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290 PART II Transaction Cycles and Business Processes
7. Payroll is often used as a good example of when 11. Describe an internal control that would prevent
batch processing by using magnetic tapes is consid- the payment of insurance premiums on an auto-
ered appropriate. Why is payroll typically considered mobile the company no longer owns.
a good application for this type of storage device? 12. Describe an internal control that would prevent
8. If an asset that is not fully depreciated is sold or the charging of depreciation expense to the main-
disposed, but the fixed asset records are not tenance department for a sweeper that is now
adjusted, what effect will this have on the financial located in and used by the engineering depart-
statements? ment.
9. Discuss the fundamental risk and control issues 13. Describe an internal control that would prevent
associated with fixed assets that are different from the acquisition of office equipment that the firm
raw materials and finished goods. does not need.
10. Describe an internal control that would prevent 14. What negative consequences result when fixed
an employee from removing a computer and then asset records include assets that the firm no lon-
reporting it as scrapped. ger owns?
Multiple-Choice Questions
1. The document that captures the total amount of ring payroll funds to the general checking
time that individual workers spend on each pro- account
duction job is called a d. the general ledger department reconciles the
a. time card. labor distribution summary and the payroll dis-
b. job ticket. bursement voucher
c. personnel action form. 4. The department responsible for approving pay
rate changes is
d. labor distribution form.
a. payroll
2. An important reconciliation in the payroll system
is when b. treasurer
a. the general ledger department compares the c. personnel
labor distribution summary from cost account- d. cash disbursements
ing to the disbursement voucher from accounts 5. Which function should distribute paychecks?
payable.
a. personnel
b. the personnel department compares the num-
b. timekeeping
ber of employees authorized to receive a pay-
check to the number of paychecks prepared. c. paymaster
c. the production department compares the num- d. payroll
ber of hours reported on job tickets to the 6. Which transaction is not processed in the fixed
number of hours reported on time cards. asset system?
d. the payroll department compares the labor dis- a. purchase of building
tribution summary to the hours reported on b. repair of equipment
time cards.
c. purchase of raw materials
3. Which internal control is not an important part of
d. sale of company van
the payroll system?
7. Depreciation
a. supervisors verify the accuracy of employee
a. is calculated by the department that uses the
time cards
fixed asset.
b. paychecks are distributed by an independent
b. allocates the cost of the asset over its useful life.
paymaster
c. is recorded weekly.
c. the accounts payable department verifies the
accuracy of the payroll register before transfer- d. results in book value approximating fair market
value.