Chapter 6 - Expenditure Cycle Part 2

Chapter 6—The Expenditure Cycle Part II: I I: Payroll Processing and Fixed Asset Procedures TRUE/FA!E

1. Time cards cards are used used by cost cost accounting to allocate direct labor labor charges to work in process. process. ANS: F 2. The personne personnell department department autho authorizes rizes change changess in employee employee pay rates. rates. ANS: T . !ost payroll payroll systems systems "or "or mid#size mid#size "irms use use real#time real#time data data processing processing.. ANS: F $. To impro%e internal control& control& paychecks should be distributed by the employee's super%isor super%isor.. ANS: F (. )mployee )mployee paycheck paycheckss should should be drawn drawn against against a special special checking checking account. account. ANS: T *. +ecause +ecause a time clock is used& used& no super%ision super%ision is re,uired re,uired when when employees employees enter enter and lea%e the work work  place. ANS: F -. n%entory n%entory control control per"orms per"orms the the "ormal record record keeping keeping "unction "unction "or "i/ed assets assets.. ANS: F 0. The deprecia depreciation tion schedu schedule le shows shows when assets assets are "ully "ully depreciat depreciated. ed. ANS: T . Authoriza Authorization tion to to dispose dispose o" "i/ed "i/ed assets assets should should be issued issued by the user user o" the asset. asset. ANS: F 1. 3ork#in#pro ork#in#process cess records records are are updated updated by payroll payroll personn personnel. el. ANS: F 11. deally& deally& payroll checks checks are written written on a special bank account used used only "or payroll. ANS: T

12. The super%isor is the best person to determine the e/istence o" a 4phantom employee5 and should distribute paychecks. ANS: F 1. 6ayroll processing can be automated easily because accounting "or payroll is %ery simple. ANS: F 1$. Timekeeping is part o" the personnel "unction. ANS: F 1(. Fi/ed asset accounting systems include cost allocation and matching procedures that are not part o" routine e/penditure systems. ANS: T 1*. Asset maintenance in%ol%es only the recording o" depreciation charges. 6hysical impro%ements are always e/pensed. ANS: F 1-. Fi/ed Asset Systems must keep track o" the physical location o" each asset to promote accountability. ANS: T 10. Time cards capture the total time an indi%idual worker spends on each production 7ob. ANS: F 1. Accounting con%entions and 8S rules sometime speci"y the depreciation parameters to be used. ANS: T 2. The "i/ed asset disposal report authorizes the user department to dispose o" a "i/ed asset. ANS: F "UTIPE C#$ICE

1. The document that captures the total amount o" time that indi%idual workers spend on each production  7ob is called a a time card .  b  7ob ticket . c  personnel action "orm . d labor distribution "orm .

ANS: + 2. An important reconciliation in the payroll system is a general ledger compares the labor distribution summary "rom cost accounting to the . disbursement %oucher "rom accounts payable  b  personnel compares the number o" employees authorized to recei%e a paycheck to the . number o" paychecks prepared c  production compares the number o" hours reported on 7ob tickets to the number o" hours . reported on time cards d  payroll compares the labor distribution summary to the hours reported on time cards .

ANS: A . 3hich internal control is not an important part o" the payroll system9 a Super%isors %eri"y the accuracy o" employee time cards. .  b 6aychecks are distributed by an independent paymaster. . c Accounts payable %eri"ies the accuracy o" the payroll register be"ore trans"erring payroll . "unds to the general checking accounting. d eneral ledger reconciles the labor distribution summary and the payroll disbursement . %oucher.

ANS: ; $. 3hich transaction is not processed in the Fi/ed Asset System9 a  purchase o" building .  b impro%ement o" e,uipment . c  purchase o" raw materials . d sale o" company %an .

ANS: ; (. or loss on disposal o" "i/ed assets . d maintaining a record o" the "air market %alue o" all "i/ed assets .

