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What is the primary purpose of the conversion cycle in an accounting information system?
Which of the following is a key difference between the expenditure cycle and the revenue cycle in an accounting information system?
Which of the following is a key benefit of using a computer-based accounting information system compared to a manual system?
What is the primary purpose of source documents in an accounting information system?
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Which of the following is a key characteristic of the general journal in a manual accounting information system?
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What is the primary purpose of the cost accounting system within the conversion cycle of an accounting information system?
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What is the first step in verifying accounts receivable?
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What is the purpose of an entity relationship diagram (ERD) in an accounting information system?
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Which of the following is NOT a common technique used in the audit trail process?
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What is the purpose of a reference file in a computer-based accounting system?
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In a computer-based accounting system, which file is a temporary file containing transactions since the last update?
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Which of the following documentation techniques is used to illustrate the sequence of operations within a program?
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Which of the following is NOT one of the three types of entities used in REA?
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What does the cardinality 'one-to-many' represent in the REA model?
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Which of the following statements about Data Flow Diagrams (DFDs) is NOT true?
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Which of the following symbols is NOT used in a Document Flowchart?
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What is the primary purpose of System Flowcharts?
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Which symbol is used in a System Flowchart to represent a direct access storage device?
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What is the primary purpose of Program Flowcharts?
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Which symbol is used in a Program Flowchart to represent a decision?
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Which of the following is NOT a characteristic of modern systems mentioned in the text?
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Why do accountants need to understand legacy systems?
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What type of environment does data storage systems in legacy systems promote?
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Which characteristic differentiates batch processing from real-time processing?
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What is a batch in the context of batch processing?
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Which step in batch processing identifies clerical errors and places them in an error file?
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What is one advantage of batch processing over real-time systems?
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Why do many AIS use batch processing according to the text?
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What do real-time systems typically require more than batch processing systems?
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The audit trail is more observable in computer-based systems than in traditional manual systems.
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Entity Relationship Diagram (ERD) is a documentation technique used to represent the relationship between entities in a system.
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The master file in computer-based systems generally contains transactions since the last update.
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Data Flow Diagrams (DFDs) are not commonly used in accounting information systems according to the text.
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The REA model version of ERD is widely used in computer-based systems for documenting relationships.
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Document Flowcharts are one of the five common techniques for documenting in a computer-based environment.
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Accountants do not need to understand legacy systems according to the text.
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The revenue cycle involves the planning, scheduling, and control of the physical product through the manufacturing process.
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General journals are used for specific classes of transactions that occur in high frequency.
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A financial transaction is an economic event that affects the liabilities and equities of the firm.
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Turnaround documents are a product document of one system that becomes a source document for another system.
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In a computer-based accounting system, a general ledger shows activity by detail for each account type listed on the chart of accounts.
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Batch processing is generally associated with real-time processing technologies in terms of transaction processing speed.
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Source documents are used to capture and formalize transaction data in manual systems but are unnecessary in computer-based accounting systems.
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Data Flow Diagrams (DFDs) represent the physical system of a business.
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Document Flowcharts contain less detail than Data Flow Diagrams.
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System Flowcharts depict the type of media being used in a system.
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Program Flowcharts illustrate the relationship between key elements of computer systems.
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Modern systems are mainly characterized by batch processing.
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Legacy systems are no longer used in data processing by firms.
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Batch processing systems typically require more resources than real-time systems.
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Batch processing requires transactions to be independent of each other during the time over which they are accumulated.
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Real-Time processing generally requires fewer resources compared to batch processing.
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In a batch processing system, a recovery program uses the original master file to create a pre-update version.
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Legacy systems that use hierarchical and network databases encourage a multi-user environment.
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Batch systems process transactions individually at the moment the economic event occurs.
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The purpose of a backup procedure in batch processing is to ensure that destructive updates leave no backup.
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In Batch Processing/Sequential File, the Old Master (father) file is updated by directly inputting new transactions.
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Computer-Based Accounting Systems can be classified into two categories: manual systems and automated systems.
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Legacy systems that use flat files for data storage are usually real-time systems.
