Question 1

As a form of internal control, sequential numbering is most likely to be associated with which step in the accounting cycle?
A)First
B)Fifth
C)Sixth
D)Last

Accepted Answer

The answer of As a form of internal control, sequential...

Question 2

TCP Corporation issues a purchase order whenever it buys inventory. Internal controls associated with the purchase order may include:
A)Sequential numbering
B)Transaction limits
C)Both A and B
D)Neither A nor B

Accepted Answer

Sequential numbering ensures that each purchase order is unique and can be easily tracked, while transaction limits set parameters for authorized purchases and prevent unauthorized spending. Therefore, both options A and B are important internal controls for ensuring proper purchasing procedures.

Question 3

As an internal control for source documents, sequential numbering is most likely to ___ an error.
A)Prevent
B)Detect
C)Correct
D)Eliminate

Accepted Answer

Sequential numbering of source documents primarily helps in detecting errors by ensuring that all documents are accounted for and that none are missing, duplicated, or improperly recorded.

Question 4

The accounting department at a local university uses the prefix ACC for all its courses, thus exemplifying which type of coding system?
A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Accepted Answer

The use of the prefix "ACC" for accounting courses is an example of a mnemonic coding system, where the code (in this case, "ACC") is designed to be easily remembered and associated with the subject it represents (accounting).

Question 5

ABT Corporation uses block coding for its chart of accounts, which includes Cash (101), Land (201), Accounts payable (301) and Retained Earnings (501). Which of the following account numbers is most likely associated with an account that will appear on the adjusted trial balance but not on the post-closing trial balance?
A)203
B)405
C)504
D)701

Accepted Answer

The answer of ABT Corporation uses block coding for its...

Question 6

As a form of internal control, transaction limits are most likely to be associated with which step in the accounting cycle?
A)Second
B)Fourth
C)Ninth
D)Last

Accepted Answer

Transaction limits are a form of internal control associated with the second step in the accounting cycle, which is recording transactions in the journal. By setting transaction limits, a company can prevent unauthorized or excessive transactions from being recorded in the journal.

Question 7

Most organizations use purchase orders to authorize inventory and other purchases. If a company's purchase order contains a field labeled "purchase order number," it most likely uses what kind of coding?
A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Accepted Answer

A purchase order number that is sequentially coded implies that each purchase order number is assigned in a numerical order, such as PO001, PO002, and so on.

Question 8

Just before preparing financial statements, an inexperienced accountant recorded the use of supplies by debiting supplies expense $100 and debiting supplies $100. Which of the following is most true?
A)The transaction was recorded correctly.
B)The unadjusted trial balance will be an effective internal control for detecting any error.
C)The adjusted trial balance will be an effective internal control for detecting any error.
D)Sequential transaction numbering will be an effective internal control for detecting any error.

Accepted Answer

The transaction was recorded incorrectly, as it should have been recorded by debiting supplies and crediting supplies expense. The unadjusted trial balance will not necessarily detect this error, as it only lists account balances and does not show the specific transactions. However, the adjusted trial balance will show the correct balances after adjusting entries, which should include the correction of this error. Sequential transaction numbering is not relevant to detecting this error.

Question 9

NTR Corporation has offices in both Los Angeles and San Francisco. In the Los Angeles office, the account number for cash is 001.101. In San Francisco, the account number for cash is 002.101. Which of the following statements is most true?
A)NTR uses sequential coding for its chart of accounts.
B)One of the offices should change its account number for cash to promote consistency and efficiency.
C)The first set of digits denotes the office.
D)The second set of digits denotes the office.

Accepted Answer

The first set of digits (001 and 002) denote the office, while the second set of digits (101) denotes the account category (cash). This indicates that NTR Corporation uses a location-based coding system for its chart of accounts. Option A is incorrect because sequential coding implies that account numbers are assigned in numerical order, which is not evident in this scenario. Option B is not necessarily true because there may be valid reasons why the two offices have different account numbers for cash, such as differences in their accounting systems or internal policies. Option D is incorrect because the second set of digits does not denote the office, but rather the account category.

Question 10

Which type of coding system helps people remember the meaning of the code?
A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Accepted Answer

Mnemonic coding systems use symbols or abbreviations that are easy to remember and help people recall the meaning of the code. Examples include medical abbreviations like "SOB" for shortness of breath or "NPO" for nothing by mouth.

Question 11

As an internal control measure in the accounting cycle, physical security most clearly applies to:
A)Source documents
B)The balance sheet
C)The income statement
D)The statement of cash flows

Accepted Answer

Physical security measures, such as locked cabinets or password-protected computer systems, are used to prevent unauthorized access to source documents, which are crucial to the accuracy of financial statements. While physical security measures may also be used for other parts of the accounting cycle, such as data backup systems, they are most relevant to source documents.

Question 12

Most organizations use purchase orders to authorize inventory and other purchases. If a company's purchase order contains a column labeled "product code," it most likely uses what kind of coding?
A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Accepted Answer

The answer of Most organizations use purchase orders to authorize...

