Chapter 16General Ledger and Business Reporting (GL/BR) Process

TRUE/FALSE

1. The GL/BR process is an interacting structure of people, equipment, methods, and controls that is
designed to accomplish both operations and information system functions.

ANS: T

2. The business reporting process comprises accumulating, classifying, and recording data, fueling the
financial reporting, business reporting, and other reporting subsystems.

ANS: F

3. The general ledger process is concerned with preparing external financial statements, ensuring they
conform to GAAP, generating Web-based forms of key financial statement and related business
reporting via the Internet, and supporting the generation of both ad hoc and predetermined business
reports.

ANS: F

4. A feeder process is any business process that accumulates event data that is then communicated to and
processed within the GL.

ANS: T

5. The managerial reporting officer is responsible for reporting GAAP financial statements.

ANS: F

6. The financial reporting officer is primarily responsible for budgeting.

ANS: F

7. The controller notifies the business reporting process of investing and financing transaction activities

ANS: F

8. The financial statements contain detailed information of all of an organizations business event data.

ANS: F

9. A performance report compares actual results with budgeted expectations.

ANS: T

10. Performance reports are often part of a managerial reporting system known as a responsibility
accounting system.

ANS: T
11. A journal voucher is an internal source document used to notify the GL to make an accounting entry.
 ANS: T

12. The general ledger master data contains summarized information of all of an organizations business
event data.

ANS: T

13. The source code field of each GL entry provides a beginning point of reference for developing a
proper chart of accounts.

ANS: F

14. Balanced scorecard is methodology for assessing an organization's business performance via four
components: (1) financial, (2) external business process, (3) vendors, and (4) innovation and
improvement activities.

ANS: F

15. Business intelligence is the integration of statistical and analytical tools with decision support
technologies to facilitate complex analyses of data warehouses by managers and decision makers.

ANS: T

16. XML is an XBRL-based language consisting of a set of tags that are used to unify the presentation of
business reporting information into a single format that can be easily read by almost any software
package and can be easily searched by web browsers.

ANS: F

17. XML is a generalized system for the customized tagging of data to enable the definition, transmission,
and interpretation of data over the Internet.

ANS: T

18. The intent of Sarbanes Oxley is to protect the company by improving the accuracy and reliability of all
disclosures.

ANS: F

19. The driving force in constructing a chart of accounts is to add structure to the classification of financial
information.

ANS: T

20. As we move toward an enterprise system environment, the chart of accounts becomes increasingly
more important.

ANS: F

21. When implementing an ERP system, it is best to provide all users with access to all menu systems, so
they can see what is going on within the system.
 ANS: F

MULTIPLE CHOICE

1. The general ledger process comprises all of the following except:

a. providing information for financial reporting
b. serving the needs of managerial reporting
c. classifying data by general ledger accounts
d. ensuring that the external financial statements conform to GAAP

ANS: D

2. The business reporting process comprises all of the following except:

a. preparing general purpose external financial statements
b. generating ad hoc and predetermined business reports for management
c. ensuring that the external financial statements adhere to GAAP
d. fueling the financial reporting, business reporting, and other reporting subsystems by
providing the information needed to prepare external and internal reports

ANS: D

3. In contrast to the managerial reporting process, the financial reporting process prepares all of the
following financial statements except:
a. the balance sheet
b. the income statement
c. the standard costing variance report
d. the statement of owner equity changes
ANS: C

4. Typically, you would expect general ledger updates for financing and investing activities to be fed to
the GL/BR process by:
a. the controller
b. the treasurer
c. the chief executive officer (CEO)
d. one of the AIS feeder systems
ANS: B

5. Typically, you would expect general ledger updates for periodic adjusting entries to be fed to the
GL/BR process by:
a. the controller
b. the treasurer
c. the chief executive officer (CEO)
d. one of the AIS feeder systems
ANS: A