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Study Notes
Auditing and Accounting Information Systems
- Audit trail: tracing a transaction from its origin to its appearance in financial statements
- Importance of audit trail:
- Verifying transactions
- Identifying errors
- Preventing fraud
- Techniques for tracing an audit trail:
- Sampling
- Confirmation
- Steps in tracing an audit trail:
- Compare AR balance in balance sheet with master file AR control account balance
- Reconcile AR control figure with AR subsidiary account total
- Select a sample of update entries made to accounts in AR subsidiary ledger and trace to transactions in sales journal (archive file)
- Identify source documents and verify them by contacting customers if necessary
Computer-Based Accounting Systems
- Characteristics of modern systems:
- Client-server based
- Process transactions in real time
- Use relational database tables
- High degree of process integration and data sharing
- Characteristics of legacy systems:
- Mainframe-based
- Batch oriented
- Use flat files for data storage
- Promote single-user environment that discourages information integration
Batch Processing vs. Real-Time Processing
- Batch processing:
- Accumulate similar transactions over time
- Process transactions in batches
- Time lag between event and processing
- Control figures used for control over transaction process
- Real-time processing:
- Process transactions individually
- No time lag between event and processing
- Requires greater resources
- Often has longer systems development time
Documentation Techniques
- Entity Relationship Diagrams (ERD):
- Represent relationships between entities in a system
- Use REA model version of ERD in AIS
- Data Flow Diagrams (DFD):
- Represent logical elements of a system
- Do not represent physical system
- Document Flowcharts:
- Illustrate relationship among processes and documents
- Contain more details than DFD
- Depict separation of functions in a system
- System Flowcharts:
- Represent relationship between key elements of computer systems
- Depict type of media used
- Program Flowcharts:
- Illustrate logic used in programs
Accounting Records and Transaction Cycles
- Three transaction cycles:
- Expenditure cycle
- Conversion cycle
- Revenue cycle
- Each cycle has two subsystems:
- Physical component
- Financial component
- Accounting records in manual system:
- Journals (general and special)
- Ledger (general and subsidiary)
- Accounting records in computer-based system:
- Master file
- Transaction file
- Reference file
- Archive file### Legacy Systems Characteristics
- Legacy systems are typically mainframe-based, batch-oriented, and use flat files, hierarchical, or network databases for data storage.
- They promote a single-user environment, discouraging information integration.
Updating Master Files
- Primary Keys (PK) and Secondary Keys (SK) are used in database updating.
- Destructive updates require backup procedures to preserve records.
Database Backup Procedures
- A master file is copied as a backup before updating.
- A recovery program uses the backup to create a pre-update version of the master file.
Computer-Based Accounting Systems
- Two broad classes of systems: batch systems and real-time systems.
Batch Processing
- A batch is a group of similar transactions accumulated over time and processed together.
- Transactions must be independent of one another during the accumulation period.
- A time lag exists between the event and the processing.
- Batch processing steps:
- Keystroke: source documents are transcribed to magnetic tape.
- Edit Run: identifies clerical errors and places them into an error file.
- Sort Run: rearranges the transaction file in the same sequence as the master file using a primary key.
- Update Run: changes the values in the master file to reflect the transactions.
- Backup Procedure: the original master continues to exist, and a new master file is created.
- Advantages of Batch Processing:
- Increases efficiency by grouping transactions.
- Provides control over the transaction process via control figures.
Real-Time Systems
- Process transactions individually at the moment the economic event occurs.
- Have no time lag between the economic event and the processing.
- Generally require greater resources than batch processing.
- Often have longer systems development time.
Characteristic Differences between Batch and Real-Time Processing
- Batch processing: time lag exists, fewer resources required, and certain records are processed.
- Real-Time processing: no time lag, more resources required, and all records are processed immediately.
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Description
Explore the objectives of transaction cycles, types of transactions, accounting records in TPS, traditional records, and documentation techniques. Learn about batch vs real-time processing and their impact on transaction processing. Understand what a financial transaction is and how it affects a firm's assets and equities.