Accounting Chapter 5 Test Answers

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Accounting system
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The methods and procedures for collecting, classifying, summarizing, and reporting a business’s financial and operating information.
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As a business grows and changes, its accounting system also changes in a three step process, what does it consist of?
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Analyze user information needs, design the system to meet the user needs, implement the system
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The accounting system design consist of what two elements?
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Internal controls and information processing methods
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What are internal controls?
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The policies and procedures that protect assets from misuse, ensure the business information is accurate, and ensure the laws and regulations are being followed
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What are processing methods?
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The means by which the accounting system collects, summarizes, and reports accounting information. They may be manual or computerized.
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When a business has a large number of similar transactions, using an all purpose journal is inefficient and impractical. In such cases what is useful?
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Subsidiary ledgers and special journals
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What is a subsidiary ledger?
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A large number of individual accounts with a common characteristic grouped together in a separate ledger
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What is a general ledger?
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The primary ledger, which contains all of the balance sheet and income statement accounts
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Each subsidiary ledger is represented in the general ledger by a summarizing account called what?
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A controlling account
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The sum of the balances of the accounts in a subsidiary ledger must equal what?
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The balance of the related controlling account
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A subsidiary ledger is a secondary ledger that supports what?
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a controlling account in the general ledger
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What are two of the most common subsidiary ledgers?
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Accounts receivable subsidiary ledger and accounts payable subsidiary ledger
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Another name for the accounts receivable subsidiary ledger is what?
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Customers ledger
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What does the accounts receivable subsidiary ledger list
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individual customer accounts in alphabetical order
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What is the controlling account in the general ledger that summarizes the debits and credits to individual customer accounts called?
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accounts receivable
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What is another name for the accounts payable subsidiary ledger?
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Creditors ledger
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What does the accounts payable subsidiary ledger list?
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Creditors accounts in alphabetical order
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What is the related controlling account for the accounts payable subsidiary ledger in the general ledger?
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Accounts payable
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What are some other subsidiary ledgers that businesses use other than accounts payable and accounts receivable?
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Equipment subsidiary ledger, to keep track of each item of equipment purchased, its cost, location, and other data
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What is one method of processing transactions more efficiently in a manual system?
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Special Journals
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Special journals are designed to record
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a single kind of transaction that occurs frequently.
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What is an example of a type of account that a special journal is frequently used for?
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Cash, since most businesses have many transactions in which cash is paid out, they will likely use a special journal for recording cash payments. They will use a separate special journal for recording cash receipts
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Providing services on account is recorded in which special journal?
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Revenue journal
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Receipt of cash from any source is recorded in which journal?
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Cash receipts journal
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Purchase of items on account is recorded in which special journal?
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Purchases journal
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Payment of cash for any purpose is recorded in which special journal?
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Cash payments journal
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What is the all-purpose two-column journal called?
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General journal
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Which journal can be used for entries that do not fit into any of the special journals?
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General journal
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Adjusting and closing entries are recorded in which journal?
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General journal
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Fees earned on account is recorded in which special journal and shown in which subsidiary account?
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Revenue journal and accounts receivable subsidiary ledger
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Cash receipts is recorded in which special journal and shown in which subsidiary account?
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cash receipts journal and accounts receivable subsidiary ledger
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Purchases on account is recorded in which special journal and shown in which subsidiary account?
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Purchases journal and accounts payable subsidiary ledger
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Cash payments is recorded in which special journal and shown in which subsidiary account?
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Cash payments journal and accounts payable subsidiary ledger
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Transactions that are recorded in the revenue and cash receipts journals will affect which subsidiary ledger?
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Accounts receivable subsidiary ledger
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Fees earned on account would be recorded in which journal?
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Revenue journal
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Cash fees earned would be recorded in which journal?
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Cash receipts journal
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When a company pays for merchandise on account, it is recorded in the revenue journal as what
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Debit Accounts receivable and credit fees earned
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Revenues are normally recorded in the revenue journal when the company sends what to the customer?
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An invoice
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What is an invoice?
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An invoice is the bill that is sent to the customer by the company
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The process of posting to a revenue journal entails, each transaction being posted individually to a customer account where?
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In the accounts receivable subsidiary ledger
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The posting to customers accounts should be done when?
