D217 Accounting Information Systems MOD/UNIT tests

MOD 1 - The primary input to the transaction processing system is

"a financial transaction." The financial transaction is the primary input to the transaction processing system. Financial transactions are economic events that affect assets and equities and are reflected on the financial statements.

The major difference between the financial reporting system (FRS) and the management reporting system (MRS) is the

"FRS provides information to external users; the MRS provides information to internal users." The FRS produces the financial statements as required by law. The MRS provides information to management for decision making such as budgets, forecasts, customer orders.

The author distinguishes between the accounting information system and the management information system based on

"whether the transactions are financial or nonfinancial that directly affect the processing of financial transactions." The AIS captures financial transactions to support systems around the revenue, expenditure and conversion cycles. The MIS captures nonfinancial transactions to support systems for marketing, inventory, manufacturing and human resources.

An example of a financial transaction is

"the purchase of computer." The purchase of a computer adds an asset to the organization.

An example of a nonfinancial transaction is

"log of customer calls." The log of customer calls is a key source of information for customer service, marketing and the sales departments.

The transaction processing system includes which of the following?

"the conversion cycle." The conversion cycle is included within the transaction processing system because it records cost accounting and production activities.

The goal of data processing is

"the production of useful information." Data is not information. Data is data. Data needs to be consolidated, processed, summarized and converted into information for management decision-making.

Which of the following is an external end user?

"tax authorities." Tax authorities are external users who expect an accurate accounting of tax due. In addition, the non-discretionary reports from the accounting information system provide what is needed for tax authorities to evaluate tax liability.

An appraisal function housed within the organization that performs a wide range of services for management is

"internal auditing." An appraisal function housed within the organization that performs a wide range of services for management is internal auditing. Internal auditors verify the accuracy and security of the information systems and also work with various business segments to secure and optimize processes.

What factor conceptually distinguishes external auditing and internal auditing?

"constituencies." External auditing and internal auditing are distinguished by constituencies. Internal auditors focus on company management. External auditors perform services to assure external investors, tax and regulatory authorities that the financial statements are complete and accurate.

MOD 2- Which system is part of the expenditure cycle?

"cash disbursements." Cash disbursements is part of the expenditure cycle. Cash disbursement is the way a firm pays vendors, creditors, and employees.

Both the revenue and the expenditure cycle can be viewed as having two key parts. These key parts are

"physical and financial." The two key parts of the revenue and expenditure cycle are physical and financial. The physical portion refers to the documents that support the necessary transactions; the financial portion refers to the effect that the appropriate transactions have on assets and equity.

System flowcharts do which one of the following?

The correct answer is "represent relationships between key elements of manual and computer systems." System flowcharts represent relationships between key elements of manual and computer systems. The system flowchart is a graphic representation of the process that is used by the programmer/analyst and systems auditors to understand the flow of data through the program or system and the files/functions that are involved from input to storage to output.

Which symbol is used to represent a data source or destination of documents and reports in a system flowchart?

"oval." This symbol is used to represent a data source or destination of documents and reports.

Which accounting application is least suited to batch processing?

"sales order processing." Sales order processing is least suited to batch processing. The production process needs to know as soon as possible if customer orders are required. At the same time, it is important to know what the potential revenue is at any given time.

In contrast to a real-time system, in a batch processing system

"there is a lag between the time when the economic event occurs, and the financial records are updated." Batch systems group transactions and they process when it is most efficient, often on an hourly, daily, or weekly basis. Batch systems process transactions in bulk when required or when convenient. These systems are appropriate when there is no urgency to the information.

In contrast to a batch processing system, in a real-time system

"processing takes place when the economic event occurs." In a real-time system processing takes place when the economic event occurs. For example, when an item is scanned at your local grocery store during checkout, the store inventory, daily sales, and cashier productivity systems are updated immediately.

The coding scheme most appropriate for a chart of accounts is

"block code." The most appropriate coding scheme for a chart of accounts is block code. As described in the text, the use of block codes allows accounts to be logically grouped in blocks. For example, 100 - 199 Current Assets, 200 - 299 Fixed Assets, and so on.

