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Testbank

to accompany

Accounting
8th Edition

by
John Hoggett, Lew Edwards,
John Medlin, Matthew Tilling
& Evelyn Hogg

Prepared by
Barbara Burns
Testbank to accompany Accounting 8e

John Wiley & Sons Australia, Ltd 2011

John Wiley and Sons Australia, Ltd 2012 7.2


Chapter 7: Accounting for Systems

Chapter 7: Accounting for Systems


Multiple Choice

1. How many of these are important considerations when developing a new accounting
system or expanding an existing system?
i. Compatibility with the type of business
ii. Flexibility/adaptability
iii. Adequacy of built-in controls
a. 0
b. 1
c. 2
d. 3

ANSWER D
Section 7.2

2. Internal control is defined to include which of the following?


a. Preparation of accounting reports
b. Measures to encourage compliance with business policies
c. Use of the double entry accounting system
d. The elimination of cash deficiencies

ANSWER B
Section 7.3

3. The assignment of tasks so that the work of one employee acts as a check on the
work of another is known as:
a. Division of responsibility
b. Safekeeping
c. Administrative control
d. Collusion

ANSWER A
Section 7.3

4. The statement about control accounts that is not correct is:


a. They provide summarised data
b. They follow the normal rules of debit and credit
c. They appear in the subsidiary ledger
d. They appear in the trial balance

ANSWER C
Section 7.5

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Testbank to accompany Accounting 8e

5. Z Company uses a subsidiary ledger and control account system for its accounts
receivable. At the end of the accounting period a listing of customers' accounts is
prepared from the subsidiary ledger. The purpose of this listing is to:
a. Furnish the amount that should be posted to the accounts receivable control
account
b. Determine whether the debits equal the credits in the subsidiary ledger
c. Prove that the subsidiary ledger agrees with the control account
d. Provide information necessary for trial balance preparation

ANSWER C
Section 7.5

6. Which of these is the main advantage of setting up special journals:


a. They can be used with a cash accounting system
b. They remove the requirement for double entry recording
c. They reduce the time taken to post to the general ledger
d. They make taking out a trial balance easier

ANSWER C
Section 7.6

7. For which of the following would a subsidiary ledger and control account system not
normally be used?
a. Plant and equipment
b. Accounts receivable
c. Inventory
d. Recording cash

ANSWER D
Section 7.5

8. How many of these are advantages of using a subsidiary ledger and control account
system?
Removal of a mass of detail from the general ledger
Division of labour between the general and subsidiary ledgers
Improved internal control
a. 0
b. 1
c. 2
d. 3

ANSWER D
Section 7.5

John Wiley and Sons Australia, Ltd 2012 7.4


Chapter 7: Accounting for Systems

9. Details of amounts owed to individual suppliers are found in the:


a. Accounts payable subsidiary ledger
b. Accounts payable control account
c. Accounts receivable subsidiary ledger
d. General ledger

ANSWER A
Section 7.5

10. If the accounts payable subsidiary ledger shows the following balances on 31 July
2011, what is the balance in the accounts payable control account on the same
date? (Assuming recording and balancing of accounts payable records are up to
date).
Wilson $ 4 000
Watson $15 250
Zhang $ 8 750
a. $0
b. $28 000 Cr
c. $28 000 Dr
d. Cannot be calculated

ANSWER B
Section 7.5

11. Which of these is not an advantage of using special journals compared to recording
all transactions in a general journal?
a. Journalising time is reduced
b. Taking out a trial balance is easier
c. Posting to the ledger is quicker
d. Similar transactions are grouped

ANSWER B
Section 7.6

12. Columns for GST collections could be found in which two special journals?
a. Cash receipts and cash payments
b. Cash receipts and sales
c. Sales and purchases
d. Cash receipts and purchases

Answer B
Section 7.6

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Testbank to accompany Accounting 8e

13. The statement that is incorrect is: In a manual accounting system:


a. Cash sales are recorded in the cash receipts journal
b. Credit sales are recorded in the sales journal
c. Sales of surplus office equipment for cash are recorded in the general journal
d. Sales of non-current assets on credit are recorded in the general journal