6. Which of the following individuals should possess the greatest knowledge of GAAP?
a. general ledger accounting department manager
b. budgeting department manager
 c. financial reporting officer
d. managerial reporting officer
ANS: C
7. Which of the following usually would be responsible for preparing operating center budgets?
a. general ledger accounting department
b. budgeting department
c. financial reporting officer
d. operating line managers
ANS: D
8. Which of the following usually would be responsible for preparing operating center performance
reports?
a. general ledger accounting department
b. budgeting department
c. financial reporting officer
d. managerial reporting officer
ANS: D
9. Normally, you would expect that operating event data updates would be sent to the GL/BR process by:
a. the controller
b. the treasurer
c. the vice president of finance
d. various feeder processes
ANS: D
10. Performance reports to various cost center, profit center, and investment center managers are usually
sent by?
a. the controller
b. the treasurer
c. the managerial reporting officer
d. the budgeting department
ANS: C
11. GAAP based financial statements are sent by:
a. the controller
b. the treasurer
c. the financial reporting officer
d. the business reporting department
ANS: C
12. Which person has responsibilities similar to those of the financial reporting officer?
a. Controller
b. Treasurer
c. managerial reporting officer
d. internal auditor
ANS: C
13. Adjusted trial balance figures are usually sent from the business reporting department to the:
a. the financial reporting officer
b. the managerial reporting officer
 c. the business reporting department
d. the budgeting department
ANS: A
14. Which of the following has responsibilities and expertise to preparing internal reports:
a. the financial reporting officer
b. the managerial reporting officer
c. the business reporting department
d. the budgeting department
ANS: B
15. Finalized budget figures are sent to the GL/BR process by
a. the financial reporting officer
b. the budgeting department
c. the business reporting department
d. the managerial reporting officer
ANS: B
16. Which of the following advises and assists the cost center, profit center, and investment center
managers in preparing the budget?
a. the financial reporting officer
b. the budgeting department
c. the business reporting department
d. the managerial reporting officer
ANS: B
17. Which of the following could be a journal voucher?
a. general ledger cash disbursements update
b. customer invoice
c. receiving report
d. purchase requisition
ANS: A
18. Which of the following statements related to journal vouchers is false for most ERP systems?
a. The person completing the adjustment will enter it directly into the computer.
b. The voucher will be electronic.
c. Journal voucher should be signed by the person(s) authorized to initiate the entry.
d. To provide an adequate audit trail, a printed copy of journal vouchers is required.
ANS: D

19. Which of the following is least likely to be part of the relevant environment of the GL/BR process?
a. the order entry/sales process
b. the billing/accounts receivable/cash receipts process
c. the purchasing/accounts payable/cash disbursements process
d. the inventory process
ANS: D

20. Inputs to a GL/BR process typically include all of the following except:
a. adjusting entry journal voucher
b. adjusted trial balance
 c. finalized budget
d. GAAP-based financial statements
ANS: D

21. In a logical DFD for the general ledger/business reporting (GL/BR) process, which of the following
processes normally would not update the general ledger master data?
a. Record budget.
b. Post events data.
c. Record adjustments.
d. Prepare financial statements.
ANS: D

22. The general ledger master data does not contain:

a. adjusting entry data
b. customer number
c. totals extracted by event type from business event data
d. a chart of accounts
ANS: B

23. Tracing back to individual business events that have been aggregated into account balances is done by
means of a(n):
a. electronic reference service
b. general ledger account
c. audit trail
d. data dictionary
ANS: C

24. The coding system typically used in the general ledger chart of accounts is:
a. serial coding
b. hierarchical coding
c. block coding
d. mnemonic coding
ANS: B

25. An account in the chart of accounts has the number 7111. Which of the following does the 7 likely
represent?
a. revenues
b. sales region
c. merchandise sales
d. golf merchandise sales
ANS: A
 26. Which of the following items is not one of the four components of the balanced
scoreboard methodology?
a. customers
b. financial
c. competitive environment
d. internal business processes
ANS: C

27. Which of the following statements related to XBRL is false?

a. XBRL is being developed by a nonprofit consortium of approximately 450 major
companies, organizations, and government agencies..
b. To date world-wide implementation and acceptance of XBRL has been slow.
c. XBRL can handle data in different languages and accounting standards as well.
d. XBRL offers cost savings, greater efficiency, and improved accuracy and reliability to all
those involved in supplying or using financial data.
ANS: B

28. The intent of the Sarbanes Oxley Act is:

a. to protect investors by improving the accuracy and reliability of corporate disclosures
b. to improve GAAP
c. to increase the speed of disclosures
d. to strengthen the internal audit department
ANS: A

29. Sarbanes-Oxley makes top management responsible for internal controls. Penalties may include:
a. imprisionment
b. Fines
c. a. and b.
d. neither a. nor b.
ANS: C

30. Which of the following represent a typical coding scheme for a general ledger account?
a. 1XXX assets
X1XX current assets
XX1X cash accounts
XXX3 cash in bank
b. 1XXX cash in bank
X1XX cash accounts
XX1X current assets
XXX3 assets
c. 1XXX non-current assets
X1XX current assets
XX1X cash accounts
XXX3 cash in bank
d. none of the above are correct

ANS: A

COMPLETION
1. The ________________________________________ is an interacting structure of people, equipment,
methods, and controls that is designed to accomplish both operations and information system functions
with the purpose of generating accounting and other reports.

ANS: general ledger and business reporting (GL/BR) process

2. The ______________________________ comprises accumulating, classifying, and recording data,

fueling the financial reporting, business reporting, and other reporting subsystems.

ANS: general ledger process

3. The ______________________________ is concerned with preparing external financial statements,

ensuring they conform to GAAP, generating Web-based forms of key financial statement and related
business reporting via the Internet, and supporting the generation of both ad hoc and predetermined
business reports.

ANS: business reporting process

4. A(n) ____________________ process is any business process that accumulates business event data
that are then communicated to and processed within the GL.

ANS: feeder

5. The ______________________________ officer possesses expertise in generally accepted accounting

principles.

ANS: financial reporting

6. The ______________________________ officer possesses expertise in preparing internal

management reports.

