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

a. General ledger compares the labor distribution summary from cost accounting to the
disbursement voucher from accounts payable
b. Personnel compares the number of employees authorized to receive a paycheck to the
number of paychecks prepared
c. Production compares the number of hours reported on job tickets to the number of hours
reported on time cards
d. Payroll 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. Accounts payable verifies the accuracy of the payroll register before transferring payroll
funds to the general checking accounting.
d. General ledger reconciles the labor distribution summary and the payroll disbursement
voucher.

4. Which transaction is not processed in the Fixed Asset System?

a. Purchase of building
b. Improvement of equipment
c. Purchase of raw materials
d. Sale of company van

5. 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

6. Depreciation records include all of the following information about fixed assets except
a. The economic benefit of purchasing the asset
b. The cost of the asset
c. The depreciation method being used
d. The location of the asset
7. 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

8. 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 disposal of fixed assets
d. Maintaining a record of the fair market value of all fixed assets

9. Which of the following is not a characteristic of the Fixed Asset System?

a. Acquisition are routine transactions requiring general authorization.
b. Retirements are reported on an authorized disposal report form.
c. Acquisition cost is allocated over are expected life of the asset.
d. Transfer of fixed assets among departments is recorded in the fixed asset subsidiary ledger.

10. In the payroll subsystem, which function should distribute paychecks?

a. Personnel
b. Timekeeping
c. Paymaster
d. Payroll

11. Where does the responsibility lie for reconciling the labor distribution summary and the payroll
disbursement voucher?
a. Cash disbursements
b. Cost accounting
c. Personnel
d. General ledger

12. 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.

13. 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 have
more 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.

14. Which department is responsible for approving changes in pay rates for employees?
a. Payroll
b. Treasurer
c. Personnel
d. Cash disbursements

15. Which of the following situation 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.

16. 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 produced
b. To prevent an absent employee’s check from being lost
c. To avoid paying absent employees for payday
d. To prevent the paymaster from cashing unclaimed checks

17. Which of the following is not a reasonable control for fixed assets?
a. Proper authorization is required for acquisition and disposal 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.

18. Cost accounting updates work-in-process accounts from

a. Time cards
b. The labor distribution summary
c. Job tickets
d. Personnel action forms

19. Payroll uses time card data to do all of the following except
a. Prepare the payroll register
b. Update employee payroll records
c. Prepare the labor distribution summary
d. Prepare paychecks
20. Payroll checks are typically drawn on
a. The regular checking account
b. A payroll imprest account
c. A wages payable account
d. Petty cash

21. The personnel action form provides authorization control by

a. Preventing paychecks for terminated employees
b. Verifying pay rates for employees
c. Informing payroll of new hires
d. All of the above

22. Accounting records that provide the audit trail for payroll include all of the following except
a. Time cards
b. Job tickets
c. Payroll register
d. Accounts payable register

23. Personnel actions forms are used to do all of the following except
a. Activate new employees
b. Terminate employees
c. Record hours worked
d. Change pay rates

24. The payroll department performs all of the following except

a. Prepare the payroll register
b. Distributes paychecks
c. Updates employee payroll records
d. Prepares paychecks

25. The document that records the total amount of time spent on a production job is the
a. Time card
b. Job ticket
c. Labor distribution summary
d. Personnel action form

26. A control technique that can reduce the risk of a terminated employee being paid is
a. A security camera viewing the time clock
b. The supervisor taking role during the shift
c. Paychecks being distributed by an independent paymaster
d. Reconciliation of time cards and job tickets
27. Accounts payable
a. Signs paychecks
b. Prepares the payroll vouchers
c. Reconciles time cards and employee records
d. Distributes paychecks to employees

28. All of the following are processed by the Fixed Asset System except
a. Sale of unneeded equipments
b. Purchase of raw materials
c. Repair of production equipments
d. Purchase of a new plant

29. The Fixed Asset system performs all of the following except
a. Determines the need for new assets
b. Maintains depreciation records
c. Records retirement and disposal of assets
d. Tracks the physical location of fixed assets