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regularly to ensure that customers accounts always show a current balance
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To provide a trail of the entries posted to the subsidiary and general ledger the source of the entries is listed how?
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The posting reference column of each account by indicating the letter R for revenue journal and the page number of the revenue journal
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To indicate that the transaction has been posted to the accounts receivable subsidiary ledger what is done?
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a check mark is inserted in the post reference column of the revenue journal
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What is posted to the general ledger after posting to the revenue journal?
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A single monthly total not an itemization of each total and who it was from
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The single monthly total that is posted to the general ledger is equal to what?
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the sum of the month’s debits to the individual accounts in the subsidiary ledger
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How is amounts collected from customers posted in the general ledger?
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A debit to general ledger accounts receivable and a credit to general ledger account fees earned
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All of the transactions for fees earned during the month are posted to the general ledger
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only once at the end of the month
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There is an accounts receivable subsidiary ledger
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for each individual customer and it maintains a record of all accounts receivable for that particular customer for the month
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The revenue journal maintains a record of all activity from
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receivables from all customers throughout the month
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All transactions that involve the receipt of cash are recorded where?
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In the cash receipts journal
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The cash receipts journal has a cash debit or credit column?
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debit
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What determines the names of the other columns in the cash receipts journal?
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The kinds of transactions in which cash is received and how often they occur
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If a company receives cash from customers on account(making payments for items previously purchased) frequently then their cash journal would have what kind of column?
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An accounts receivable credit column
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There is a general ledger account summarizing the
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total of each similarly type of account. Example would be there would be a separate general ledger account for cash, for accounts receivable, for rent revenue, etc. Each of those such as cash would have ONE total debit or credit amount for the combined amount from customers for the month)
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As it pertains to the cash receipts journal, if there is cash paid for something that is not frequent such as rent revenue then
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it would be posted as a credit in the other accounts credit column and debit to the cash column
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At the end of the month the total debits and total credits in the cash receipts journal must
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match. If they do not match then an error has occurred
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What is the first step of the process of posting from a cash receipts journal? When should it be done?
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Each transaction involving the receipt of cash on account is posted individually to a customer account in the accounts receivable subsidiary ledger Posting to customer accounts should be done on a regular basis to ensure customer accounts always showing a current balance
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A customers accounts receivable account usually shows a debit balance indicating
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An amount owed by the customer
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If a customers account balance results in a zero balance then it may be indicated how?
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With a straight line in the balance column
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If a posting results in a credit balance to a customers accounts receivable account then that customer has a credit, they have overpaid and it is indicated by
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an asterisk or parenthesis in the balance column
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To indicate that a transaction has been posted from the cash receipts journal or revenue journal, etc. to the subsidiary ledger what is done?
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A check mark is placed in the posting reference column
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When the total amount of cash from the cash receipts journal is added together for the month and the total debit amount is ready to be transferred to the cash general ledger what happens?
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Two lines are drawn below the column of numbers in the cash receipts journal, the figures are added, the number 11is placed in parenthesis (11 indicates 1-asset, 1- first item in the asset column cash) and the 11 is also placed in the account number area at the top of the cash general ledger account and the same total is entered in the debit field of the general ledger indicating the process is complete
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If the controlling account and the subsidiary general ledger account balances do not agree then
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an error has occurred
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All purchases on account are recorded where?
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Purchases journal
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Cash purchases are recorded where?
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Cash payments journal
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The amounts purchased on account are recorded in the purchases journal in what column?
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In the credit column
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Purchase of supplies on account would be recorded where?
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Purchase journal in the debit column
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The purchase journal typically has a credit or a debit accounts payable column?
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Credit
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The control account is the
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General ledger acct. Therefore when its noted that the control account and the subsidiary account totals have to match, an example would be the accounts payable general ledger acct(the control acct) and the accounts payable subsidiary ledgers
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E-commerce
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Using the internet to perform business transactions
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What does B2C mean?
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business to customer
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What does supply chain management mean(SCM)?
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Internet applications to plan and coordinate suppliers
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What does customer relationship management mean?
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Internet applications to plan and coordinate marketing and sales effort
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Product life-cycle management (PLM)?
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Internet applications to plan and coordinate the product development and design process

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