ANS: < . 3hich o" the "ollowing is not a characteristic o" the Fi/ed Asset System9 a Ac,uisitions are routine transactions re,uiring general authorization. .  b 8etirements are reported on an authorized disposal report "orm. . c Ac,uisition cost is allocated o%er the e/pected li"e o" the asset. . d Trans"er o" "i/ed assets among departments is recorded in the "i/ed asset subsidiary . ledger.

ANS: A 1. n the payroll subsystem& which "unction should distribute paychecks9 a  personnel .  b timekeeping . c  paymaster  . d  payroll .

ANS: ; 11. 3here does the responsibility lie "or reconciling the labor distribution summary and the payroll disbursement %oucher9 a cash disbursements .  b cost accounting . c  personnel . d general ledger  .

ANS: < 12. 3hich o" the "ollowing statements is not true9 a 8outine payroll processing begins with the submission o" time cards. .  b 6ayroll clerks must %eri"y the hours reported on the time cards. . c 6ayroll reconciles personnel action "orms with time cards and prepares paychecks. . d ;ash disbursements signs paychecks and "orwards them to the paymaster "or distribution. .

ANS: + 1. n a manu"acturing "irm& employees use time cards and 7ob tickets. 3hich o" the "ollowing statements is not correct9 a ?ob tickets are prepared by employees "or each 7ob worked on& so an employee may ha%e . more that one 7ob ticket on a gi%en day.  b An indi%idual employee will ha%e only one time card. . c The time reported on 7ob tickets should reconcile with the time reported on time cards. . d 6aychecks should be prepared "rom the 7ob tickets. .

ANS: < 1$. 3hich department is responsible "or appro%ing changes in pay rates "or employees9 a  payroll .  b treasurer  . c  personnel . d cash disbursements .

ANS: ; 1(. 3hich o" the "ollowing situations represents a serious control weakness9 a Timekeeping is independent o" the payroll department. .  b 6aychecks are distributed by the employees immediate super%isor. . c Time cards are reconciled with 7ob tickets. . d 6ersonnel is responsible "or updating employee records& including creation o" records "or . new hires.

ANS: + 1*. 3hy would an organization re,uire the paymaster to deli%er all unclaimed paychecks to the internal audit department9 a to detect a 4phantom employee5 "or whom a check was produced .  b to pre%ent an absent employee@s check "rom being lost . c to a%oid paying absent employees "or payday . d to pre%ent the paymaster "rom cashing unclaimed checks .

ANS: A 1-. 3hich o" the "ollowing is not a reasonable control "or "i/ed assets9 a 6roper authorization is re,uired "or ac,uisition and disposal o" "i/ed assets. .  b Fi/ed asset records show the location o" each asset. . c Fully depreciated assets are immediately disposed o". . d or some paycheck would not clear. This will alert management to the problem so correcti%e action can be taken. (. 3hy should employees clocking on and o"" the 7ob be super%ised. ANS: A "orm o" payroll "raud in%ol%es employees clocking the time cards o" absent employees. +y super%ising the clocking in and out process& this "raud can be reduced or eliminated. *. 3hat is a personnel action "orm9 ANS: The personnel action "orm pro%ides the payroll department with a list o" currently acti%e employees& so that any submission o" time cards by super%isors "or "ictitious or e/#employees will not be processed. -. n a manu"acturing "irm& employees typically "ill out two di""erent documents regarding their time worked. 3hat are they9 3hy are there two9 ANS: The two documents are the time card and the 7ob ticket. Two are re,uired because the time card records all the time worked by an employee during the period while the 7ob ticket details the time by  pro7ect. 0. Cist two types o" authorization re,uired in the Fi/ed Asset System. ANS: authorization to purchase the asset and to dispose o" the asset . Cist "our types o" data that appear on a depreciation schedule. ANS: item description& depreciation method& use"ul li"e& date ac,uired& cost& sal%age %alue& accumulated depreciation& depreciation e/pense per period& book %alue 1. 3hich documents prompt the "i/ed asset department to create a "i/ed asset record9 ANS: the recei%ing report and the disbursement %oucher  11.