ANSWER C
Section 7.6

14. The general ledger posting from the credit sales journal is:
a. Debit to Accounts Receivable, credit to Sales, credit to GST collections
b. Debit to Sales, credit to GST Collections, credit to Cash
c. Debit to Sales, credit to Accounts Receivable
d. Debit to Cash, debit to GST Collections, credit to Accounts Receivable

ANSWER A
Section 7.6

15. A credit of $540 000, including 10% GST, was posted to the Accounts Payable
Control account on the last day of the month. From which special journal would this
posting most likely have come?
a. Cash receipts
b. Cash payments
c. Purchases
d. Sales

ANSWER C
Section 7.6

16. A column for Discount Received could be found in which journal?


a. General
b. Sales
c. Cash payments
d. Cash receipts

ANSWER C
Section 7.6

17. The transaction that could not result in a credit balance in a debtor's account is:
a. Receipt of a deposit for work ordered
b. Return of faulty goods by a customer after payment had been made
c. Payment by a customer after the debt had been written off as irrecoverable
d. Sale of goods on credit that will be paid for in the next accounting period

ANSWER D
Section 7.6

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Chapter 7: Accounting for Systems

18. Kylie is both a debtor and a creditor of Tiger Balm. At the end of the period she
owes Tiger Balm $200 while Tiger Balm owes her $1,500. The correct journal
entry to offset the amounts against each other is:
a. Debit debtors $200; credit creditors $200
b. Debit creditors $200; credit debtors $200
c. Debit debtors $1,500; credit creditors $1,500
d. Debit creditors $1,500; credit debtors $1,500

ANSWER B
Section 7.6

19. Alles Supplies bought $10 000 worth of goods from Ajax Pty Ltd on credit. Before
payment was made Ajax, in turn, purchased $4000 worth of stationery on credit from
Alles Supplies. What is the general journal entry in Alles Supplies books to offset the
amount owing to it against the amount it owes?
a. Accounts Receivable, Ajax Ltd $4000
Accounts Payable, Ajax Ltd $4000
b. Accounts Receivable, Ajax Ltd 6000
Accounts Payable, Ajax Ltd 6000
c. Accounts Payable, Ajax Ltd 6000
Accounts Receivable, Ajax Ltd 6000
d. Accounts Payable, Ajax Ltd 4000
Accounts Receivable, Ajax Ltd 4000

ANSWER D
Section 7.6

20. Which of these is not a general ledger software package?


a. Excel
b. Attache
c. MYOB
d. QuickBooks

ANSWER A
Section 7.7

21. The listings of the MYOB AccountRight Plus command centres are:
a. Page Layout, Master Document, Outline
b. Accounts, Banking, Sales, Time Billing, Purchases, Payroll, Inventory, Card File
c. Journal, ledger, Trial balance, Income statement, Balance sheet
d. Invoices, Cheques, Orders, Deposits, Credit Notes

ANSWER B
Section 7.8

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Testbank to accompany Accounting 8e

22. In MYOB details of customers, suppliers and employees addresses, contact


information, credit terms, etc. are stored in the:
a. Card file
b. Banking command centre
c. Accounts command centre
d. Inventory command centre

Answer A
Section 7.8

23. With QuickBooks __________ are the equivalent to MYOBs command centres.
a. Hubs
b. Centres
c. Icons
d. Sections

ANSWER B
Section 7.8

24. The Find Transaction button, which appears in all MYOB command centres,
shows:
a. The income statement
b. The balance sheet
c. A record of all the transactions entered in that module in a particular time period
d. The general ledger

ANSWER C
Section 7.8

25. In MYOB, which of these is not a function of the sales module?


a. Preparing invoices
b. Recording sales
c. Recording receipts from customers
d. Recording GST outlays

ANSWER D
Section 7.8

26. With MYOB, the chart of accounts is accessed through which module?
a. Banking
b. Payroll
c. Accounts
d. Inventory

ANSWER C
Section 7.8

John Wiley and Sons Australia, Ltd 2012 7.8


Chapter 7: Accounting for Systems

27. In QuickBooks a sales invoice can be created by clicking on the ________ icon in
the customers section of the home page.
a. invoices
b. sales
c. credit transaction
d. customer

ANSWER A
Section 7.8.

