Chapter 8

1. What information is contained in a journal voucher? A journal voucher is used to make

2. How are journal vouchers used as a mechanism? Journal vouchers must be approved
by an authorized person, and thus provide an effective control against errors and
unauthorized general ledger entries.

3. What information is contained in the general ledger master file? The general ledger
master file is ordered by the chart of accounts. The account number, the account
description, the asset class, the normal balance, beginning balance, total debits and total
credits for the period, and the current balance are the typical pieces of information found
in each record of a general ledger master file.

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4. What is the purpose of the general ledger history file? The purpose is to present

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comparative financial reports on a historic basis.

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6. List the primary users of the FRS and discuss their information needs. The primary

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users of financial statement information are external users such as stockholders, creditors,
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and government agencies such as the IRS and the SEC. These users need information that
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allow them to assess performance over time and to compare performance with other
organizations. The IRS needs financial information to determine whether the corporation
is paying the appropriate amount of taxes, while the SEC requires the information of
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publicly traded organizations to ensure that the market place is fair to the average
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investor.
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7. Name in order the 11 steps of the financial reporting process. 1. Capture the transaction
2. Recording special journal3. Post to subsidiary ledger4. Post to the general ledger5.
Prepare the unadjusted trial balance 6. Make adjusting entries 7. Journalize and post
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adjusting entries 8. Prepare the adjusted trial balance 9. Prepare the financial statements
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10. Journalize and post the closing entries 11. Prepare the post-closing trial balance

8. What assumption is made regarding the external users of financial statements? The
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financial statements are prepared based upon the assumption that the users of financial
reports understand the conventions and accounting principles that are applied, and that
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the financial statements have information content that is useful.

9. when are adjusting entries made and what is their purpose? When are the
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corresponding voucher entries made? Adjusting entries are made after the regular
accounting entries have been made and posted to the general ledger and any
corresponding subsidiary ledgers. After an unadjusted trial balance of the general ledger
has been prepared, the adjusting entries are made to correct any errors and to record any
unrecorded transactions (i.e. accruals) during the period. The vouchers are prepared after
the adjusting entries have been identified and made to the worksheet

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 10. What tasks should the general ledger clerk not be allowed to do? The general ledger
clerks should not: 1. have record keeping responsibility for special journals or subsidiary
ledgers, 2. prepare journal vouchers, or have custody of physical assets.

11. What are the two operational reports produced by the FRS that provide proof of the
accuracy of the process? Journal voucher listing and general ledger change report.

18. Explain how the formalization of tasks promotes internal control. A formalization of
tasks clearly specifies the responsibilities of a certain job position. With employee
responsibilities clearly specified, management can construct an organization that avoids
assigning incompatible tasks to an individual.

21. How does management by exception help to alleviate information overload by a

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decision. Thus, only situations which are not proceeding as scheduled are highlighted by

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the reports and analyzed by the manager. Thus, the manager does not have to weed

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through multiple reports to find the situations which need attention.

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31. What is goal congruence? Goal congruence means that when lower level managers
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pursue their own objectives, they also make a contribution to the objectives of their
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superiors.

1. Discuss any separation of duties necessary to control against unauthorized entries to

the general ledger. What other control procedures regarding the general ledger should be
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employed? Since general ledger clerks have access to the general ledger, they should not
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have access to the journal vouchers in the source departments. If these journal vouchers
are acquired by the general ledger clerks, or anyone else with authorization to enter the
general ledger, these vouchers may be used to make unauthorized entries. Prenumbering
and logging these documents at their source provides a means of accountability.
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12. Sometimes a trade-off must be made between information accuracy and timeliness.
Give an example in which it is imperative to make an estimate now, rather than wait a
couple of weeks for an exact number. An example where timeliness is more important in
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accounting information systems occurs for year-end accruals. An exact number regarding
the cost of utilities may not be available for three or four weeks, yet the accrued liability
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account must reflect this liability on the year-end financial statements. Thus, an estimate
is more important to have during the financial statement preparation period than having
no amount while waiting for the exact number.
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2). D

3). C

5). C

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