ERP 2110 Concept Exam #1 (Ch. 1-3)

Common Stock is a(n) ________ account that has a normal ________ balance.

??

Regarding T-accounts, which of the following statements is correct?

A T-account is a summary device with credits posted on the right side of the vertical line.

GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to ________.

Generally Accepted Accounting Principles

Which of the following is a decision made by an internal user?

How much money should the business budget for production?

Which of the following accounts decreases with a debit?

Notes Payable

Regarding generally accepted accounting principles (GAAP), which of the following statements is incorrect?

Relevant information is complete, neutral, and free from error.

Economic resources and debts of the company are shown on the balance sheet.

True

Procedures anchor an information system to a process.

True

Rather than being controlled, dynamic processes are adaptive.

True

The five-component framework can be used when assessing the scope of new systems.

True

The normal balance of an account is the increase side of the account.

True

Which of the following is a liability account?

Unearned Revenue

A debt that a business owes is called ________.

a liability

Which of the following is provided in a typical chart of accounts?

account number

A(n) ________ is referred to as a task within a business process.

activity

To conceive good information, information system users must ________.

cross-check data

The field of accounting that focuses on providing information for external decision makers is ________.

financial accounting

A storage disk is an example of a ________ component of an information system.

hardware

Which of the following components of a functioning information system includes the computer, keyboard, and monitor?

hardware

The first step in the journalizing and posting process is to ________.

identify the accounts involved and the account type

A company's information system discovers a customer's poor credit history only after certain goods have been shipped to him. The information produced, as a result, was not useful because the data was ________.

ill-timed

Which of the following financial statements would be most useful if an analyst wants to know the profitability of a company?

income statement

Which one of the following account groups normally has a credit balance?

liabilities and revenues

Which one of the following account groups will decrease with a debit?

liabilities and revenues

The Salaries Payable account is a(n) ________.

liability account with a normal credit balance

Accounts Payable is a(n) ________ account and has a normal ________ balance.

liability; credit

The field of accounting that focuses on providing information for internal decision makers is ________.

managerial accounting

The accounting process of transferring data from the journal to the ledger is called ________.

posting

In the airline industry, instructions for cancelling reservation is an example of a/an ________.

procedure

Journalizing a transaction involves ________.

recording the data only in the journal

Amounts earned from delivering goods or services to customers are called ________.

revenues

A ________ is referred to as a subset of activities in a business process that is performed by a particular individual.

role

Day-to-day operations, such as placing an order, are considered ________ processes.

structured

A(n) ________ is a group of components that interact to achieve some purpose.

system

The amount of net income is transferred from ________ to ________.

the income statement; the statement of owner's equity

Dynamic processes are evaluated on effectiveness more than efficiency because ________.

they change so fast that it is often not possible to measure efficiency over time

Which of the following represents the correct flow of accounting data?

transactions occur; source documents are prepared; transactions are analyzed; transactions are journalized and posted

A chart of accounts is a detailed record of the changes in a particular asset, liability, or equity account during a specified period.

true

An accounts receivable requires the business to pay cash in the future.

true

An asset account is increased by a debit.

true

The balances in the liability and revenue accounts are increased with a credit.

true

Which of the following is a liability account?

Accounts Payable

________ represents a short-term liability created by purchasing "on account."

Accounts Payable

A customer's promise to pay in the future for services or goods sold is called a(n) ________.

Accounts Receivable

Which of the following is an asset account?

Accounts Receivable

________ represent the right to receive cash in the future from customers for goods sold or for services performed.

Accounts Receivable

Regarding the accounting equation, which of the following is a correct statement?

All of the statements are correct.

Which of the following formulae is used to calculate average total assets for the return on assets ratio?

Average total assets = (Beginning total assets + Ending total assets) / 2

Which of the following financial statements reports that total assets are equal to total liabilities plus total owner's equity?

Balance sheet

Regarding the double-entry system, which of the following statements is incorrect?

Because of technology, the use of the double-entry system of accounting is optional.

Which of the following statements is TRUE about processes and procedures of an information system?

Each information system has a different procedure for every process it supports.

Which of the following statements is TRUE of expenses?

Expenses decrease equity, so an expense account's normal balance is a debit balance.

According to the five-component framework, programs tell people what to do, and procedures tell hardware what to do.

False

Information systems that support a dynamic process will restrict user behavior and innovation.

False

Which of the following is a feature of a structured process?

It is a formally defined process.

Which of the following statements is TRUE about information?

It is different from data.

Which of the following is a feature of a dynamic process?

It is more dependent on effectiveness than efficiency.