When a firm wants its coding system to convey meaning without reference to any other document, it would choose

"a mnemonic code." When a firm wants its coding system to convey meaning without reference to any other document, it would choose a mnemonic code. For example, colleges and universities use mnemonic codes- such as "Acct 101" for Intro to Accounting- to define courses by department and level. These mnemonic codes provide helpful information for decision making.

The most important advantage of sequential coding is that

"missing or unrecorded documents can be identified." The most important advantage of sequential coding is that missing or unrecorded documents can be identified. For example, checks, invoices and orders are commonly coded in sequence to easily identify missing or unprocessed items.

UNIT 2 FORM A - Li has implemented a new accounting information system (AIS) to help him manage his construction company. Li uses the information captured by the system to plan each project, forecasting the requirements for raw materials and the cash flow expected.

Which AIS subsystem helps Li in planning?

"Management reporting system (MRS)." The MRS subsystem of the AIS provides management with special reports that aid in budgeting and forecasting.

Which information does the management reporting system (MRS) provide?

"Variance reports." The MRS provides the internal information needed to run a business (e.g., variance reports).

Useful information has the following characteristics: relevance, timeliness, accuracy, completeness, and summarization.

What happens if the information is untimely?

"The decision maker wastes resources analyzing outdated information." The decision maker spends time and resources on the outdated information, which delays the optimal decision.

Useful information has the following characteristics: relevance, timeliness, accuracy, completeness, and summarization.

What happens if the information is inaccurate?

"The decision maker receives materially wrong information." The decision maker needs information that has no material errors.

Which important information does external feedback about the level of uncollected customer accounts indicate to the management information system?

"The organization needs to review its credit-granting policies." The uncollected customer accounts are an indication that some customers have received too much credit, and management should review those policies.

What is a type of data source for the accounting information system (AIS)?

"Raw material is moved into work-in-process." Transferring raw material into work-in-process is an internal transaction that involves the movement of resources within the organization. This is a data source for the AIS.

Why would an organization decide to develop its own custom information system?

"It has unique information needs." An organization would develop its own custom information system when there is no readily available solution for its information needs.

An objective of internal control is to mitigate the risk from errors and fraud.

What is the primary risk associated with revenue cycle transactions?

"Inaccurately recording sales and cash receipt transactions in journals and accounts." Recording sales and cash receipt transactions in journals and accounts must be accurate.

What does the letter N in an inverted triangle mean in a system flowchart?

"It is a temporary file using a numeric filing system." The inverted triangle means that it is a temporary file and the N means that it uses a numeric filing system.

Which digital computer file contains account data that are updated by transactions and includes the general ledger and subsidiary ledgers?

"Master file." The general ledger and subsidiary ledgers are examples of master files.

How would shipping logs be depicted in a system flowchart?

"Parallelogram symbol." The parallelogram symbol is used to depict many types of hard-copy accounting records.

What is the circular symbol labeled A in the system flowchart?

"This is an on-page connector used to replace flow lines that otherwise would cause excessive clutter on the page." The connector replaces the lines that signify the movement. Lines should be used whenever possible to promote clarity. Restricted use of connectors, however, can improve the readability of a flowchart.

What is an advantage of sequential codes?

"Sequential coding supports the reconciliation of a batch of transactions at the end of processing." If the transaction processing system detects any gaps in the sequence of transaction numbers, it alerts management to the possibility of a missing or misplaced transaction.

Why is there no lag time with real-time systems?

"Real-time systems process transactions individually when the events occur." Because transactions happen at the same time, no time lags exist between occurrence and processing.

UNIT 2 FORM B- What does efficiency mean in the data collection process?

" Collecting data only once." Efficiency in data collection means that data is collected only once.

Useful information has the following characteristics: relevance, timeliness, accuracy, completeness, and summarization.

What happens if the information is incomplete?

"The decision maker does not have enough information in order to act." The decision maker is using an incomplete set of information, which leads to either needing to seek additional information or taking a risk that the missing information materially affects.

