CHAPTER 8

MULTIPLE CHOICE
1. The coding scheme most appropriate for a
chart of accounts is
a.sequential code
b.block code
c.group code
d.mnemonic code
ANS: B
2. A common use for sequential coding is
a.creating the chart of accounts
b.identifying inventory items
c.identifying documents
d.identifying fixed assets
ANS: C
3. The most important advantage of sequential
coding is that
a.missing or unrecorded documents can be
identified
b.the code itself lacks informational content
c.items cannot be inserted
d.deletions affect the sequence
ANS: A
4. When a firm wants its coding system to
convey meaning without reference to any other
document, it
would choose
a.an alphabetic code
b.a mnemonic code
c.a group code
d.a block code
ANS: B
5. The most important advantage of an
alphabetic code is that
a.meaning is readily conveyed to users
b.sorting is simplified
c.the capacity to represent items is increased
d.missing documents can be identified
ANS: C
6. Entries into the General Ledger System
(GLS) can be made using information from
a.the general journal
b.a journal voucher which represents a
summary of similar transactions
c.a journal voucher which represents a single,
unusual transaction
d.all of the above
ANS: D
7. Which statement is not correct? The general
ledger master file
a.is based on the firms chart of account
b.contains a record for control accounts
c.is an output of the Financial Reporting
System (FRS)
d.supplies
information
for
management
decision making
ANS: C

8. What type of data is found in the general

ledger master file?
a.achronological record of all transactions
b.the balance of each account in the chart of
accounts
c.budget records for each account in the chart
of accounts
d.subsidiary details supporting a control
account
ANS: B
9. Which report is not an output of the Financial
Reporting System (FRS)?
a.variance analysis report
b.statement of cash flows
c.tax return
d.comparative balance sheet
ANS: A
10. Which steps in the Financial Accounting
Process are in the correct sequence?
a.record the transaction, post to the ledger,
prepare the adjusted trial balance, enter
adjusting entries, prepare financial statements
b.record
the
transaction,
prepare
the
unadjusted trial balance, record adjusting
journal
entries, record closing entries, prepare financial
statements
c.record the transaction, post to the ledger,
record
adjusting
entries,
prepare
the
unadjusted
trial balance, prepare financial statements
d.record the transaction, post to the ledger,
prepare the adjusted trial balance, prepare
financial statements, record closing entries
ANS: D
11. Which statement is not correct?
a.the post-closing trial balance reports the
ending balance of each account in the general
ledger
b.one purpose of preparing the unadjusted trial
balance is to ensure that debits equal credits
c.financial statements are prepared based on
the unadjusted trial balance
d.the unadjusted trial balance reports control
account balances but omits subsidiary ledger
detail
ANS: C
12. What account appears on the postclosing
trial balance?
a.income summary
b.machinery
c.rent expense
d.interest income
ANS: B
13. Financial statements are prepared from the
a.trial balance
b.adjusted trial balance
c.general ledger

d.general journal
ANS: B
14. Risk exposures in the General Ledger and
Financial Reporting Systems include all of the
following
except
a.loss of the audit trail
b.unauthorized access to the general ledger
c.loss of physical assets
d.general ledger account out of balance with
the subsidiary account
ANS: C
15. Which situation indicates an internal
control risk in the General Ledger/Financial
Reporting Systems
(GL/FRS)?
a.the employee who maintains the cash journal
computes depreciation expense
b.the cash receipts journal voucher is approved
by the Treasurer
c.the cash receipts journal vouchers are
prenumbered and stored in a locked safe
d.the employee who maintains the cash
receipts journal records transactions in the
accounts receivable subsidiary ledger
ANS: D
16. With a limited work force and a desire to
maintain strong internal control, which
combination of duties
performed by a single individual presents the
least risk exposure?
a.maintaining the inventory ledger and
recording the inventory journal voucher in the
general ledger
b.recording the inventory journal voucher in
the general ledger and maintaining custody of
inventory
c.maintaining the cash disbursements journal
and recording direct labor costs applied to
specific jobs
d.preparing the accounts payable journal
voucher and recording it in the general ledger
ANS: C
17. The audit trail fulfills all of the following
purposes except
a.provides the ability to answer inquiries
b.ensures the accuracy of the application
software
c.fulfills governmental regulations
d.offers a means for preventing, detecting, and
correcting errors
ANS: B
18. Which best describes a batch process
General Ledger System (GLS)
a.paper documents are eliminated
b.the general ledger master file is updated
each night

