Midterm Activity 2

CHAPTER 4
1. Which document is NOT prepared by the sales department?

a. packing slip
b. shipping notice
c. bill of lading
d. stock release
2. Which document triggers the update of the inventory subsidiary ledger?

a. bill of lading
b. stock release
c. sales order
d. shipping notice
3. Which function should the billing department NOT perform?

a. record the sales in the sales journal
b. send the ledger copy of the sales order to accounts receivable
c. send the stock release document and the shipping notice to the billing department as proof of shipment
d. send the stock release document to inventory control
4. When will a credit check approval most likely require specific authorization by the credit department?
a. when verifying that the current transaction does not exceed the customer’s credit limit
b. when verifying that the current transaction is with a valid customer
c. when a valid customer places a materially large order
d. when a valid customer returns goods
5. Which type of control is considered a compensating control?

a. segregation of duties
b. access control
c. supervision
d. accounting records
6. Which of the following is NOT an independent verification control?

a. The shipping department verifies that the goods sent from the warehouse are correct in type and
quantity.
b. General ledger clerks reconcile journal vouchers that were independently prepared in various
departments.
c. The use of prenumbered sales orders.
d. The billing department reconciles the shipping notice with the sales invoice to ensure that customers
are billed for only the quantities shipped.
7. Which function or department below records the decrease in inventory due to a sale?
a. warehouse
b. sales department
c. billing department
d. inventory control
8. Which situation indicates a weak internal control structure?

a. the AR clerk authorizes the write off of bad debts
b. the record-keeping clerk maintains both AR and AP subsidiary ledgers
c. the inventory control clerk authorizes inventory purchases
d. the AR clerk prepares customer statements every month
9. The bill of lading is prepared by the

a. sales clerk.
b. warehouse clerk.
c. shipping clerk.
d. billing clerk.
10. Which of following functions should be segregated?

a. opening the mail and recording cash receipts in the journal
b. authorizing credit and determining reorder quantities
c. shipping goods and preparing the bill of lading
d. providing information on inventory levels and reconciling the bank statement
CHAPTER 5
1. Which document helps to ensure that the receiving clerks actually count the number of goods received?
a. packing list
b. blind copy of purchase order
c. shipping notice
d. invoice
2. When the goods are received and the receiving report has been prepared, which ledger may be
updated?
a. standard cost inventory ledger
b. inventory subsidiary ledger
c. general ledger
d. accounts payable subsidiary ledger
3. Which statement is NOT correct for an expenditure system with proper internal controls?
a. Cash disbursements maintain the check register.
b. Accounts payable maintains the accounts payable subsidiary ledger.
c. Accounts payable is responsible for paying invoices.
d. Accounts payable is responsible for authorizing invoices.
4. Which duties should be segregated?
a. matching purchase requisitions, receiving reports, and invoices and authorizing payment
b. authorizing payment and maintaining the check register
c. writing checks and maintaining the check register
d. authorizing payment and maintaining the accounts payable subsidiary ledger
5. Which documents would an auditor most likely choose to examine closely to ascertain that all
expenditures incurred during the accounting period have been recorded as a liability?
a. invoices
b. purchase orders
c. purchase requisitions
d. receiving reports
6. Which task must still require human intervention in an automated purchases/cash disbursements
system?
a. determination of inventory requirements
b. preparation of a purchase order
c. preparation of a receiving report
d. preparation of a check register
7. Which one of the following departments does not have a copy of the purchase order?
a. the purchasing department
b. the receiving department
c. accounts payable
d. general ledger
8. Which document typically triggers the process of recording a liability?

a. purchase requisition
b. purchase order
c. receiving report
d. supplier’s invoice
9. Which of the following tasks should the cash disbursement clerk NOT perform?
a. review the supporting documents for completeness and accuracy
b. prepare checks
c. approve the liability
d. mark the supporting documents paid
10. Which of the following is true?

a. The cash disbursement function is part of accounts payable.
b. Cash disbursements is an independen accounting function.
c. Cash disbursements is a treasury function.
d. The cash disbursement function is part of the general ledger department.
CHAPTER 6
1. The document that captures the total amount of time that individual workers spend on each production
job is called a
a. time card.
b. job ticket.
c. personnel action form.
d. labor distribution form.
2. An important reconciliation in the payroll system is when

a. the general ledger department compares the labor distribution summary from cost accounting to the
disbursement voucher from accounts payable.
b. the personnel department compares the number of employees authorized to receive a pay check to the
number of pay checks prepared
. c. the production department compares the number of hours reported on job tickets to the number of
hours reported on time cards.
d. the payroll department compares the labor distribution summary to the hours reported on time cards.
3. 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. the accounts payable department verifies the accuracy of the payroll register before transferring payroll
funds to the general checking account
d. the general ledger department reconciles the labor distribution summary and the payroll disbursement
voucher
4. The department responsible for approving pay rate changes is

a. payroll
b. treasurer
c. personnel
d. cash disbursements
5. Which function should distribute paychecks?

a. personnel
b. timekeeping
c. paymaster
d. payroll
6. Which transaction is not processed in the fixed asset system?

a. purchase of building
b. repair of equipment
c. purchase of raw materials
d. sale of company van
7. Depreciation
a. is calculated by the department that uses the fixed asset.
b. allocates the cost of the asset over its useful life.
c. is recorded weekly.
d. results in book value approximating fair market value.
8. Depreciation records include all of the following information about fixed assets EXCEPT the
a. economic benefit of purchasing the asset.
b. cost of the asset.
c. depreciation method being used.
d. location of the asset.
9. Which control is not a part of the fixed asset system?

a. formal analysis of the purchase request
b. review of the assumptions used in the capital budgeting model
c. development of an economic order quantity model
d. estimates of anticipated cost savings
10. Objectives of the fixed asset system do NOT include

a. authorizing the acquisition of fixed assets.
b. recording depreciation expense.
c. computing gain and/or loss on the disposal of fixed assets.
d. maintaining a record of the fair market value of all fixed assets.
11. 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 subsidiary ledger

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CHAPTER 4

1. Which document is NOT prepared by the sales department?

2. Which document triggers the update of the inventory subsidiary ledger?

3. Which function should the billing department NOT perform?

5. Which type of control is considered a compensating control?

6. Which of the following is NOT an independent verification control?

8. Which situation indicates a weak internal control structure?

9. The bill of lading is prepared by the

10. Which of following functions should be segregated?

8. Which document typically triggers the process of recording a liability?

10. Which of the following is true?

2. An important reconciliation in the payroll system is when

3. Which internal control is not an important part of the payroll system?

4. The department responsible for approving pay rate changes is

5. Which function should distribute paychecks?

6. Which transaction is not processed in the fixed asset system?

9. Which control is not a part of the fixed asset system?

10. Objectives of the fixed asset system do NOT include

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