Useful information has the following characteristics: relevance, timeliness, accuracy, completeness, and summarization.

What happens if the information lacks summarization?

" The decision maker is overwhelmed by the amount of detail in the information." As information flows upward through an organization, decision makers need more summarized data.

An office manager receives the following marketing fax from a current supplier: "Our company is having a promotion this month for all our main products. Please call for more information."

Which characteristic of useful information is missing from this scenario?

"Complete." The fax does not include all the information necessary to take appropriate action: phone number, products that fall under the promotion, promotion terms etc.

Why are accountants involved in the information system development team?

" They are the domain experts, determining the nature of the information required, its source, its destination, and the rules that need to be applied." The accountants have a very specialized role due to understanding what data are needed, where data can be found within the system, and what rules need to be applied.

What is the main difference between centralized data processing (CDP) and distributed data processing (DDP)?

" CDP uses a common data center for all the processing needs of the organization; in DDP, every department has its own processing capabilities." The CDP uses common processing capabilities for the whole organization, while the DDP encourages localized processing.

Sara has started a very successful online company selling custom-made jewelry. One of her competitive advantages is a state-of-the-art information system that promotes visibility within the supply chain.

Which one of the information system's subsystems helps Sara manage the customer orders she receives?

"Transaction processing system (TPS)." The TPS records the orders as financial transactions in the accounting records.

A system flowchart is a graphical representation of the physical relationships among key elements of a system.

What do these elements include?

"Organizational departments." Organizational departments are included in system flowcharts.

What does the letter C in an inverted triangle mean in a system flowchart?

" It is a temporary file using a chronological filing system." The inverted triangle means that it is a temporary file and the C means that it uses a chronological filing system.

In a system flowchart, how would a clerk's tasks of entering sales orders be depicted?

"Bucket-shaped symbol." The bucket-shaped symbol represents a manual process.

It is a standard and a necessity to maintain the master file integrity of an organization so that if the current master files become corrupt, destroyed, or plagued with errors, the organization has a recourse.

What should the organization have in place in case of such an event?

"Master file backup." IT professionals can retrieve the most current backed-up file from the archives and use it to reconstruct the current version of the master file

MOD 3- Which document triggers the revenue cycle?

"the customer purchase order." The customer purchase order triggers the revenue cycle. The receipt of the customer purchase order indicating the items and quantity required is the first step in the revenue cycle. Customer purchase orders can be received by phone, email, regular mail, or other means.

Which department is least likely to be involved in the revenue cycle?

"accounts payable." The accounts payable department is least likely to be involved in the revenue cycle. Accounts payable is charged with managing the segment of the expenditure cycle that involves payments to vendors and creditors.

The purpose of the sales invoice is to

"bill the customer." The purpose of the sales invoice is to bill the customer. The sales invoice will be sent to the customer for payment. At the same time the invoice will also update inventory, send a journal to the general ledger, and record the sales journal.

Which type of control is considered a compensating control for customer payments?

"supervision." Supervision is a compensating control for customer payments. Compensating controls are put in place when more effective controls are deemed too difficult or costly to implement. Supervision is the simplest and most common form of compensating control.

Commercial accounting systems have fully integrated modules. The word "integrated" means that

"the transfer of information among modules occurs automatically." The word "integrated" means that the transfer of information among modules occurs automatically. In a fully integrated system, the shipping advice will generate the request for invoice automatically. This eliminates the risk that the invoice request is not processed or is processed for a different amount.

MOD 4- A copy of the purchase order (PO) is sent to the

"vendor." A copy of the purchase order (PO) is sent to the vendor. The purchase order is the formal document that tells the vendor what material is needed, at what price, in what quantity and on what date.

The departments involved in the purchasing process are purchasing, receiving, inventory control and

"accounts payable." The departments involved in the purchasing process are purchasing, receiving, inventory control and accounts payable. Accounts payable completes the purchasing process by authorizing and executing the cash disbursement based on a signal from receiving or inventory control.