c.there is a time lag between transaction

processing and posting to the general ledger
d.no direct access or querying of the General
Ledger is possible
ANS: C
19. An advantage of a batch General Ledger
System (GLS) is that
a.separation
between
authorization
and
transaction processing is strictly enforced
b.the general ledger master file is recreated
with each update
c.updates and reconciliation of transactions
occur as a step within the transaction cycle
d.errors and out-of-balance conditions are
identified at the end of the month
ANS: C
20. A characteristic of the Management
Reporting System (MRS) is
a.the MRS operates in conformity with
generally accepted accounting principles
b.it is a legal requirement that the MRS be
installed and functioning properly
c.the MRS is developed by implementing SEC
requirements
d.the MRS focuses on internal decision-making
information
ANS: D
21. Which statement is not true?
a.authority refers to an individuals obligation
to achieve desired results
b.if an employee is given the responsibility for
a task, that employee should be given
authority to make decisions within the limits of
that task
c.the level of detail provided to an employee is
a function of the employees position with
the firm
d.all of the above are true
ANS: A
22. Which statement is not true? The
managers span of control
a.is narrow for routine and repetitive tasks
b.is related to the number of layers of
management
c.affects the amount of detail provided to a
manager
d.can affect employee morale and motivation
ANS: A
23. Short-range planning involves
a.setting goals and objectives of the firm
b.planning the production schedule for the next
quarter
c.planning the growth of the firm
d.deciding on the degree of diversification
among the firms products
ANS: B
24. Long-range planning involves

a.planning the marketing and promotion for a

product
b.presenting department heads with budgetary
goals for the next year
c.preparing a work force utilization budget for
the next quarter
d.deciding the optimum size of the firm
ANS: D
25. The level of management that makes
tactical planning decisions is
a.top management
b.middle management
c.operations management
d.front-line management
ANS: B
26. The decision to enter a new market is an
example of
a.strategic planning
b.tactical planning
c.management control
d.operational control
ANS: A
27. All of the following are elements of
operational control decisions except
a.determining the scope of the activity
b.setting operating standards
c.evaluating performance
d.taking corrective action when necessary
ANS: A
28. In contrast to tactical planning decisions,
management control decisions, and operational
control decisions, strategic planning decisions
usually
a.are more focused
b.have a shorter time frame
c.are unstructured
d.have a high degree of certainty
ANS: C
29. Which of the following management
principles affects the management reporting
system?
a.formalization of tasks
b.authorization
c.span of control
d.all of the above
ANS: D
30. All of the following are elements of problem
structure except
a.certainty
b.data
c.procedures
d.objectives
ANS: A
31. All of the following are examples of
programmed reports except
a.cash flow reports for Division B
b.year-to-date local income tax payments
made by all employees living in City X and

working in City Y
c.inventory exception reports for Division G
d.equipment utilization reports for Plant M
ANS: B
32. A fundamental principle of responsibility
accounting is that
a.managers are accountable only for items
they control
b.a managers span of control should not
exceed eight people
c.structured reports should be prepared weekly
d.the information flow is in one direction, topdown
ANS: A
33. Which statement is not true? Responsibility
accounting
a.involves both a top-down and bottom-up flow
of information
b.acknowledges that some economic events
cannot be traced to any manager
c.creates a budget
d.compares actual performance with budget
ANS: B
34. What mechanism is used to convey to
managers the standards by which their
performance will be
measured?
a.the responsibility report
b.the scheduled report
c.the budget
d.all of the above
ANS: C
35. All of the following concepts encourage
goal congruence except
a.detailed
information
reporting
at
all
management levels
b.authority and responsibility
c.formalization of tasks
d.responsibility accounting
ANS: A
36. Which of the following statements is NOT
true?
a.Sorting records that are coded alphabetically
tends to be more difficult for users than
sorting numeric sequences.
b.Mnemonic coding requires the user to
memorize codes.
c.Sequential codes carry no information
content beyond their order in the sequence.
d.Mnemonic codes are limited in their ability to
represent items within a class.
ANS: B
37. Which file has as its primary purpose to
present comparative financial reports on a
historic basis?
a.journal voucher history file
b.budget master file
c.responsibility file

