College of Saint Lawrence, Inc

Balagtas, Bulacan
ACCOUNTING INFORMATION SYSTEM

MIDTERM EXAMINATION

DIRECTION: This test consist of 65 items-multiple choice

questions with four answer choices. Read each question and
answer choice carefully and choose the ONE best answer. Try
to answer all questions. In general, if you have some
knowledge about a question, it is better to try to answer it.
Policy of RIGHT MINUS WRONG will be followed.

1. 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

2. 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. three subsystems-sales order processing, credit authorization, and cash
receipts

3. 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

4. Which document triggers the revenue cycle?

A. the sales 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

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 D. select items from inventory for shipment

7. 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

8. 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

9. 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

10. 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

11. 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

12. Customers should be billed for backorders when

A. 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

13. Usually specific authorization is required for all of the following except

A. sales on account which exceed the credit limit

B. sales of goods at the list price
C. cash refund for goods returned without a receipt
D. write off of an uncollectible account receivable

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

A. Credit
B. accounts payable
C. billing
D. Shipping

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15. Which of following functions should be segregated?

A. opening the mail and making the journal entry to record cash receipts
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

16. Which situation indicates a weak internal control structure?

A. 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

17. 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

18. 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 invoices

B. reconcile the accounts receivable control to the accounts receivable
subsidiary ledger
C. prepare monthly customer statements
D. reconcile total sales on account to the debits in the accounts receivable
subsidiary ledger

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

A. sales invoice
B. stock release form
C. packing slip
D. shipping notice

20. 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

21. Internal controls for handling sales returns and allowances do not include

A. computing bad debt 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

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 C. visual verification that all sales invoices were prepared
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. At which point is supervision most critical in the cash receipts system?

A. accounts receivable
B. general ledger
C. mail room
D. cash receipts

26. 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

27. A cash prelist is

A. a document that records sales returns and allowances

B. a document returned by customers with their payments
C. the source of information used to prepare monthly statements
D. none of the above

28. 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

29. 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 occurs automatically
C. batch processing is not an option
D. separate entries are made in the general ledger accounts and the subsidiary
ledgers

30. 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

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 D. none of the above

31. 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 syste
C. backup procedures require human intervention
D. data are easily accessible

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

A. cash receipts journal

B. sales journal
C. purchases journal
D. general journal

33. 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

34. 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

35. 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

36. 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

37. 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 advantage in the
marketplace

38. 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

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 D. bill for goods delivered

39. 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

40. 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

41. 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

42. 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

43. 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

44. 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

45. 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

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

A. packing slip
B. purchase requisition
C. receiving report
D. supplier’s invoice

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47. 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

48. 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

49. 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

50. When purchasing inventory, which document usually triggers the recording of a
liability?

A. purchase requisition
B. purchase order
C. receiving report
D. supplier’s invoice

51. 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

52. 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
invoices on onevoucher
D. many firms replace accounts payable with a voucher payable system

53. 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 from the purchasing department
D. reconcile the inventory control account with the inventory subsidiary
summary

54. The documents in a voucher packet include all of the following except

A. a check
B. a purchase order
C. a receiving report

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 D. a supplier’s invoice

55. To maintain a good credit rating and to optimize cash management, cash
disbursements 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

56. 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

57. 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

58. When a trading partner agreement is in place, the traditional three way match may
be eliminated.

A. True
B. False

59. Authorization of purchases in a merchandising firm occurs in the inventory control

department.

A. True
B. False

60. In a voucher system, the sum of all unpaid vouchers in the voucher register equals
the firm’s total voucher payable balance.

A. True
B. False

61. The accounts payable department reconciles the accounts payable subsidiary
ledger to the control account.

A. True
B. False

62. The use of inventory reorder points suggests the need to obtain specific
authorization.

A. True
B. False

63. Firms that wish to improve control over cash disbursements use a voucher system.

A. True
B. False

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64. The blind copy of the purchase order that goes to the receiving department
contains no item descriptions.
A. True
B. False

65. Proper segregation of duties requires that the responsibility approving a payment be
separated from posting to the cash disbursements journal.

A. True
B. False

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