When a cash disbursement in payment of an accounts payable is recorded

"the liability account is decreased." When a cash disbursement in payment of an accounts payable is recorded the liability account is decreased. On the Balance Sheet, accounts payable is a current liability. When a cash disbursement is recorded, the liability will be reduced.

The greatest risk of misappropriation of funds occurs in

"accounts payable." The greatest risk of misappropriation of funds occurs in accounts payable. This may take the form of payments for goods not ordered or received and to vendors that do not exist. The risk can be reduced through supervision, segregation of duties, independent verification, or automated processes.

In a firm with proper segregation of duties, adequate supervision as a compensating control is still necessary in

"receiving." In a firm with proper segregation of duties, adequate supervision is most critical in receiving. Every day materials arrive on the receiving dock. Until those receipts are recorded in the system, they are invisible to anyone but the receivers and their supervisors. Supervision is a compensating control appropriate before more automated controls take effect. Scanning technology and automated three-way match are technological controls that reduce risk.

MOD 5- The fixed asset system records the

"purchase of a new plant." The fixed asset system records the purchase of a new plant. The fixed asset system records property, plant, and equipment used in the operation of the business. These represent the largest investments of the firm.

In a technology enabled payroll system, Personnel, Time Keeping, Payroll, and Accounts Payable connect to which department to pay employees?

"cash disbursements." In a technology-enabled payroll system, Personnel, Time Keeping, Payroll and Accounts Payable connect to cash disbursements to pay employees. Personnel inputs the basic employee information and rate of pay; Time Keeping collects hours worked and verifies time cards; Payroll inputs the hours worked into the payroll system which calculates gross and net pay, taxes, and other deductions; Accounts Payable approves the payment amount; and finally cash disbursements issues pay checks or direct deposit. The general ledger will be updated after the cash disbursement occurs.

An important reconciliation in the payroll system is

"general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable." An important reconciliation in the payroll system is that the general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable. Cost accounting will be tracking the job tickets to properly account for work in process. Accounts payable will produce a disbursement voucher based on input from timecards. Job tickets and timecards should match when hours and hourly rates are extended.

Which of the following situations represents an internal control weakness?

"Paychecks are distributed by the employees' immediate supervisor." The distribution of paychecks by the employees' immediate supervisor is an internal control weakness. Paychecks should go directly to employees either by mail or through direct deposit. Giving the responsibility for distribution to the supervisor creates the possibility of loss, theft, or withholding of pay from an employee that the supervisor simply does not like. An additional risk arises if the employee is absent on payday and the supervisor has no secure storage for the check until the employee is back.

Which of the following is NOT a reasonable control for fixed assets?

"Fully depreciated assets are disposed of immediately." Requiring that fully depreciated assets be disposed of immediately is not a reasonable control for fixed assets. Fully depreciated assets may have years of useful life remaining. For example, manufacturing machinery may be depreciated over three years but many factories use machines that are 10, 15, or 20 years old if they are well maintained.

MOD 6- What type of data is found in the general ledger master file?

"balances for each account in the chart of accounts." Balances for each account in the chart of accounts are found in the general ledger master file. The text describes the general ledger file as the information hub for the accounting system. Each record in the general ledger master file corresponds with one of the accounts in the chart of accounts. Each record is either a GL Master account (i.e., Sales) or a control account (i.e. Accounts Receivables control)

Which report is an output of the financial reporting system (FRS)?

"comparative balance sheet." A comparative balance sheet is an output of the financial reporting system. The law requires that corporations generate a series of financial reports - Income Statement, Balance Sheet, Statement of Cash Flows, Tax Returns, and others. This requirement is met by the financial reporting system.

A characteristic of the management reporting system (MRS) is

"that it focuses on internal decision-making information." The management reporting system (MRS) focuses on internal decision-making information. The MRS is the source for reports that managers will use to analyze business performance such as variance analysis, production efficiency, sales, and purchases.

