts on a daily basis
b) posted by individual amounts only at the end of the month
c) not posted
d) posted in summary only at the end of the month
54. Assuming the use of special journals, the sale of equipment in exchange for a promissory note would be recorded
in the:
a) sales journal
b) cash payments journal
c) cash receipts journal
d) general journal
55. Assuming the use of special journals, the sale of merchandise to Jerri Blackwell on account would be recorded in
the:
a) sales journal
b) accounts receivable journal
c) general journal
d) cash receipts journal
56. Assuming the use of special journals, the sale of merchandise to Landon Browning for cash would be recorded in
the:
a) cash receipts journal
b) cash payments journal
c) general journal
d) sales journal
189
a L.O. 4 Moderate Page: 291
57. The receipt of a note receivable in exchange for equipment would be recorded in the:
a) general journal
b) sales journal
c) cash receipts journal
d) long-term asset journal
58. Assuming the use of special journals, the borrowing of $80,000 from the bank by signing a note payable would
be recorded in the:
a) cash receipts journal
b) sales journal
c) cash payments journal
d) general journal
59. Gere Company returned defective supplies and received a cash refund. Assuming the use of special journals, this
entry would be recorded in the:
a) sales journal
b) cash payments journal
c) cash receipts journal
d) general journal
60. Clooney Enterprises returned office supplies to the dealer and received a full cash refund. Assuming the use of
special journals, this entry would be recorded in the:
a) general journal
b) cash receipts journal
c) cash payments journal
d) none of the above
61. Garner Enterprises received payment within the discount period from a customer who had purchased
merchandise on account. The sales invoice was for $2,000, and credit terms were 3/15 n/30. In the cash receipts
journal, $1,940 will appear under the:
a) cash debit column
b) accounts receivable credit column
c) sales revenue credit column
d) cash credit column
62. Welch Industries received payment after the expiration of the discount period from a customer who had
purchased merchandise on account. The sales invoice was for $3,000, and credit terms were 3/15 n/30. The cost
of the merchandise was $1,800. In the cash receipts journal:
a) $3,000 will appear in the accounts receivable credit column
b) $3,000 will appear in the accounts receivable debit column
c) $3,000 will appear in the sales revenue credit column
d) $90 will appear in the sales discounts debit column
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63. Referring to Table 1, how would this transaction be recorded in Deed’s cash receipts journal?
a) debit Cash $3,000; credit Accounts Receivable-Carter Company $3,000
b) debit Cash $2,744 and Sales Discounts $56; credit Accounts Receivable-Carter Company $2,800
c) debit Cash $2,744; credit Accounts Receivable-Carter Company $2,744
d) debit Cash $2,800; credit Accounts Receivable-Carter Company $2,800
64. Referring to Table 1, when will the cash receipt be posted to Carter Company’s account receivable account in the
accounts receivable subsidiary ledger?
a) on March 31, because special journals are always posted monthly
b) on March 1, because subsidiary ledgers are posted daily
c) any time, it doesn’t matter when subsidiary ledgers are posted
d) none of the above
65. Referring to Table 1, how would this transaction be recorded in Deed’s cash receipts journal if payment is made
on March 15?
a) debit Cash $2,800; credit Accounts Receivable-Carter Company $3,000
b) debit Accounts Receivable-Carter Company $3,000; credit Cash $2,744 and Sales Discounts $56
c) debit Cash $2,800; credit Accounts Receivable-Carter Company $3,000 and Sales Discounts $56
d) debit Cash $2,800; credit Accounts Receivable-Carter Company $2,800
66. On April 10, Hot Company received a check from Cold Company for payment of an invoice dated March 24 for
$2,000 with credit terms of 2/10 n/30. On March 28, Cold had returned $200 of the merchandise because it was
defective. How would this transaction be recorded in Hot’s cash receipts journal?
a) debit Cash $1,800; credit Accounts Receivable-Cold Company $1,800
b) debit Cash $2,000; credit Accounts Receivable-Cold Company $2,000
c) debit Cash $1,764; credit Accounts Receivable-Cold Company $1,764
d) debit Cash $1,764 and Sales Discounts $36; credit Accounts Receivable-Cold Company $1,800
191
67. The end-of-month balance in Northington Company’s cash receipts journal cash column is $22,550. How will
this column be posted?
a) The total will be posted to the cash account as a debit.
b) The total will be posted to the cash account as a credit.
c) The individual amounts are posted on a daily basis.
d) The total is not posted.