Question 13

NTR Corporation has offices in both Los Angeles and San Francisco. In the Los Angeles office, the account number for cash is 001.101. In San Francisco, the account number for cash is 002.101. The account number for accounts receivable in the Los Angeles office is therefore likely to be:
A)001.102
B)002.102
C)102.002
D)002.110

Accepted Answer

Since the cash account number in the Los Angeles office is 001.101, it is likely that the accounts receivable account number would be similar, but with a different third number (since accounts receivable is a different type of account than cash). Therefore, the most likely account number for accounts receivable in the Los Angeles office would be 001.102.

Question 14

All of the following are common coding systems used in organizations except:
A)Block
B)Hierarchical
C)Random
D)Sequential

Accepted Answer

Block, Hierarchical, and Sequential are all common coding systems used in organizations. Random is not a common coding system as it lacks any logical or organized structure.

Question 15

Linda embezzled cash from her employer by forging a signature on a check. Which of the following internal controls for source documents would most likely prevent such occurrences in the future?
A)Sequential numbering
B)Physical security
C)Transaction limits
D)Bank reconciliation

Accepted Answer

The answer of Linda embezzled cash from her employer by...

Question 16

As an internal control for source documents, transaction limits are most likely to ___ an error.
A)Prevent
B)Detect
C)Correct
D)Eliminate

Accepted Answer

Transaction limits are set to prevent errors from occurring by limiting the amount of a transaction or the frequency of transactions. By setting limits, the company can reduce the risk of errors, such as fraud or accidental mistakes. However, transaction limits alone may not be sufficient to completely prevent errors and other internal controls should be implemented as well.

Question 17

Courses intended for freshmen at a local university are numbered from 100 to 199, while courses intended for seniors at the same university are numbered from 400 to 499. Which coding system is the university using?
A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Accepted Answer

The university uses a block coding system because it groups courses into blocks based on the year of study, with specific ranges of numbers designated for freshmen and seniors.

Question 18

ABT Corporation uses block coding for its chart of accounts, which includes Cash (101), Land (201), Accounts payable (301) and Retained Earnings (501). Which of the following account numbers is most likely associated with an account that will appear on the income statement?
A)101
B)102
C)401
D)601

Accepted Answer

Retained Earnings (501) is an equity account and not directly associated with the income statement. Cash (101) and Land (201) are assets, while Accounts payable (301) is a liability, therefore, none of them are directly associated with the income statement. The only account number listed that is associated with the income statement is 601.

Question 19

Requiring ___ on certain source documents is associated with transaction limits as an internal control.
A)Sequential numbering
B)Physical security
C)Supervisory approval
D)Internal transaction notifications

Accepted Answer

Supervisory approval on certain source documents is a common internal control associated with transaction limits. It ensures that transactions above a certain threshold are reviewed and authorized by a supervisor or manager, adding a layer of oversight and reducing the risk of errors or fraud.

Question 20

Common internal controls associated with source documents include: (i) sequential numbering, (ii) physical security, (iii) equality of debits and credits.
A)I and II only
B)I and III only
C)II and III only
D)I, II and III

Accepted Answer

Sequential numbering and physical security are common internal controls for source documents. Equality of debits and credits is a principle of double-entry bookkeeping, not specifically a control related to source documents.

Quiz 2: Transaction Processing in the Ais

As a form of internal control, sequential numbering is most likely to be associated with which step in the accounting cycle?

TCP Corporation issues a purchase order whenever it buys inventory. Internal controls associated with the purchase order may include:

As an internal control for source documents, sequential numbering is most likely to ___ an error.

The accounting department at a local university uses the prefix ACC for all its courses, thus exemplifying which type of coding system?

As a form of internal control, transaction limits are most likely to be associated with which step in the accounting cycle?

Most organizations use purchase orders to authorize inventory and other purchases. If a company's purchase order contains a field labeled "purchase order number," it most likely uses what kind of coding?

Just before preparing financial statements, an inexperienced accountant recorded the use of supplies by debiting supplies expense $100 and debiting supplies $100. Which of the following is most true?

NTR Corporation has offices in both Los Angeles and San Francisco. In the Los Angeles office, the account number for cash is 001.101. In San Francisco, the account number for cash is 002.101. Which of the following statements is most true?

Which type of coding system helps people remember the meaning of the code?

As an internal control measure in the accounting cycle, physical security most clearly applies to:

Most organizations use purchase orders to authorize inventory and other purchases. If a company's purchase order contains a column labeled "product code," it most likely uses what kind of coding?

NTR Corporation has offices in both Los Angeles and San Francisco. In the Los Angeles office, the account number for cash is 001.101. In San Francisco, the account number for cash is 002.101. The account number for accounts receivable in the Los Angeles office is therefore likely to be:

All of the following are common coding systems used in organizations except:

Linda embezzled cash from her employer by forging a signature on a check. Which of the following internal controls for source documents would most likely prevent such occurrences in the future?

As an internal control for source documents, transaction limits are most likely to ___ an error.

Courses intended for freshmen at a local university are numbered from 100 to 199, while courses intended for seniors at the same university are numbered from 400 to 499. Which coding system is the university using?

ABT Corporation uses block coding for its chart of accounts, which includes Cash (101) , Land (201) , Accounts payable (301) and Retained Earnings (501) . Which of the following account numbers is most likely associated with an account that will appear on the income statement?

Requiring ___ on certain source documents is associated with transaction limits as an internal control.

Common internal controls associated with source documents include: (i) sequential numbering, (ii) physical security, (iii) equality of debits and credits.