30. The payroll department performs all of the following except

a. Prepares paychecks
b. Transfers adequate funds to the payroll imprest accounts
c. Updates employee payroll records
d. Prepares the payroll register

31. Depreciation
a. Assures that assets are reported at fair market value
b. Is discretionary for many firms
c. Allocates the cost of an asset over its useful life
d. Is the responsibility of the department using the asset

32. The Fixed Asset System is similar to the expenditure cycle except
a. Fixed asset transactions are non-routine and require special authorization and controls
b. Fixed assets are capitalized, not expensed
c. Both a and b
d. None of the above

33. Assets maintenance involves

a. The recording of periodic depreciation
b. Adjusting the asset records to reflect the cost of physical improvements
c. Keeping track of the physical location of the assets
d. All of the above
34. The Fixed Asset Systems does all of the following except
a. Records acquisition of assets
b. Records improvements to assets
c. Estimate the fair market value of assets in service
d. Records the disposal of assets

35. Asset disposal

a. Occurs as soon as an asset is fully depreciated
b. Requires no special authorization
c. Automatically initiates the purchase of a replacement asset
d. Must follow formal authorization procedures
1. The purpose of the purchase requisition is to
a. Order goods from vendors
b. Record receipt of goods from vendors
c. Authorize the purchasing department to order goods
d. Bill for goods delivered

2. The purpose of the receiving report is to

a. Order goods from vendors
b. Record receipt of goods from vendors
c. Authorize the purchasing department to order goods
d. Bill for goods delivered

3. All of the following departments have a copy of the purchase order except
a. The purchasing department
b. The receiving department
c. Accounts payable
d. General ledger

4. The purpose of the purchase order is to

a. Order goods from vendors
b. Record receipt of goods from vendors
c. Authorize the purchasing department to order goods
d. Approve payment for goods received

5. The open purchase order file in the purchasing department is used to determine
a. The quality of items a vendor ships
b. The best vendor for a specific item
c. The orders that have not been received
d. The quantity of items received

6. The purchase order

a. Is the source document to make an entry into the accounting records\
b. Indicates item description, quantity, and price
c. Is prepared by the inventory control department
d. Is approved by the end-user department

7. The reason that a blind copy of the purchase order is sent to receiving is to
a. Inform receiving when a shipment is due
b. Force a count of the items delivered
c. Inform receiving of the type, quantity, and price of items to be delivered
d. Require that the goods delivered are inspected
8. The receiving report is used to
a. Accompany physical inventories to the storeroom or warehouse
b. Advise the purchasing department of the dollar value of the goods delivered
c. Advise general ledger of the accounting entry to be made
d. Advise the vendor that the goods arrived safely

9. When a copy of the receiving report arrives in the purchasing department, it is used to
a. Adjust perpetual inventory records
b. Record the physical transfer of inventory from receiving to the warehouse
c. Analyze the receiving department’s process
d. Recognize the purchase order as closed

10. The financial value of a purchase is determined by reviewing the

a. Packing slip
b. Purchase requisition
c. Receiving report
d. Supplier’s invoice

11. Which document is least important in determining the financial value of a purchase?
a. Purchase requisition
b. Purchase order
c. Receiving report
d. Supplier’s invoice

12. In a merchandising firm, authorization for the payment of inventory is the responsibility of
a. Inventory control
b. Purchasing
c. Accounts payable
d. Cash disbursements

13. In a merchandising firm, authorization for the purchase of inventory is the responsibility of
a. Inventory control
b. Purchasing
c. Accounts payable
d. Cash disbursements

14. When purchasing inventory, which documents usually triggers the recording of a liability?
a. Purchase requisition
b. Purchase order
c. Receiving report
d. Supplier’s invoice
15. Because of time delays between receiving inventory and making the journal entry
a. Liabilities are usually understated
b. Liabilities are usually overstated
c. Liabilities are usually correctly stated
d. None of the above