28. Within the MYOB Banking module, the __________________ command allows
the balance in the bank account to be verified with the bank statement:
a. Receive Money
b. Reconcile Accounts
c. Spend Money
d. Transaction Journal

ANSWER B
Section 7.8

29. Which of these is not a common problem of a computerised accounting system?


a. Computer fraud
b. Power failure
c. Computer viruses
d. Lack of keyboard skills

ANSWER D
Section 7.9

30. In comparing the operation of a manual accounting system with a computerised


system which of the following is incorrect?
Step in the Accounting Manual System Computerised
Cycle System

a. Journalise transactions Manual Automatic


b. Post to ledger accounts Manual Automatic
c. Prepare trial balance Manual Automatic
d. Prepare closing entries Manual Automatic

ANSWER A
Section 7.10

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Testbank to accompany Accounting 8e

31. How many of these are advantages offered by the use of computers in accounting?
Faster response time
Error reduction
A greater range of reports
A lower capital outlay
a. One
b. Two
c. Three
d. Four

ANSWER C
Section 7.9

32. Which of these does not normally provide an input into an accounting system?
a. Bank statement
b. Bar code reader
c. Managerial report
d. Invoice

ANSWER C
Section 7.1

33. Which of these is not one of the three phases in the development of an accounting
system?
a. systems analysis,
b. systems design
c. systems implementation and review
d. systems plan

ANSWER D
Section 7.2

34. The main reason for using special journals and subsidiary ledgers is:
a. to make manual accounting systems operate more efficiently
b. to divide the accounting work up between employees
c. to allow the manual system to be more easily computerised
d. because fewer mistakes are likely to occur

ANSWER A
Section 7.4

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Chapter 7: Accounting for Systems

35. In comparing computerised and manual accounting systems the correct statement is:
a. A computerised system does not require any reversing entries
b. In computerised systems the use of journals is less important than in a manual
system
c. Errors are easier to find in a computerised accounting system
d. A worksheet for adjustments is still often prepared when a computerised system
is used

ANSWER B
Section 7.10

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Testbank to accompany Accounting 8e

Fill-in the blanks

1. Data are recorded facts; i_____________ is data that have been processed so as
to be more useful to potential users.

ANSWER information
Section 7.1

2. The procedures adopted by an entity to control its activities and protect its assets
are known as its system of i__________ c__________.

ANSWER internal control


Section 7.3

3. Groups of individual accounts whose total should equal the balance of a related
control account are known as a s____________ ledger.

ANSWER subsidiary
Section 7.5

4. A general ledger account supported by the detail of a subsidiary ledger is known


as a c__________ account.

ANSWER control
Section 7.5

5. Sales of inventory on credit are recorded in the s__________ special journal.

ANSWER sales
Section 7.6

6. The special journal used to record all cash receipts is the c__________
r___________ journal.

ANSWER cash receipts


Section 7.6

7. Credit sales are processed through the s__________ command centre of MYOB
AccountRight Plus.

ANSWER sales
Section 7.8

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Chapter 7: Accounting for Systems

8. All cash receipts, other than receipts from debtors, are processed through the
b_______________ command centre of MYOB AccountRight Plus.

ANSWER banking
Section 7.8

9. In an i_______________ accounting package when transactions are entered into


one module the computer automatically updates the other modules.

ANSWER integrated
Section 7.7

10. The major accounting functions available with QuickBooks Premier are
Suppliers, Customers, E___________ and Banking.

ANSWER Employees
Section 7.8

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Testbank to accompany Accounting 8e

Exam type questions

QUESTION 7.1

S. Swallowtail uses a sales journal, a cash receipts journal, a general journal, a general
ledger and an accounts receivable subsidiary ledger. The terms of all credit sales are
5/10, n/30.
Accounts receivable balances at 1 August 2011 were:
$
O. Orchard -
E. Emperor 1,700
M. Monarch 360
B. Brown 990
$3,050

A summarised trial balance as at 1 August, 2011 is as follows:


Account Title Account Balances
Dr Cr
$ $
Cash at bank 19,320
Accounts receivable control 3,050
GST collections 480
Sales 19,580
Sales returns & allowances 800
Discount allowed 480
Other accounts 3,590
$23,650 $23,650