68. Which of the following transactions are recorded in the purchases journal?
a) purchase of store supplies for cash
b) purchase of inventory on account
c) purchase of inventory for cash
d) return of supplies purchased on account
70. Currie Enterprises paid a creditor on account. Assuming the use of special journals, this entry would be recorded
in the:
a) cash receipts journal
b) purchases journal
c) general journal
d) cash payments journal
71. The purchase of office equipment for cash would be recorded in the:
a) cash payments journal
b) cash receipts journal
c) either the cash payments journal or the purchases journal
d) purchases journal
72. The individual amounts in the accounts payable credit column of the purchases journal are posted:
a) individually to the accounts payable account in the general ledger
b) individually to the accounts payable subsidiary ledger
c) individually to the purchases account in the general ledger
d) in total to the accounts payable subsidiary ledger
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73. Amounts are posted individually from the purchases journal to the:
a) credit column of the creditors’ accounts in the accounts payable subsidiary ledger
b) credit column of the inventory account in the general ledger
c) credit column of the accounts receivable account in the general ledger
d) debit column of the cash account in the general ledger
75. The payment of a note payable plus the accrued interest would be recorded in the:
a) cash payments journal
b) general journal
c) purchases journal
d) sales journal
77. A document issued by a seller to credit a customer's account for returned merchandise is referred to as a:
a) credit memorandum
b) debit memorandum
c) seller’s memorandum
d) accounts receivable memorandum
193
79. Jetson Company records returns and allowances in the general journal. On June 25, Jetson issued a $120 debit
memo for merchandise purchased on credit from Crimson Company because part of the merchandise that was
sent was not what Jetson ordered. What entry does Jetson make?
a) no entry is required by Jetson
b) Accounts Payable-Crimson Company 120
Inventory 120
c) Accounts Receivable-Crimson Company 120
Sales Returns and Allowances 120
d) Accounts Payable-Crimson Company 120
Accounts Receivable-Crimson Company 120
80. Jets Company records returns and allowances in the general journal. On August 16, Jets issued a $150 credit
memo to Celtics Company for merchandise sold on credit on August 1. What entry does Jets make?
a) no entry is required by Jets Company
b) Accounts Payable-Celtics Company 150
Inventory 150
c) Accounts Receivable-Celtics Company 150
Sales Returns and Allowances 150
d) Sales Returns and Allowances 150
Accounts Receivable-Celtic Company 150
81. Big Industries purchased merchandise from Small Company paying $5,000 in cash and promising to pay the
remaining $5,000 in 30 days. Assuming the use of special journals, Big Industries would record this entry in the:
a) cash payments journal
b) general journal
c) sales journal
d) cash receipts journal
82. Perkins issued a $500 credit memo to a customer, Susan Richardson, for inventory that Richardson returned
because it was not what she had ordered. What entry does Perkins make?
a) Accounts Receivable-Richardson 500
Sales Returns and Allowances 500
b) Sales Returns and Allowances 500
Accounts Payable-Richardson 500
c) Accounts Payable-Richardson 500
Sales Returns and Allowances 500
d) Sales Returns and Allowances 500
Accounts Receivable-Richardson 500
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83. Perkins issued a $500 credit memo to a customer, Susan Richardson, for inventory that Richardson returned
because it was not what she had ordered. What entry does Richardson make?
a) Accounts Payable-Perkins 500
Inventory 500
b) Inventory 500
Accounts Payable-Perkins 500
c) Accounts Payable-Perkins 500
Accounts Receivable-Perkins 500
d) Accounts Payable-Perkins 500
Sales Returns and Allowances 500
84. Ruby Company purchased inventory from Diamond Company, and received a credit memo from Diamond
Company. Diamond Company had charged Ruby Company $3.85 rather than $3.58 for each of the 100 items
ordered. What entry will Ruby Company make?
a) Sales Returns and Allowances 27
Inventory 27
b) Accounts Payable-Diamond Company 27
Inventory 27
c) No entry is required because Ruby Company did not issue the memo.
d) Inventory 27
Accounts Payable-Diamond Company 27
85. Ruby Company purchased inventory from Diamond Company, and received a credit memo from Diamond
Company. Diamond Company had charged Ruby Company $3.85 rather than $3.58 for each of the 100 items
ordered. What entry will Diamond Company make?