16. Usually the open voucher payable file is organized by

a. Vendor
b. Payment due date
c. Purchase order number
d. Transaction date

17. Which of the following statements is not correct?

a. The voucher system is used to improve control over cash disbursements
b. The sum of the paid vouchers represents the voucher payable liability of the firm
c. The voucher system permits the firm to consolidate payments of several invoice on one
voucher
d. Many firms replace accounts payable with a voucher payable system

18. In the expenditure cycle, general ledger does not

a. Post the journal voucher from the accounts payable department
b. Post the account summary from inventory control
c. Post the journal voucher the purchasing department
d. Reconcile the inventory control account with the inventory subsidiary summary

19. The documents in a voucher packet include all of the following except
a. A check
b. A purchase order
c. A receiving report
d. A supplier’s invoice

20. To maintain a good credit rating and to optimize cash management, cash disbursement should
arrive at the vendor’s place of business
a. As soon as possible
b. On the due date
c. On the discount date
d. By the end of the month
21. The cash disbursement clerk performs all of the following tasks except
a. Reviews the supporting documents for completeness and accuracy
b. Prepares checks
c. Signs checks
d. Marks the supporting documents paid

22. When a cash disbursement in payment of an accounts payable is recorded

a. The liability account is increased
b. The income statement is changed
c. The cash account is unchanged
d. The liability account is decreased

23. Authorization for payment of an accounts payable liability is the responsibility of

a. Inventory control
b. Purchasing
c. Accounts payable
d. Cash disbursements

24. Of the following duties, it is most important to separate

a. Warehouse from stores
b. Warehouse from inventory control
c. Accounts payable and accounts receivable
d. Purchasing and accounts receivable

25. In a firm with proper segregation of duties, adequate supervision is most critical in
a. Purchasing
b. Receiving
c. Accounts payable
d. General ledger

26. The receiving department is not responsible to

a. Inspect shipments received
b. Count items received from vendors
c. Order goods from vendors
d. Safeguard goods until they are transferred to the warehouse

27. The major risk exposures associated with the receiving department include all of the following
except
a. Goods are accepted without a physical count
b. There is no inspection for goods damaged in shipment
c. Inventories are not secured on the receiving dock
d. The audit trail is destroyed
28. When searching for unrecorded liabilities at the end of an accounting period, the accountant
would search all of the files except
a. The purchase requisition file
b. The cash receipts file
c. The purchase order file
d. The receiving report file

29. In regards to the accounts payable department, which statement is not true?
a. The purchase requisition shows that the transaction was authorized
b. The purchase order proves that the purchase was required
c. The receiving report provides evidence of the physical receipt of the goods
d. The supplier’s invoice indicates the financial value of the transaction

30. In a computerized system that uses an economic order quantity (EOQ) model and the perpetual
inventory method, who determines when to recorder inventory?
a. The inventory control clerk
b. The purchasing department
c. The vendor
d. The computer system

31. Firms can except that proper use a valid vendor file will result in all of the following benefits
except
a. Purchasing agents will be discouraged from improperly ordering inventory from related
parties
b. Purchases from fictitious vendors will be detected
c. The most competitive price will be obtained
d. The risk of purchasing agents receiving kickbacks and bribes will be reduced

32. In a real-time processing system with a high number of transaction, the best and most practical
control over cash disbursements is to have
a. All checks manually signed by the treasurer
b. All checks signed by checks- signing equipment
c. Check over a certain dollar amount manually signed by the treasurer
d. Checks over a certain dollar amount manually signed by the cash disbursements clerk

33. The document which will close the open purchase requisition file is the
a. Purchase order
b. Vendor invoice
c. Receiving report
d. None of the above
34. Goods received are inspected and counted to
a. Determine that the goods are in good condition
b. Determine the quantity of goods received
c. Preclude payment for goods not received or received in poor condition
d. All of the above

35. If a company uses a standard cost system, inventory records can be updated from the
a. Vendor invoice
b. Purchase order
c. Receiving report
d. Purchase requisition

36. If a company uses an actual cost system, inventory records can first be updated from the
a. Vendor in voice
b. Purchase order
c. Receiving report
d. Purchase requisition