________ are components of an information system that anchor it to a process.

Procedures

Which of the following statements is TRUE of revenues?

Revenues increase equity, so a revenue account's normal balance is a credit balance.

Which of the following statements is TRUE of an income statement?

There is net income when total revenues are greater than total expenses.

Which of the following statements is TRUE of dynamic processes?

These processes rely, to a large extent, on human intuition.

A payable is always a liability.

True

Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers.

True

Control is critical in structured processes.

True

The Sarbanes-Oxley Act (SOX) requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.

True

The balance sheet helps analyze the business's performance in terms of profitability.

True

The balance sheet of a business summarizes an entity's revenues and expenses.

True

A compound journal entry has more than two accounts, but the total dollar value of the debits still must equal the total dollar value of the credits.

True

Which of the following statements regarding the accounting equation is incorrect?

The equation can be stated as assets plus liabilities equals equity.

Which of the following is included on the balance sheet?

Assets

Which of the following is the correct accounting equation?

Assets = Liabilities + Equity

Which of the following is TRUE of assets?

Assets are something of value the business owns or controls.

Which of the following is a characteristic of structured processes?

They are effective.

A business borrows cash by signing a note payable. Which of the following accounts is debited?

Cash

A business pays $800 cash for office supplies. Which of the following accounts is credited?

Cash

A business performs services for $26,000 and collects cash from the customer. Which of the following accounts will be debited?

Cash

A business purchases equipment with $8,000 cash. Which of the following accounts is credited?

Cash

A listing of all accounts in numerical order is called a(n) ________.

Chart of Accounts

A business purchases equipment with $8,000 cash. Which of the following accounts is debited?

Equipment

The assets of Star Company are $110,000 and the total liabilities are $10,000. The equity is ________.

$100,000

All repositories are databases.

False

Costs for developing an information system are the only costs associated with it.

False

Liabilities are economic resources that are expected to benefit the business in the future.

False

Managerial accounting focuses on information needed by lenders, customers, and the federal government.

False

Procedures for dynamic processes typically define what the users of a system can do and under what conditions they can do it.

False

The instructions of a dynamic process are more rigid when compared to a structured process.

False

The equity of Alliance Company is $100,000 and the total liabilities are $10,000. The total assets are ________.

$110,000

Spring Company has assets and equity that amount to $260,000 and $70,000, respectively. Liabilities total ________.

$190,000

A business collects cash from a customer for services that were performed one month earlier. Which of the following accounts is credited?

Accounts Receivable

A business performs services for a customer for $26,000 on account. Which of the following accounts is debited?

Accounts Receivable

Regarding the ledger, which of the following statements is incorrect?

Both the chart of accounts and the ledger provide the balance of each account at a specific point in time.

________ means accomplishing a certain process with minimum resources.

Efficiency

________ is referred to as knowledge derived from recorded facts and figures.

Information

Which of the follow statements regarding the primary objective of financial reporting is correct?

Information that is faithfully represented is complete, neutral, and free from error.

Which of the following is the record holding all the accounts, the changes in those accounts, and their balances?

Ledger

Regarding liabilities, which of the following statements is incorrect?

Liabilities are economic resources that are expected to benefit the business in the future.

Which of the following accounts is an asset?

Machinery & Equipment

Which of the following is a source document that provides the evidence and data for accounting transactions?

Sales invoice

A business performs services for a customer for $26,000 on account. Which of the following accounts is credited?

Service Revenue

Which of the following sequences is the normal sequence of flow of accounting data?

Source document → Journal → Ledger

Accounts Receivable is a(n) ________ account and has a normal ________ balance.

asset; debit

Which one of the following account groups normally has a debit balance?

assets and expenses

Country Homes Company just recorded a transaction in its books. If this transaction increased the total liabilities by $16,000, then ________.

assets must increase, or equity must decrease by $16,000

Which of the following financial statements is used to report the economic resources, debt, and overall financial position of a company?

balance sheet

Which of the following financial statements would be most useful if an analyst wants to know the likelihood of repayment of business debts?

balance sheet

A(n) ________ is referred to as a sequence of activities for accomplishing a function.

business process

Customers' names, numbers, and addresses are an example of the ________ component of an information system.

data

Which of the following is an example of a dynamic process?

deciding the location for a new store

The return on assets is calculated by ________.

dividing net income by average total assets

The owner's claim to the assets of the business is called ________.

equity

A liability account is increased by a debit.

false

Debit refers to the right side of the T-account, and credit refers to the left side.

false

The process of transferring data from the ledger to the journal is called posting.

false