ACCOUNTING MIDTERM 6-9
True
Notes receivable represent claims for which formal instruments of credit are issued as evidence of debt.
False
The basic principles of an accounting information system are cost awareness, usefulness, and fixed structure.
True
The cost of goods available for sale consists of the beginning inventory plus the cost of goods purchased.
False
Accounts receivable are the result of cash and credit sales.
True
Allowance for Doubtful Accounts is a contra asset account.
True
Finished goods are a classification of inventory for a manufacturer that are completed and ready for sale
True
Companies use a petty cash fund to pay relatively small amounts.
True
Goods out on consignment should be included in the inventory of the consignor.
True
Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods.
True
Internal control consists of all the related methods and measures adopted within an organization to safeguard its assets and to enhance the accuracy and reliability of its accounting records.
True
A one-column purchases journal is used to record purchases of merchandise on account.
True
A subsidiary ledger provides up-to-date information on specific account balances.
True
An accounting information system involves data collection, data processing, and information dissemination.
True
An accounting information system should be cost effective; that is, the benefits of the information must outweigh the cost of providing it.
False
An accounts receivable subsidiary ledger has all the detailed information about the cash sales to individual customers.
True
Control accounts are always located in the general ledger.
False
Generally accepted accounting principles require that the direct write-off method be used for financial reporting purposes if it is also used for tax purposes.
True
Internal control consists of the plan of organization and all of the related methods and measures adopted within a business to (a) safeguard its assets, and (b) enhance the accuracy and reliability of its accounting records.
False
Inventory turnover is calculated as cost of goods sold divided by ending inventory.
False
Only large companies need to be concerned with a system of internal control.
False
Raw materials inventories are the goods that a manufacturer has completed and are ready to be sold to customers.
True
Receivables may be sold because they may be the only reasonable source of cash.
False
Sales resulting from the use of Visa and MasterCard are considered credit sales by the retailer.
True
The accounts payable subsidiary ledger provides detailed information about amounts owed to creditors.
True
The responsibility for keeping the records for an asset should be separate from the physical custody of that asset.
True
The responsibility for ordering, receiving, and paying for merchandise should be assigned to different individuals.
True
The safeguarding of assets is an objective of a company's system of internal control.
True
Under the FIFO method, the costs of the earliest units purchased are the first charged to cost of goods sold.
True
A factor purchases receivables from businesses for a fee and collects the remittances directly from customers.
True
Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.
True
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.
True
Enterprise resource planning systems integrate all aspects of the organization, including accounting, sales, human resource management, and manufacturing.
True
In a period of falling prices, the LIFO method results in a lower cost of goods sold than the FIFO method.
True
In general, documents should be prenumbered and all documents should be accounted for.
True
The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.
True
The lack of agreement between the bank balance and the book balance is due to time lags and errors.
True
The maturity date of a 1-month note receivable dated June 30 is July 30.
False
The more inventory a company has in stock, the greater the company's profit.
True
To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by an employee who has no other responsibilities pertaining to cash.
False
When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.