a) Sales Returns and Allowances 27
Inventory 27
b) Sales Returns and Allowances 27
Accounts Receivable-Ruby Company 27
c) Accounts Payable-Ruby Company 27
Inventory 27
d) Inventory 27
Accounts Payable-Ruby Company 27
86. The account that is credited for every transaction entered in the purchases journal is:
a) cash
b) purchase discounts
c) accounts payable
d) sales discounts
195
87. The entries in a purchases journal are posted to the ______ subsidiary ledger.
a) accounts payable
b) purchases
c) accounts receivable
d) sales
88. The ______ journal is used by the seller to record the return by a customer of merchandise sold for cash.
a) general
b) sales
c) cash receipts
d) cash payments
89. The accounts payable subsidiary ledger has postings from which sets of journals?
a) purchases, general, and cash payments
b) purchases, cash receipts, and sales
c) sales, cash payments, and general
d) purchases, general, and cash receipts
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MATCHING
a) network
b) spreadsheet
c) accounting information system
d) special journal
e) software
f) on-line processing
g) subsidiary ledger
h) menu
i) general journal
j) control account
91. ______________ Set of programs or instructions that cause the computer to perform the work desired
92. ______________ The combination of personnel, records, and procedures that a business uses to meet the need
for financial data
93. ______________ An account whose balance equals the sum of the balances in a group of related accounts in a
subsidiary ledger
94. ______________ Journal used to record all transactions that do not fit one of the special journals
95. ______________ Book of accounts that provides supporting details on individual balances, the total of which
appears in a general ledger account
96. ______________ A computer program that links data by means of formulas and functions
97. ______________ An accounting journal designed to record one specific type of transaction
98. ______________ Computerized processing of related functions on a continuous basis
99. ______________ A list of options for choosing computer functions
100. ______________ The system of electronic linkages that allows different computers to share the same
information
Solution:
91. e
92. c
93. j
94. i
95. g
96. b
97. d
98. f
99. h
100. a
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PROBLEMS AND CRITICAL THINKING EXERCISES
101. Describe the four features of a good accounting information system and give an example of each.
Solution:
a) Control over operations. Examples: control over cash payments; accurate recordkeeping for accounts
receivable; insuring against theft of inventory.
b) Compatibility with the business’s specific operations and organizational structure. Examples: tracking the
events of a business having many branch offices and summarizing those events by office, by region, or by
sales type; summarizing the accounting information of a business operating in many countries and adjusting
for foreign currency translations.
c) Flexibility in response to changes in the business. Examples: the system’s ability to adapt to major changes
such as the adding of a product line, buying an existing business, or opening a new store.
d) Favorable cost/benefit relationship. Example: paying for customized programming instead of purchasing an
existing software package because the incremental benefits to be derived from the specialized information
obtained exceeds the additional costs incurred.
102. Many companies are computerizing their accounting systems. Discuss some of the benefits of a computerized
accounting system.
Solution:
Computerized accounting systems are able to handle large volumes of transactions efficiently and more reliably
than manual systems. The tedious and frequently error-ridden task of posting becomes a simple and speedy
process, which the computer can do automatically. The preparation of financial statements, often requiring a
work sheet, is handled through the pushing of a button. Access to the information contained in a computerized
accounting system is readily available to managers for decision making.
Solution:
Spreadsheets can be used to prepare the various financial reports that are the end result of the accounting
information system. Specifically, a spreadsheet can be used to prepare an income statement, a statement of
owner’s equity, a balance sheet, and a statement of cash flows. The power of a spreadsheet is apparent when
enormous amounts of data must be analyzed. The spreadsheet will be updated automatically after making
changes to a number or numbers.
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104. Using the information in the following unidentified journals, state how the selected numbers would be posted
using the selections below.
Debits Credits
Date Cash Sales Acc. Sales Rev. Other Acct. Amount CGS Dr.
Dis. Rec. Inv. Cr.
Sept. 8 3,000 3,000 1,750
10 2,500 Ross, Capital 2,500
13 50 Int. Revenue 50
15 582 18 600 Jane Gibson
30 e) 6,132 d) 18 600 3,000 Totals f) 2,550 h) 1,750
a) 25,440 ______________
b) 5,550 ______________
c) 9,000 ______________
d) 18 ______________
e) 6,132 ______________
f) 2,550 ______________
g) 4,250 ______________
h) 1,750 ______________
199
Solution:
a) 5
b) 6
c) 3
d) 1
e) 1
f) 6
g) 6
h) 5
Dec. 8 Sold $2,000 of merchandise to Bruce Company for cash. The cost of the merchandise was $1,250.
16 Issued a credit memo for $650 to Susan Wilson for merchandise she purchased on credit several days
ago. The cost of the returned merchandise was $250.
Record the above transactions in either the cash receipts journal or the general journal.
General Journal
Date Accounts Debit Credit
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Solution:
General Journal
Date Accounts Debit Credit
Dec.16 Sales Returns and Allowances 650
Accounts Rec.-Susan Wilson 650
Inventory 250
Cost of Goods Sold 250
106. Given the following unidentified journal, write an explanation for each entry.
Solution:
107. J and R Sporting Goods reports these selected transactions for the month of August:
201
Aug. 9 Issued invoice No. 159 for sale on account to Evans Company, $3,500, term 1/10 n/30. The cost of the
merchandise was $2,200.
10 Issued invoice No. 160 for sale on account to Sails and Boats, $4,300, terms 2/15 n/45. The cost of the
merchandise was $2,450.
20 Issued a credit memo to Sails and Boats for $2,800 for merchandise returned. The cost of the returned
merchandise was $1,595.
Record the above transactions in either the sales journal or the general journal.