Big data analytics are characterized by

"volume, velocity, and variety of data." Big data analytics are characterized by volume, velocity, and variety of data. These are referred to as the three Vs: extreme volumes of data (megabytes, terabytes, petabytes, etc.), the rapid velocity at which the data must be processed (particularly in applications involving machine learning and artificial intelligence), and the wide variety of structured and unstructured data types that need to be integrated (audio, video, external web data, social media, the financial reporting system, the management reporting system).

What function does prescriptive analytics serve?

"It tells the user what actions should be taken in response to specific questions." Prescriptive analytics tells the user what actions should be taken in response to specific questions. For example, some companies use predictive analytics to optimize trade promotions. Prescriptive analytics helps them determine which campaigns to run and for which products.

UNIT 3 FORM A - Which item reflects vital information such as quantities and unit prices?

"Sales order." The sales order contains vital information such as unit prices and quantities.

How do inventory control functions adjust inventory at the time of a return?

"A credit memo issues automatically." An approved credit memo triggers the system to adjust the inventory when items are returned.

Which risk is associated with charge accounts within the revenue cycle?

"The sales clerk allows customers who are not creditworthy to buy items on the charge account." The clerk can be careless and allow purchases from individuals who do not pay their bills.

Which function reflects the expenditure cycle?

"Updating inventory." Inventory is a part of the expenditure cycle because the quantities and condition are updated.

What is the purpose of the blind copy?

"Reconcile and verify contents." The blind copy is used to force the clerk to count contents to verify items match.

Which items reflect fixed assets?

"Buildings." Buildings can sold and converted to cash.

What contributes to the success of the electronic data interchange system?

"Implementation of agreements." Implementation of agreements contributes to the success by circumventing discrepancies.

What is an example of a payroll system information technology (IT) control?

"Direct deposit." Direct deposit is an example of an IT control.

Which department is responsible for receiving the supplier's invoice, the purchase order, and the receiving report in order to post the acquisition of fixed assets?

"Accounts Payable." Accounts Payable receives the supplier's invoice, purchase order, and receiving report to post the acquisition of fixed assets in the accounts payable subledger.

Which information from timecards provides an audit trail to support financial reporting?

The correct answer is "Hours worked." Payroll expenses should be supported with hours worked by employees on a specified date.

Why are journal vouchers reviewed and approved before entry into the general ledger (GL)?

"Journal vouchers are reviewed and approved as part of a system of internal control to ensure GL entries are authorized." Journal vouchers are entered into the GL and require a level of review and approval to ensure information is accurate, complete, authorized, and supported.

Why is a management reporting system a control?

"A management reporting system contains data that can be used to monitor the company." Management reporting systems are implemented at the discretion of organization management based on internal user needs to manage and control business activities.

Why is the general ledger history file used for comparative financial reports?

"The file uses the same format as the general ledger master, and therefore, the account structures will be the same for information year to year." The same format and account structures allow for transactions to be grouped and categorized consistently from year to year.

Which comparison serves as a tool for managers by using data from the budget master file and from the responsibility center file?

"A comparison of budgets to actual amounts and review of the variance." A comparison of budgeted amounts in accounts to actual revenue and expense amounts by responsibility center in accounts can signal accounts that require further inquiry.

UNIT 3 FORM B- Which strategic agreement is made between buyer and seller for electronic data interchange?

"The agreement details the quantities to be sold, guaranteed delivery times, payment terms, and methods of handling disputes." The strategic agreement of the electronic data interchange technology has specific terms agreed on prior to utilization of the service.

What is a reason for sales returns?

" Buyer refusing due to late arrival." Late deliveries can affect sales returns.

What is a risk associated with one clerk receiving inventory?

"Unauthorized purchases." Unauthorized purchases can cause excessive inventory and tie up funds.

What is the importance of supervisory control?

"To review and examine content reported." This is the compensating control function that allows a manager to review all content of sales for accuracy.

What is the purpose of authorized vendors?

" To reduce fraud." The purpose of authorized vendors is to reduce vendor fraud schemes.

Which procedure should be followed when receiving goods?