d.general ledger history file

ANS: D
38. All of the following are characteristics of
the strategic planning process except the
a.emphasis on both the short and long run.
b.review of the attributes and behavior of the
organizations competition.
c.analysis of external economic factors.
d.analysis of consumer demand.
ANS: A
39. Which of the following performance
measures can not result in dysfunctional
behavior?
a.price variance
b.quotas
c.ROI
d.net income
e.all of the above can result in dysfunctional
behavior
ANS: E
40. Which of the following best describes a
profit center:
a.authority to make decisions affecting the
major determinants of profit, including the
power to choose its markets and sources of
supply.
b.authority to make decisions affecting the
major determinants of profit, including the
power to choose its markets and sources of
supply, and significant control over the
amount of invested capital.
c.authority to make decisions over the most
significant costs of operations, including the
power to choose the sources of supply.
d.authority to provide specialized support to
other units within the organization.
e.responsibility
for
combining
the
raw
materials, direct labor, and other factors of
production into a final product.
ANS: A
CHAPTER 9
1. All of the following are basic data
management tasks except
a.data deletion
b.data storage
c.data attribution
d.data retrieval
ANS: C
2. The task of searching the database to locate
a stored record for processing is called
a.data deletion
b.data storage
c.data attribution
d.data retrieval
ANS: D

3. Which of the following is not a problem

usually associated with the flat-file approach to
data
management?
a.data redundancy
b.restricting access to data to the primary user
c.data storage
d.currency of information
ANS: B
4. Which characteristic is associated with the
database approach to data management?
a data sharing
b.multiple storage procedures
c.data redundancy
d.excessive storage costs
ANS: A
5. Which characteristic is not associated with
the database approach to data management?
a.the ability to process data without the help of
a programmer
b.the ability to control access to the data
c.constant production of backups
d.the inability to determine what data is
available
ANS: D
6. The textbook refers to four interrelated
components of the database concept. Which of
the following is not one of the components?
a.the Database Management System
b.the Database Administrator
c.the physical database
d.the conceptual database
ANS: D
7. Which of the following is not a responsibility
of the Database Management System?
a.provide an interface between the users and
the physical database
b.provide security against a natural disaster
c.ensure that the internal schema and external
schema are consistent
d.authorize access to portions of the database
ANS: C
8. A description of the physical arrangement of
records in the database is
a.the internal view
b.the conceptual view
c.the subschema
d.the external view
ANS: A
9. Which of the following may provide many
distinct views of the database?
a.the schema
b.the internal view
c.the user view
d.the conceptual view
ANS: C
10. Users access the database
a.by direct query

b.by developing operating software

c.by constantly interacting with systems
programmers
d.all of the above
ANS: A
11. The Data Definition Language
a.identifies, for the Database Management
System, the names and relationships of all data
elements, records, and files that comprise the
database
b.inserts database commands into application
programs to enable standard programs to
interact with and manipulate the database
c.permits users to process data in the database
without the need for conventional programs
d.describes every data element in the
database
ANS: A
12. The Data Manipulation Language
a.defines the database to the Database
Management System
b.transfers data to the buffer area for
manipulation
c.enables application programs to interact with
and manipulate the database
d.describes every data element in the
database
ANS: C
13. Which statement is not correct? A query
language like SQL
a.is written in a fourth-generation language
b.requires user familiarity with COBOL
c.allows users to retrieve and modify data
d.reduces reliance on programmers
ANS: B
14. Which duty is not the responsibility of the
Database Administrator?
a.to develop and maintain the Data Dictionary
b.to implement security controls
c.to design application programs
d.to design the subschema
ANS: C
15. In a hierarchical model
a.links between related records are implicit
b.the way to access data is by following a
predefined data path
c.an owner (parent) record may own just one
member (child) record
d.a member (child) record may have more than
one owner (parent)
ANS: B
16. Which term is not associated with the
relational database model?
a.tuple
b.attribute
c.collision
d.relation
ANS: C