The following transactions occurred during August:

SALES JOURNAL
2011 Inv Account Sales GST Accounts
Number Collections Receivable
Aug $ $ $
4 102 O. Orchard 200 20 220
10 103 E. Emperor 500 50 550
30 104 M. Monarch 100 10 110
800 80 $880

CASH RECEIPTS JOURNAL


2011 Account Bank Discount GST Sales GST Accounts
Allowed Collections Collections Receivable
Aug $ $ $ $
8 M. Monarch 360 360
13 O. Orchard 209 10 1 220
17 Sales 660 600 60
21 Sales 1,650 1,500 150
31 E. Emperor 1,700 1,700
$4,579 $10 $1 $2,100 $210 $2,280

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Chapter 7: Accounting for Systems

GENERAL JOURNAL

2011 Account Debit Credit


Aug $ $
3 Sales returns and allowances 90
GST collections 9
Accounts receivable (B. Brown) 99
Credit for defective goods.

REQUIRED:

a) Set up the general ledger accounts, post from the journals to the general ledger
and balance the accounts at 31 August 2011.

b) Take out a trial balance.

c) Set up the accounts receivable subsidiary ledger accounts, post from the journals
to the accounts receivable subsidiary ledger and balance the accounts.

d) Reconcile the subsidiary ledger to the accounts receivable control account by


means of a schedule of debtors balances.

QUESTION 7.2
The International Company presents the following information:

ACCOUNTS PAYABLE BALANCES at 1 November 2011.


$
S. Singapore 1,000
M. Malaysia 4,200
I. Indonesia 500
H. Hong Kong 6,400
$12,100

PURCHASES JOURNAL
Date Inv Account Purchases GST Accounts
Outlays Payable
2011 $ $ $
Nov 3 1442 Malaysia 1,190 119 1,309
Nov 4 12AA Singapore 580 58 638
16019 Hong Kong 2,000 200 2,200
Nov 7 1A57 K Korea 110 11 121
Nov 13 943 Malaysia 2,230 223 2,453
Nov 15 1760 Indonesia 60 6 66
$6,170 $617 $6,787

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Testbank to accompany Accounting 8e

CASH PAYMENTS JOURNAL


Date Cheq Account Accounts Purchases Other GST Disc GST Bank
No. Payable Outlays Rev Outlays
2011 $ $ $ $ $ $ $
Nov 6 955 Purchases 430 43 473
7 956 Singapore 1,000 30 3 967
957 Indonesia 500 500
9 958 Electricity 90 9 99
13 959 Wages 1,220 1,220
960 Malaysia 4,200 40 4 4,156
19 961 Hong Kong 6,400 6,400
25 962 Purchases 180 18 198
30 963 Stationery 750 75 825
$12,100 $610 $2,060 $145 $70 $7 $14,838

GENERAL JOURNAL
Date Account Debit Credit
2011 $ $
Nov 9 Accounts payable control (Singapore) 35
Purchases returns 35

REQUIRED:

a) Post the relevant information from the journals to the general ledger accounts
payable control account. Balance the account. (Do not post to the other general
ledger accounts).
b) Set up the accounts payable subsidiary ledger accounts. Post from the journals
to the accounts payable subsidiary ledger and balance the accounts.
c) Reconcile the subsidiary ledger to the accounts payable control account by
means of a schedule of creditors balances as at 30 November 2011.

QUESTION 7.3

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 GJ for general journal.

a. __________ Purchase of equipment for cash


b. __________ Owner withdraws cash
c. __________ Sale of furniture in exchange for a note receivable
d. __________ Payment for the purchase of inventory within the discount period
e. __________ Receipt of payment on account
f. __________ Purchase goods for resale on credit
g. __________ Returned goods purchased and receiving a cash refund
h. __________ Recorded return of goods sold on credit
i. __________ Payment of rent
j. __________ Sale of goods on credit
k. __________ Purchase of inventory for resale for cash
l. __________ Purchase of equipment on credit