Sales Journal
Date Account Debited Acc. Rec. Dr. Cost of Goods Sold Dr
Sales Rev. Cr. Inventory Cr.
General Journal
Date Accounts Debit Credit
Solution:
Sales Journal
Date Account Debited Acc. Rec. Dr. Cost of Goods Sold Dr
Sales Rev. Cr. Inventory Cr.
Aug. 9 Evans Company 3,500 2,200
10 Sails and Boats 4,300 2,450
31 Totals 7,800 4.650
General Journal
Date Accounts Debit Credit
Aug. 20 Sales Returns and Allowances 2,800
Accounts Rec.-Sails and Boats 2,800
Inventory 1,595
Cost of Goods Sold 1,595
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108. Describe in detail the process of posting data from the sales journal of a company using a perpetual inventory
system. Where does it go, when is it posted, and what steps are followed?
Solution:
The sales journal records credit sales. Each line in the journal represents a single sale and the dollar value of
each sale is entered in the accounts receivable debit and sales revenue credit column. At the end of each month,
the total of this amount column is posted as a debit to accounts receivable and a credit to sales in the general
ledger. An S with a page number immediately following is entered in the reference columns of these two
accounts, indicating the source of the entry. The completion of this posting process is indicated by writing the
account numbers for accounts receivable and sales right beneath the total of the amount column.
On a daily basis, the amount of each sale is debited to the individual customer’s account in the accounts
receivable subsidiary ledger. Again, an S followed by a page number is written in the reference column of each
customer’s account for each entry. A checkmark is placed in the reference column next to each individual
amount in the sales journal. This indicates that the amount has been posted.
Since the company is using the perpetual inventory system, the sales journal contains a column for a debit to cost
of goods sold and a credit to inventory. The total of this column is posted at the end of each month when the
total of the accounts receivable debit and sales revenue credit column is posted.
109. Indicate the proper journal to use to record each of the following transactions. Use S for sales journal, P for
purchases journal, CR for cash receipts journal, CP for cash payments journal, and J for general journal.
203
Solution:
a) CP
b) CP
c) CR
d) CP
e) CR
f) J
g) CP
h) CP
i) CR
j) S
k) J
l) P
m) CR
n) CP
110. Identify all the journals in which the following accounts would be debited or credited. Use P for purchases
journal, S for sales journal, CP for cash payments journal, CR for cash receipts journal, and J for general journal.
Some accounts may be used in more than one journal.
Solution:
a) CR, S, J
b) S, J, CR
c) J
d) CR, CP
e) P, CP, J
f) CR, S
g) J
i) CR, CP, P, S, J
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111. Indicate how the following columns are posted from the sales journal, cash payments journal, and the cash
receipts journal. Use the following letters to indicate your answer:
a) In total only
b) Individually only
c) In total and individually
Solution:
1) b
2) c
3) a
4) c
5) a
6) c
7) a
8) b
9) a
10) a
205
112. Burton Company uses special journals along with the general journal to record its daily transactions. Using the
following abbreviations, identify the appropriate journal in which to record each transaction.
Sales Journal S
Purchases Journal P
Cash Receipts Journal CR
Cash Payments Journal CP
General Journal J
Solution:
a) P
b) CR
c) CP
d) J
e) CP
f) CR
g) CP
h) CP
i) CR
j) J
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113. Tom and Jerry Company uses special journals along with the general journal to record its daily transactions.
Using the following abbreviations, identify the appropriate journal in which to record each transaction.
Sales Journal S
Purchases Journal P
Cash Receipts Journal CR
Cash Payments Journal CP
General Journal J
Solution:
a) S
b) S
c) J
d) P
e) P
f) J
g) CR
h) CP
i) CR
j) CP
207
114. Austin Painting and Accessories reports the following transactions for the month of March.
May 2 Purchased inventory on credit from Paint Suppliers, terms 2/10 n/30, $4,000.
7 Purchased supplies on credit from Office Wholesalers, terms 2/10 n/45, $750.
9 Returned $2,700 of inventory purchased on April 2 to Paint Suppliers for full credit.
10 Purchased office equipment on account from Officeland, terms 3/15 n/45, $4,700.
Record the above transactions in the purchases journal and the general journal.
Purchases Journal
Credit Debits
Date Account Acc. Pay. Inv. Supplies Other Acct. Amount
Credited
General Journal
Date Accounts Debit Credit
Solution:
Purchases Journal
Credit Debits
Date Acct. Credited Acc. Pay. Inv. Supplies Other Acct. Amount
May 2 Paint Suppliers 4,000 4,000
7 Office 750 750
Wholesalers
10 Officeland 4,700 Office 4,700
Equipment
30 Totals 9,450 4,000 750 4,700
General Journal
Date Accounts Debit Credit
May 9 Accounts Payable-Paint Suppliers 2,700
Inventory 2,700
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Solution:
209