. TF.05-001 The methods and procedures for collecting, cla and operating informa
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Question
. TF.05-001 The methods and procedures for collecting, cla and operating information are called the accounting system. ssifying, summarizing, and reporting a business's financial 2. TF.05-005 An accounting system design consists of internal controls and information processing methods. True False 3. TF.0S-006 Most accounting systems evolve as the business grows and requires changes in its methods for collecting accumulating, and reporting information. True False 4. TF.05-009 When specialized journals are used, the general journal is not necessary. True False 5. TF.05-012 The format and number of specialized journals that a business uses depend upon the legal organization of the business. True False 6. TF.05-013 The basic procedure of posting from a revenue journal is to make all postings at the end of the month. True False 7. TF.05-015 The presence of a subsidiary ledger requires the presence of a summarizing control account in the general ledger True False 8. TF.05-017 The customers subsidiary ledger is controlled by the general ledger account entitled Accounts Payable. True False 9. TF.05-018Explanation / Answer
1) Yes, it is true that the methods and procedures for collecting, classifying, summarizing, and reporting a business's financial and operating information is known as accounting system. In daily routine various business transactions takes place. These transactions act as input to a system and then they are processed for final output. All the financial transaction are recorded in chronological order in books. Then transactions of similar nature are grouped together and form one account. This activity is known as classification. After they are classified then summary of all accounts is prepared in form of trial balance, profit and loss account and balance sheet. At last summarized information is analyzed and information about the performance and financial position of the business is communicated to the interested users.
2) True, an accounting system design consists of internal controls and information processing methods. Internal controls are policies and procedures that protects assets from misuse, ensures that information is correct and accurate, also ensure that all laws and policies are being followed. These controls are specillay designed for the protection of assets and the reliability of accounting information. Information processing methods are the methods by which information is collected, summarized and reported to end users.
3) True, most accounting systems evolve as the business grow and require changes in its methods for collecting, accumulating and reporting information. It is correct that as business expands its user's needs in terms of information required also changes. Therefore, it is necessary to first understand the necessity or usage of information by user. Then design the system according to the user need. Finally implement the system so that information received by user is as per his requirements.
4) False, when specialized journals are used, the general journal is not necessary. Special journals has been designed to record the transactions that reoccur frequently in accounting period. There are 6 journals to record the transactions which occur frequently: Purchase journal, Sales journal, Cash receipts journal, Cash payment journal, Purchase return journal and Sales return journal. The transactions other than transactions related to special journal are recorded in general journal like adjusting and closing entries. Therefore, one may use special journal and general journal simultaneously.
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