17. In the relational database model

a.relationships are explicit
b.the user perceives that files are linked using
pointers
c.data is represented on two-dimensional
tables
d.data is represented as a tree structure
ANS: C
18. In the relational database model all of the
following are true except
a.data is presented to users as tables
b.data can be extracted from specified rows
from specified tables
c.a new table can be built by joining two tables
d.only one-to-many relationships can be
supported
ANS: D
19. In a relational database
a.the users view of the physical database is
the same as the physical database
b.users perceive that they are manipulating a
single table
c.a virtual table exists in the form of rows and
columns of a table stored on the disk
d.a programming language (COBOL) is used to
create a users view of the database
ANS: B
20. The update anomaly in unnormalized
databases
a.occurs because of data redundancy
b.complicates adding records to the database
c.may result in the loss of important data
d.often results in excessive record insertions
ANS: A
21.
The
most
serious
problem
with
unnormalized databases is the
a.update anomaly
b.insertion anomaly
c.deletion anomaly
d.none of the above
ANS: C
22. The deletion anomaly in unnormalized
databases
a.is easily detected by users
b.may result in the loss of important data
c.complicates adding records to the database
d.requires the user to perform excessive
updates
ANS: B
23. Which statement is correct?
a.in a normalized database, data about
vendors occur in several locations
b.the accountant is responsible for database
normalization
c.in a normalized database, deletion of a key
record could result in the destruction of the
audit trail

d.connections between M:M tables is provided

by a link table
ANS: D
24. Which of the following is not a common
form of conceptual database model?
a.hierarchical
b.network
c.sequential
d.relational
ANS: C
25. Which of the following is a relational
algebra function?
a.restrict
b.project
c.join
d.all are relational algebra functions
ANS: D
26. Which statement is false?
a.The DBMS is special software that is
programmed to know which data elements
each
user is authorized to access.
b.User programs send requests for data to the
DBMS.
c.During processing, the DBMS periodically
makes backup copies of the physical
database.
d.The DBMS does not control access to the
database.
ANS: D
27. All of the following are elements of the
DBMS which facilitate user access to the
database except
a.query language
b.data access language
c.data manipulation language
d.data definition language
ANS: B
28. Which of the following is a level of the
database that is defined by the data definition
language?
a.user view
b.schema
c.internal view
d.all are levels or views of the database
ANS: D
29. An example of a distributed database is
a.partitioned database
b.centralized database
c.networked database
d.all are examples of distributed databases
ANS: A
30. Data currency is preserved in a centralized
database by
a.partitioning the database
b.using a lockout procedure
c.replicating the database
d.implementing concurrency controls

ANS: B
31. Which procedure will prevent two end users
from accessing the same data element at the
same time?
a.data redundancy
b.data replication
c.data lockout
d.none of the above
ANS: C
32. The advantages of a partitioned database
include all of the following except
a.user control is enhanced
b.data transmission volume is increased
c.response time is improved
d.risk of destruction of entire database is
reduced
ANS: B
33. A replicated database is appropriate when
a.there is minimal data sharing among
information processing units
b.there exists a high degree of data sharing
and no primary user
c.there is no risk of the deadlock phenomenon
d.most data sharing consists of read-write
transactions
ANS: B
34. What control maintains complete, current,
and consistent data at all information
processing units?
a.deadlock control
b.replication control
c.concurrency control
d.gateway control
ANS: C
35. Data concurrency
a.is a security issue in partitioned databases
b.is implemented using time stamping
c.may result in data lockout
d.occurs when a deadlock is triggered
ANS: B
36. Entities are
a.nouns that are depicted by rectangles on an
entity relationship diagram
b.data that describe the characteristics of
properties of resources
c.associations among elements
d.sets of data needed to make a decision
ANS: A
37. A user view
a.presents the physical arrangement of records
in a database for a particular user
b.is the logical abstract structure of the
database
c.specifies the relationship of data elements in
the database
d.defines how a particular user sees the
database
ANS: D

38. All of the following are advantages of a

partitioned database except
a.increased user control by having the data
stored locally
b.deadlocks are eliminated
c.transaction processing response time is
improved
d.partitioning can reduce losses in case of
disaster

ANS: B
39. Each of the following is a relational algebra
function except
a.join
b.project
c.link
d.restrict
ANS: C