"The clerk must count and inspect all deliveries to ensure receipt of the right product." All incoming and outgoing items should be physically counted to ensure accuracy.

Which entry is made to record wages payable?

"Debit work-in-process; credit wages payable." To record wages payable, the general ledger accountant will debit work-in-process and credit wages payable.

Which task is included when a supervisor reviews and approves employee time (timecards, time sheets, and job tickets)?

"Review and approval of the numbers of hours worked." Supervisors review and approve the number of hours worked to determine if information is accurate and complete

Which journals record the results of transaction cycles?

" Special journals and subsidiary accounts of the general ledger." Transaction cycles are part of the accounting information system and record individual events in the special journals and subsidiary accounts of the general ledger.

Which efficiencies do real-time general ledger/financial reporting systems have on an organization's ability to produce financial statements?

" A real-time general ledger/financial reporting system uses integrated transaction processing for concurrent posting in the system." An efficiency of a real-time general ledger/financial reporting system is integrated transaction processing, which allows concurrent posting in the system.

Which control framework does the general ledger/financial reporting system (GL/FRS) follow?

"Committee of Sponsoring Organizations of the Treadway Commission (COSO)." The discussion of GL/FRS control activities follows the COSO framework.

MOD 7- Which of the following is a problem usually associated with the flat-file approach to data management?

"data redundancy." Data redundancy is a problem with the flat-file approach. Excel spreadsheets are an example of a flat file database. There is no simple way to determine if a particular data item is already in the spreadsheet, especially as the spreadsheet grows.

Which problem is characteristically associated with the flat-file approach to data management?

"the inability to determine what data is available." The inability to determine what data is available is a characteristic problem with flat-file data management. The only way to determine if data is available in the file is to sequentially read through the entire file from beginning to end, or until the desired data is encountered.

A description of the physical arrangement of records in the database is

"the internal view." The description of the physical arrangement of records is the internal view. The internal view shows the way that the data is organized in the database. This is also known as the hierarchical view.

Which of the following may provide many distinct views of the database?

"the user view." The user view provides many distinct views of the database. The user view (subschema) shows the segment of the database that the user can access. This access will vary by user as their requirements vary by business function.

The update anomaly in unnormalized tables

"occurs because of data redundancy." The update anomaly occurs because of data redundancy in unnormalized tables. Because data can appear multiple times in an unnormalized database, it is difficult to ensure that all occurrences get updated when a change occurs. This problem becomes much worse as the database grows in size.

The deletion anomaly in unnormalized tables

"may result in the loss of important data." The deletion anomaly may result in the loss of important data. The deletion anomaly arises when data is inadvertently deleted from the table, resulting in the loss of important data.

MOD 8 - Which of the following is one of the core ERP applications?

"Distribution." The core ERP applications are sales, distribution, business planning, shop floor control and logistics. Core applications are those applications that operationally support the day-to-day activities of the business. If these applications fail, so does the business. Typical core applications include, but are not limited to, sales and distribution, business planning, production planning, shop floor control, and logistics. Core applications are also called online transaction processing (OLTP) applications.

The objective of an ERP is

"to integrate key processes of the organization, such as order entry, manufacturing, procurement and accounts payable, payroll, and human resources." The objective of an ERP is to integrate key processes of the organization, such as order entry, manufacturing, procurement and accounts payable, payroll, and human resources. By doing so, a single computer system can serve the unique needs of each functional area.

Closed Database architecture is

"similar in concept to the basic flat-file model." Closed database architecture is similar in concept to the basic flat-file model. Under this approach, a database management system is used to provide minimal technological advantage over flat-file systems. The database management system is little more than a private but powerful file system.

A data mart is

"a data warehouse created for a single function or department." A data mart is a data warehouse created for a single function or department. Modern data warehouses may contain gigabytes of data for use by all business functions and departments. To maximize value for single functions or departments, a data mart may be created within the data warehouse that contains the data specific to the function's requirements. For example, a sales data mart will contain all of the data related to customers, salespeople, inventory, sales orders, etc., but not manufacturing or financial data.