ANS: managerial reporting

7. The ____________________ notifies the business reporting process of investing and financing
transaction activities

ANS: treasurer

8. The ______________________________ is a list of all the accounts in the general ledger.

ANS: chart of accounts

9. A(n) ____________________ report compares actual results with budgeted expectations.

ANS:
performance
 10. Often, performance reports are part of a managerial reporting system known as a(n)
______________________________ system.

ANS:
responsibility accounting/reporting

11. A(n) ______________________________ is an internal source document used to notify the general
ledger to make an accounting entry.

ANS: journal voucher

12. The ___________________________________ data contains summarized information of all an

organizations business event data.

ANS: general ledger master

13. The source code field of each GL entry provides a beginning point of reference for developing a
proper _____________________.

ANS: audit trail

14. Consider the GL account number 1122. From right to left, where each successive digits rank order
is subordinate to the rank to the left is known as _________________________ coding.

ANS: hierarchical

15. ______________________________ is methodology for assessing an organization's business

performance via four components: (1) financial, (2) internal business process, (3) customers, and (4)
innovation and improvement activities.

ANS: Balanced scorecard

16. ___________________________________ is the integration of statistical and analytical tools with

decision support technologies to facilitate complex analyses of data warehouses by managers and
decision makers.

ANS: Business intelligence

17. _____________________________________________ is an XML-based language consisting of a set

of tags that are used to unify the presentation of business reporting information into a single format.

ANS: eXtensible Business Reporting Language (XBRL)

18. ____________is a generalized system for the customized tagging of data to enable the definition,
transmission, and interpretation of data over the Internet. XML uses predefined tags to let information
providers create uniform information for users.

ANS: XML

19. The intent of ______________________________ is to protect investors by improving the accuracy

and reliability of corporate disclosures.

ANS: Sarbanes Oxley

 20. Sarbanes-Oxley, Section 409 states that companies shall disclose to the public on a
____________________ and ____________________ basis such additional information concerning
material changes in the financial condition or operations of the issuer. . . .

ANS: rapid, current

21. Sarbanes-Oxley Section 401 covers ____________________ in financial reports.

ANS: disclosures

22. ____________________________________ is the process by which assurance is provided through

monitoring of automated controls and business events in real-time or near real time.

ANS: Continuous assurance (continuous auditing)

23. ____________________ of financial information is a potential information use problem that may arise
when changing account numbers and account number structure.

ANS: Comparability

PROBLEMS

1. TB Figure 16.1 is a Level zero DFD for the GL/BR process.

Required:

Explode bubble 3.0, for the Record Adjustments process into a level 1DFD

ANS:
2. TB Figure 16.3 is a Level zero DFD for the GL/BR process.

Required:

Explode bubble 4.0, for the Prepare Business Reports process into a level 1DFD
 ANS.

ESSAY QUESTIONS

1. Discuss the following components of the balanced scorecard:

(1) financial
(2) internal business processes
(3) customers
(4) innovation and improvement activities

ANS:
Balanced scorecard is a methodology for assessing an organizations business performance
via four components: (1) financial, (2) internal business processes, (3) customers, and (4) innovation
and improvement activities. The financial aspect focuses on more traditional measures of business
performance related to how shareholders view the organizations performance. The internal business
processes relate to the organizations ability to identify its core competencies and to assess how well it
performs in these identified areas of competency. The customer component focuses on identifying how
customers perceive the organization in terms of the value that it is creating for them. Innovation and
improvement activities are monitored to assess how the organization is continuing to improve and how
it is creating additional value.
2. The important information services functions of the GL/BR process emphasized in chapter 16 included
two categories: (1) general ledger activities and (2) other business reporting. Briefly discuss what
comprises the general ledger (GL) process comprises and what comprises the business reporting
process.

ANS:
The general ledger process comprises accumulating data, classifying data by general ledger accounts,
and recording data in those accounts. Fueling the financial reporting, business reporting, and other
reporting subsystems by providing the information needed to prepare external and internal reports. In
servicing the information needs of managerial reporting, the GL interacts with the budgeting modules.

The business reporting process is concerned with the following: Preparing general purpose, external
financial statements (e.g., the conventional four that you have studied in other accounting courses: the
balance sheet, income statement, statement of owner equity changes, and cash flow statement).
Ensuring that the external financial statements conform to GAAP; therefore, among other things, the
statements must contain appropriate footnote disclosures. Generating Web-based forms of key
financial statement and related business reporting information for dissemination via the Internet.
Supporting the generation of both ad hoc and predetermined business reports that support operational
and strategic decision making.

3. Chapter 16 includes a discussion The Sarbanes Oxley Act of 2002. Describe the three sections of
Sarbanes Oxley that were discussed, and how these may impact financial reporting.

ANS:
The following are the major concepts covered with each section of Sarbanes Oxley.

Section 401
- disclosures in financial reports
- off balance sheet items
- redefines GAAP
- transparent reporting of economic effect of transactions

Section 404
- reporting on internal controls
- requires SEC to set rules
- report must include responsibility of management
- report must include attestation

Section 409 -
- rapid and current disclosure
- covers material items
- speeding up reporting