CHAPTER 7 ACCOUNTING INFORMATION SYSTEMS

True or False1. An
accounting information system should be cost effective; that is, the benefits
of the information must outweigh the cost of providing it.

2. An accounting system has flexibility if it
is able to be used by many different companies at the same time.

3. General ledger accounting systems are
software programs that integrate the various accounting functions related to
sales, purchases, cash receipts and disbursements, and payroll.

4. Enterprise
resource planning systems integrate all aspects of the organization, including
accounting, sales, human resource management, and manufacturing.

5. A subsidiary ledger is a group of control
accounts which provides information to the managers for controlling the
operation of the company.

6. An accounts receivable subsidiary ledger
has all the detailed information about the cash sales to individual customers.

7. The accounts payable subsidiary ledger provides
detailed information about amounts owed to creditors.

8. The total of the individual account
balances in the accounts receivable subsidiary ledger should agree with the
total of the individual account balances in the accounts payable subsidiary
ledger.

9. Control accounts are always located in the
general ledger.

10. A control account and subsidiary ledger can
be established for inventory.

11. A subsidiary ledger provides up-to-date
information on specific account balances.

12. An advantage of using a subsidiary ledger
is that one employee must post to both the subsidiary ledger and the general
ledger.

13. Special journals are used to record unique
transactions which do not occur very often.

14. A cash receipts journal can be used to
record all transactions involving cash coming into the business, regardless of
the source.

15. The cash payments journal only has one
column because all entries recorded in this journal require a credit to the Cash
account.

16. A cash payments journal should notbe used to record
transactions which require payment by check.

17. If a transaction cannot be recorded in a
special journal, it indicates that the company should adopt an electronic
accounting system.

18. A debit column for Sales Returns and
Allowances may be found in the cash payments journal.

19. A one-column purchases journal is used to
record purchases of merchandise on account.

20. Using special journals can save time in posting
because column totals are often posted rather than individual entries.

21. The reference column in a sales journal is
used to indicate the general ledger account number when the entry is posted.

22. Postings are generally made more frequently
to the general ledger control accounts than to the individual accounts in the
subsidiary ledgers.

23. The amounts appearing in the Inventory
column of the cash payments journal are posted individually to the accounts in
the accounts payable subsidiary ledger.

24. Transaction amounts recorded in the general
journal are never posted to accounts in the subsidiary ledger.

25. When control and subsidiary accounts are
involved, there must be a dual posting.

26. An accounting
information system involves data collection, data processing, and information
dissemination.

27. The basic
principles of an accounting information system are cost awareness, usefulness,
and fixed structure.

28. Each general ledger
control account balance must equal the composite balance of the individual
accounts in the related subsidiary ledger at the end of an accounting period.

29. When special
journals are employed, all postings must be monthly or daily but cannot be
both.

30. Totaling the
columns of a journal and proving the equality of the totals is called footing
and cross-footing a journal.

31.Only transactions that cannot be entered in a special journal are
recorded in the general journal.