CHAPTER 16 General Ledger and Reporting System

Question 1

1. From where do adjusting entries usually come?
   a. treasurer
   b. controller
   c. various accounting cycle subsystems, such as sales order entry
   d. unit managers

Answer 1

b. controller (Correct. Adjusting entries are entered by the controller after the trial balance
has been prepared.)

Question 2

2. Errors in financial statements provided to creditors, investors, and government agencies
   can cause those stakeholders to make wrong decisions. This threat is referred to as
   a. inaccurate or invalid general ledger data.
   b. unauthorized disclosure of financial information.
   c. the loss or destruction of master data.

Answer 2

a. inaccurate or invalid general ledger data. (Correct. Inaccurate general ledger data can
result in misleading reports that cause managers to make erroneous decisions.)

Question 3

3. The audit trail is a traceable path that shows how a transaction flows through the information
   system to affect general ledger account balances. Access to the audit trail is typically
   restricted to
   a. managers.
   b. auditors.
   c. secretary.
   d. company workers.

Answer 3

a. managers. (Correct.)

Question 4

4. The journal voucher file contains the information that would be found in the general journal
   in a manual accounting system. What individual journal entries are not used to update
   its general ledger?
   a. the date of the journal entry
   b. the accounts debited and credited
   c. addresses of creditors
   d. the amounts

Answer 4

c. addresses of creditors (Correct. Not included in journal entries.)

Question 5

5. What of the following checks is not an input edit and processing control needed to ensure
   journal entries made by the treasurer are accurate and complete?
   a. a validity check
   b. field (format) checks
   c. closed-loop verification
   d. back validation

Answer 5

d. back validation (Correct.)

Question 6

6. The number of orders shipped per warehouse worker each day is a metric that would most
   likely appear in which part of the balanced scorecard?
   a. innovation and learning
   b. customer
   c. internal operations
   d. financial

Answer 6

c. internal operations (Correct.)

Question 7

7. Which of the following is an important part of the audit trail?
   a. journal vouchers
   b. flexible budgets
   c. trial balance
   d. data warehouse

Answer 7

a. journal vouchers (Correct. Journal vouchers provide information concerning the source
of changes to the general ledger accounts.)

Question 8

8. An adjusting journal entry to record interest revenue that has been earned but not yet received is an example of which of the following?
   a. accrual
   b. deferral
   c. estimate
   d. revaluation

Answer 8

a. accrual (Correct.)

Question 9

9. Which of the following is designed primarily to improve the efficiency of financial
reporting?
a. XML 
b. XBRL
c. IFRS 
d. The balanced scorecard

Answer 9

b. XBRL (Correct. The eXtensible Business Reporting Language was developed, in part,
by accountants to facilitate business reporting.)

Question 10

10. Which of the following graph design principles is most important for ensuring that financial
    data is accurately interpreted?
    a. including a title that summarizes the point of the graph
    b. attaching data values to specific elements in the graph
    c. starting the y-axis of the graph at zero
    d. using different colors for different variables

Answer 10

c. starting the y-axis of the graph at zero (Correct. Starting the y-axis at zero accurately
depicts the magnitude of changes in the data.)