Accounting Information Systems Overview

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Questions and Answers

What is contained in the general ledger master file?

List of transactions with allocating expenses

Principal FRS file based on the chart of accounts (correct)

Financial data by responsibility centers

All historical journal vouchers

Which step occurs after capturing transactions in the financial reporting process?

Make Adjusting Entries

Prepare the unadjusted trial balance

Record the Special Journal (correct)

Prepare the post-closing trial balance

What are managerial reports used for?

Analyzing accounts for year-end closing

Listing transactions for compliance

Preparing financial statements

Evaluating cash flow and sales forecasts (correct)

Which file provides past journal vouchers for audit trails?

Journal voucher history file Signup and view all the answers

Which of the following is NOT a report generated by the GLS?

Inventory valuation report Signup and view all the answers

What is a potential risk associated with the GL/FRS system?

Defective audit trail Signup and view all the answers

Which is an appropriate action in the financial reporting process after posting to the subsidiary ledger?

Make Adjusting Entries Signup and view all the answers

What is included in the budget master file?

Budget data by responsibility centers Signup and view all the answers

What is defined as an economic event that affects a firm's assets and is measured in monetary terms?

Financial Transaction Signup and view all the answers

Which cycle includes the process of planning, scheduling, and controlling the manufacturing process?

Conversion Cycle Signup and view all the answers

Which type of journal records nonrecurring, infrequent transactions?

General Journal Signup and view all the answers

What term describes a product document that becomes a source document for another system?

Turnaround Document Signup and view all the answers

Which of the following statements about the expenditure cycle is correct?

It includes both physical and financial components. Signup and view all the answers

Which ledger provides detailed information for each account type?

Subsidiary Ledger Signup and view all the answers

In a manual accounting system, what is primarily used to capture transaction data?

Source Documents Signup and view all the answers

What connects the accounts receivable balance with the master file in a computer-based accounting system?

Control Account Signup and view all the answers

What is the purpose of reconciling the AR control figure with the AR subsidiary account total?

To ensure consistency between different financial records. Signup and view all the answers

What are two common techniques used in auditing accounts receivable?

Sampling and confirmation. Signup and view all the answers

Which document is typically used in the Sales Journal?

Sales Order. Signup and view all the answers

In computer-based systems, what is mainly considered the physical audit trail?

The data entry and computer programs. Signup and view all the answers

Which document can serve as a source document for verifying accounts receivable?

Sales Order. Signup and view all the answers

What is the Accounts Receivable Subsidiary Ledger?

The total of all customers' receivables. Signup and view all the answers

Which journal records cash receipts from customers?

Cash Receipts Journal. Signup and view all the answers

What is a disadvantage of computer-based audit trails compared to manual systems?

Less observable audit trails. Signup and view all the answers

What is one characteristic of legacy systems?

Mainframe-based applications Signup and view all the answers

Which of the following describes the nature of transactions in batch processing?

Transactions must be independent of one another. Signup and view all the answers

What happens to the master file during updates according to backup procedures?

It is copied as a backup before being updated. Signup and view all the answers

What process follows the identification of clerical errors in the batch?

Edit Run Signup and view all the answers

Which of the following is an advantage of batch processing?

Increased efficiency through grouping transactions Signup and view all the answers

What type of environment do legacy data storage systems promote?

Single-user environment Signup and view all the answers

Which run rearranges the transaction data by key field?

Sort Run Signup and view all the answers

What is a key feature of early legacy systems?

Use of flat files for data storage Signup and view all the answers

What occurs during the Update Run in batch processing?

Values in the master file are updated. Signup and view all the answers

What is a defining characteristic of computer-based accounting systems?

They can be categorized into batch and real-time systems. Signup and view all the answers

What is a potential risk related to journal entries in the GL/FRS?

Improperly prepared journal entries Signup and view all the answers

Which of the following is necessary for transaction authorization in GL/FRS?

Journal vouchers must be authorized by a manager Signup and view all the answers

What consequence can result from unauthorized access to the G/L?