John Wiley and Sons Australia, Ltd 2012 7.16


Chapter 7: Accounting for Systems

Solution exam type questions

SOLUTION QUESTION 7.1


S. SWALLOWTAIL General Ledger
a) Cash at Bank
2011 $ 2011 $
Aug 1 Balance 19,320
31 CRJ 4,579
23,899

Accounts Receivable Control


2011 $ 2011 $
Aug 1 Balance 3,050 Aug 31 CRJ 2,280
31 SJ 880 31 GJ 99
31 Balance 1,551
$3,930 $3,930
31 Balance 1,551

GST Collections
2011 $ 2011 $
Aug 31 CRJ 1 Aug 1 Balance 480
GJ 9 31 SJ 80
31 Balance 760 31 CRJ 210
$770 $770
31 Balance 760

Sales
2011 $ 2011 $
Aug 1 Balance 19,580
31 SJ 800
31 CRJ 2,100
22,480

Sales Returns and Allowances


2011 $ 2011 $
Aug 1 Balance 800
3 GJ 90
890

Discount Allowed
2011 $ 2011 $
Aug 1 Balance 480
31 CRJ 10
490
Other accounts
2011 $ 2011 $
Aug 1 Balance 3,590

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Testbank to accompany Accounting 8e

b)
Trial Balance as at 31 August 2011
Account Title Account Balances
Dr Cr
$ $
Cash at bank 23,899
Accounts receivable control 1,551
GST collections 760
Sales 22,480
Sales returns & allowances 890
Discount allowed 490
Other accounts 3,590
$26,830 $26,830

c) Accounts Receivable Subsidiary Ledger

O. Orchard
2011 $ 2011 $
Aug 4 SJ 220 Aug 13 CRJ 220

E. Emperor
2011 $ 2011 $
Aug 1 Balance 1,700 Aug 31 CRJ 1,700
10 SJ 550 31 Balance 550
$2,250 $2,250
31 Balance 550

M. Monarch
2011 $ 2011 $
Aug 1 Balance 360 Aug 8 CRJ 360
30 SJ 110 31 Balance 110
$470 $470
31 Balance 110

B. Brown
2011 $ 2011 $
Aug 1 Balance 990 Aug 3 GJ (returns) 99
31 Balance 891
$990 $990
31 Balance 891
d)
Schedule of Debtors Balances as at 31 August 2011
$
E. Emperor 550
M. Monarch 110
B. Brown 891
Balance as per control account $1,551

John Wiley and Sons Australia, Ltd 2012 7.18


Chapter 7: Accounting for Systems

SOLUTION QUESTION 7.2

(a) INTERNATIONAL COMPANY

Accounts Payable Control


2011 $ 2011 $
Nov 30 Bank/discount 12,100 Nov 1 Balance 12,100
Purchase returns 35 Nov 30 Purchases journal 6,787
Balance 6,752 _____
$18,887 $18,887
Balance 6,752

(b) ACCOUNTS PAYABLE SUBSIDIARY LEDGER

S. Singapore
2011 2011
Nov 7 CPJ 1,000 Nov 1 Balance 1,000
9 GJ 35 4 PJ 638
Balance 603 ___
$1,638 $1,638
Balance 603

M. Malaysia
Nov 13 CPJ 4,200 Nov 1 Balance 4,200
Balance 3,762 Nov 3 PJ 1,309
____ 13 PJ 2,453
$7,962 $7,962
Balance 3,762

I. Indonesia
Nov 7 CPJ 500 Nov 1 Balance 500
Balance 66 Nov 15 PJ 66
$566 $566
Balance 66

H. Hong Kong
Nov 19 C PJ 6,400 Nov 1 Balance 6,400
Balance 2,200 Nov 4 PJ 2,200
$8,600 $8,600
Balance 2,200

K. Korea
Nov 7 PJ 121

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Testbank to accompany Accounting 8e

c) Schedule of Creditors Balances 30 November 2011

$
S. Singapore 603
M. Malaysia 3,762
I. Indonesia 66
H. Hong Kong 2,200
K. Korea 121
Balance as per creditors control A/c $6,752

SOLUTION QUESTION 7.3

a. CP
b. CP
c. GJ
d. CP
e. CR
f. P
g. CR
h. GJ
i. CP
j. S
k. CP
l. GJ or P

John Wiley and Sons Australia, Ltd 2012 7.20

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