37. Copies of a purchase order are sent to all of the following except
a. Inventory control
b. Receiving
c. General ledger
d. Accounts payable

38. The receiving report

a. Is used to update the actual cost inventory ledger
b. Accompanies the goods to the storeroom
c. Is sent to general ledger
d. Is returned to the vendor to acknowledge receipt of the goods

39. A supplier invoice

a. Is included with the goods
b. Shows what was ordered even if all was not shipped
c. Is sent by vendor to accounts payable
d. None of the above

40. The cash disbursement function is

a. Part of accounts payable
b. An independent accounting function
c. A treasury function
d. Part of the general ledger department
1. The revenue cycle consists of
a. One subsystem-order entry
b. Two subsystems-sales order processing and cash receipts
c. Two subsystems-order entry and inventory control
d. Tree subsystem-sales order processing, credit authorization, and cash receipts

2. The reconciliation that occurs in the shipping department is intended to ensure that
a. Credit has been approved
b. The customer is billed for the exact quantity shipped
c. The goods shipped match the goods ordered
d. Inventory records are reduced for the goods shipped

3. The adjustment to accounting records to reflect the decrease in inventory due to a sale
occurs in the
a. Warehouse
b. Shipping department
c. Billing department
d. Inventory control department

4. Which document triggers the revenue cycle?

a. The sale order
b. The customer purchase order
c. The sales invoice
d. The journal voucher

5. Copies of the sales order can be used for all of the following except
a. Purchase order
b. Credit authorization
c. Shipping notice
d. Packing slip

6. The purpose of the sales invoice is to

a. Record reduction of inventory
b. Transfer goods from seller to shipper
c. Bill the customer
d. Select items from inventory for shipment

7. The customer open order file is used to

a. Respond to customer queries
b. Fill the customer order
c. Ship the customer order
d. Authorize customer credit
8. The stock release copy of the sales order is not used to
a. Locate and pick the items from the warehouse shelves
b. Record any out-of-stock items
c. Authorize the warehouse clerk to release custody of the inventory to shipping
d. Record the reduction of inventory

9. The shipping notice

a. Is mailed to the customer
b. Is a formal contract between the seller and the shipping company
c. Is always prepared by the shipping clerk
d. Informs the billing department of the quantities shipped

10. The billing department is not responsible for

a. Updating the inventory subsidiary records
b. Recording the sale in the sales journal
c. Notifying accounts receivable of the sale
d. Sending the invoice to the customer

11. Customers should be billed for backorder when

a. The customer purchase order is received
b. The backordered goods are shipped
c. The original goods are shipped
d. Customers are not billed for backorders because a backorder is a lost sale

12. Usually specific authorization is required for all of the following

a. Sales on account which exceed the credit limit
b. Sales of goods at the list price
c. A cash refund for goods returned without a receipt
d. Write off an uncollectible account receivable

13. Which of the following functions should be segregated?

a. Opening the mail and making the journal entry to record cash receipt
b. Authorizing credit and determining reorder quantities
c. Maintaining the subsidiary ledgers and handling customer queries
d. Providing information on inventory levels and reconciling the bank statement

14. Which situation indicates a weak internal control structure?

a. The mailroom clerk authorizes credit memos
b. The record keeping clerk maintains both accounts receivable and accounts payable
subsidiary ledgers
c. The warehouse clerk obtains a signature before releasing goods for shipment
d. The accounts receivable clerk prepares customer statements every month
15. The most effective internal control procedure to prevent or detect the creation of fictitious
credit memoranda for sales returns is to
a. Supervise the accounts receivable department
b. Limit access to credit memoranda
c. Prenumber and sequence check all credit memoranda
d. Require management approval for all credit memoranda

16. 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 invoice
b. Reconcile the accounts receivable control to the accounts receivable subsidiary ledger
c. Prepare monthly customer statement
d. Reconcile total sales on account to the debits in the accounts receivable subsidiary
ledger