Errors and fraud in financial reporting Signup and view all the answers

What is a key function of independent verification in GL/FRS?

To reconcile journal vouchers and summaries Signup and view all the answers

What advantage does database technology bring to the GL/FRS?

Immediate update and reconciliation Signup and view all the answers

How does centralized access in database technology act as a control?

Through the use of passwords and authorization tables Signup and view all the answers

Which of the following best describes the purpose of HTML?

To format web pages and define their layout Signup and view all the answers

What is an important feature of HTML related to linking?

Supports hypertext links to other documents Signup and view all the answers

Study Notes

GLS Database Components

General ledger master file serves as the primary financial reporting system (FRS) based on the chart of accounts.
General ledger history file is utilized for comparative financial analysis.
Journal voucher file contains all journal vouchers for the current accounting period.
Journal voucher history file archives past journal vouchers for auditing purposes.
Responsibility center file organizes financial data by responsibility centers for management reporting system (MRS).
Budget master file presents budget data categorized by responsibility centers in MRS.

Financial Reporting Process

Involves multiple steps: capturing transactions, recording in special journals, posting to subsidiary and general ledgers, and preparing trial balances before creating financial statements.
Adjusting journal entries and closing entries ensure the accuracy of financial reports and balance sheets.

GLS Reports

General ledger analysis includes transaction listings, expense allocations to cost centers, account balance comparisons from prior periods, and trial balances.
Financial statements produced include the balance sheet, income statement, and statement of cash flows.
Managerial reports analyze various sections such as sales, cash flow, and receivables.
Chart of accounts provides a coded listing to categorize various accounts accurately.

Potential Risks in General Ledger/Financial Reporting System (GL/FRS)

Risks include defective audit trails, unauthorized access, discrepancies between GL and subsidiary accounts, and inaccurate journal vouchers leading to incorrect GL balances.

Financial Transaction Overview

Financial transactions are economic events impacting a firm's assets and equity, categorized into three cycles: expenditure, conversion, and revenue cycles.
Each cycle involves physical and financial components, creating delays due to credit relationships with suppliers and customers.

Manual System Accounting Records

Source documents capture transaction data, while product documents result from transaction processing.
Journals record transactions chronologically; special journals handle frequent transactions, while general journals capture infrequent ones.
Ledgers aggregate financial activities; the general ledger shows overall account activity, while subsidiary ledgers provide detailed views for specific accounts.

Computer-Based Accounting Systems

The audit trail in computer systems is less visible than in manual systems, relying on physical data entry and computer programs stored in magnetic files.
Understanding legacy systems is crucial, as they have mainframe-based applications, batch-oriented processing, and varied data storage methods.

Updating Master Files and Backup Procedures

Master file updates require a backup to maintain data integrity; recovery programs recreate pre-update versions of master files.
Systems can be classified into batch systems (accumulating and processing similar transactions together) and real-time systems for immediate processing.

Batch Processing Steps

Involves keystroke entry, error checking, sorting by primary keys, updating master files, and maintaining backup procedures.
Enhances organizational efficiency by processing multiple transactions simultaneously rather than individually.

GL/FRS Control Issues

Controls required for transaction authorization, segregation of duties, access controls, and independent verification to minimize errors and fraud.
Sarbanes-Oxley mandates rigorous controls to limit access to authorized users only.

Advantages of Database Technology in GL/FRS

Ensures immediate updates and reconciliation, facilitating timely information access.
Centralized records and robust security measures like passwords and authorization tables bolster control over financial data.

HTML Overview

HTML (Hyper Text Markup Language) is used for structuring web pages, defining layouts, fonts, and graphic elements for appealing presentations.
Supports hypertext links, enabling navigation between documents and enhancing user interactivity on the web.

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Description

Explore the critical components of the General Ledger System (GLS) and its interrelation with other information subsystems. This quiz covers the essentials of ledger master files, journal vouchers, and the importance of historical data for audits. Test your understanding of these financial structures and their applications.