17. Which department is least likely to be involved in the revenue cycle?

a. Credit
b. Accounts payable
c. Billing
d. Shipping

18. Which document is included with a shipment sent to a customer?

a. Sales invoice
b. Stock release form
c. Packing slip
d. Shipping notice

19. Good internal controls in the revenue cycle should ensure all of the following except
a. All sales are profitable
b. All sales are recorded
c. Credit is authorized
d. Inventory to be shipped is not stolen

20. 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 subsidiary
b. Authorize credit
c. Segregate custody of inventory from record keeping
d. Segregate record keeping duties of general ledger from accounts receivable
21. Internal control for handling sales returns and allowances do not include
a. Computing bed dept expense using the percentage of credit sales
b. Verifying that the goods have been returned
c. Authorizing the credit memo by management
d. Using the original sales invoice to prepare the sales returns slip

22. The printer ran out of preprinted sales invoice forms and several sales invoices were not
printed. The best internal control to detect this error is
a. A batch total of sales invoices to be prepared compared to the actual number of sales
invoices prepared
b. Sequentially numbered sales invoices
c. Visual verification that all sales invoices
d. None of the above will detect this error

23. Which department prepares the bill of lading?

a. Sales
b. Warehouse
c. Shipping
d. Credit

24. A remittance advice is

a. Used to increase (debit) an account receivable by the cash received
b. Is a turn-around document
c. Is retained by the customer to show proof of payment
d. None of the above

25. A weekly reconciliation of cash receipts would include comparing

a. The cash prelist with bank deposit slips
b. The cash prelist with remittance advices
c. Bank deposit slips with remittance advices
d. Journal vouchers from accounts receivable and general ledger

26. At which point is supervision most critical in the cash receipts system?
a. Accounts receivable
b. General ledger
c. Mail room
d. Cash receipts

27. EDI trading partner agreements specify all of the following except
a. Selling price
b. Quantities to be sold
c. Payment terms
 d. Person to authorize transactions

28. A cash prelist is

a. A document that records sales returns and allowance
b. A document returned by customers with their payments
c. The source of information used to prepare monthly statements
d. None of the above

29. An advantage of real-time processing of sales is

a. The cash cycle is lengthened
b. Current inventory information is available
c. Hard copy documents provide a permanent record of the transaction
d. Data entry errors are corrected at the end of each batch

30. Commercial accounting systems have fully integrated modules. The word “integrated”
means that
a. Segregation of duties is not possible
b. Transfer of information among modules accurs automatically
c. Batch processing is not an option
d. Separate entries are made in the general ledger accounts and the subsidiary ledgers

31. The data processing method that can shorten the cash cycle is
a. Batch, sequential file processing
b. Batch, direct access file processing
c. Real-time file processing
d. None of the above

32. Which of the following is not a risk exposure in a microcomputer accounting system?
a. Reliance on paper documentation is increased
b. Functions that are segregated in a manual environment may be combined in a
microcomputer accounting system
c. Backup procedures require human intervention
d. Data are easily accessible

33. Which journal is not used in the revenue cycle?

a. Cash receipts journal
b. Sales journal
c. Purchases journal
d. General journal
34. Periodically, the general ledger department receives all of the following except
a. Total increases to accounts receivable
b. Total of all sales backorders
c. Total of all sales
d. Total decreases in inventory

35. The credit department

a. Prepares credit memos when goods are returned
b. Approves credits to accounts receivable when payments are received
c. Authorizes the granting of credit to customers
d. None of the above

36. Adjustments to accounts receivable for payments received from customers is based upon
a. The customer’s check
b. The cash prelist
c. The remittance advice that accompanies payment
d. A memo prepared in the mailroom

37. The revenue cycle utilizes all of the following files except
a. Credit memo file
b. Sales history file
c. Shipping report file
d. Cost data reference file

38. All of the following are advantages of real-time processing of sales except
a. The cash cycle is shortened
b. Paper work is reduced
c. Incorrect data entry is difficult to detect
d. Up-to-date information can provide a competitive in the marketplace

39. Which documents is NOT prepared by the sales department

a. Packing slip
b. Shipping notice
c. Bill of lading
d. Stock release

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

a. Segregation of duties
b. Access control
c. Supervision
d. Accounting records