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Questions and Answers
What is the primary purpose of the conversion cycle in an accounting information system?
What is the primary purpose of the conversion cycle in an accounting information system?
- To record the acquisition of goods and services from suppliers
- To process sales orders and manage the sales process
- To monitor the flow of cash receipts from customers
- To plan, schedule, and control the physical production process (correct)
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 difference between the expenditure cycle and the revenue cycle in an accounting information system?
- The expenditure cycle deals with cash disbursements, while the revenue cycle deals with cash receipts
- The expenditure cycle is focused on the physical acquisition of goods and services, while the revenue cycle is focused on the physical sales process
- The expenditure cycle has a time lag between the physical and financial components, while the revenue cycle does not (correct)
- The expenditure cycle is concerned with the cost accounting system, while the revenue cycle is concerned with the sales order processing system
Which of the following is a key benefit of using a computer-based accounting information system compared to a manual system?
Which of the following is a key benefit of using a computer-based accounting information system compared to a manual system?
- More detailed subsidiary ledgers to track activity by account type
- Faster processing of transactions and generation of accounting records (correct)
- Increased use of special journals to record high-frequency transactions
- Improved documentation techniques for transaction processing
What is the primary purpose of source documents in an accounting information system?
What is the primary purpose of source documents in an accounting information system?
Which of the following is a key characteristic of the general journal in a manual accounting information system?
Which of the following is a key characteristic of the general journal in a manual accounting information system?
What is the primary purpose of the cost accounting system within the conversion cycle of an accounting information system?
What is the primary purpose of the cost accounting system within the conversion cycle of an accounting information system?
What is the first step in verifying accounts receivable?
What is the first step in verifying accounts receivable?
What is the purpose of an entity relationship diagram (ERD) in an accounting information system?
What is the purpose of an entity relationship diagram (ERD) in an accounting information system?
Which of the following is NOT a common technique used in the audit trail process?
Which of the following is NOT a common technique used in the audit trail process?
What is the purpose of a reference file in a computer-based accounting system?
What is the purpose of a reference file in a computer-based accounting system?
In a computer-based accounting system, which file is a temporary file containing transactions since the last update?
In a computer-based accounting system, which file is a temporary file containing transactions since the last update?
Which of the following documentation techniques is used to illustrate the sequence of operations within a program?
Which of the following documentation techniques is used to illustrate the sequence of operations within a program?
Which of the following is NOT one of the three types of entities used in REA?
Which of the following is NOT one of the three types of entities used in REA?
What does the cardinality 'one-to-many' represent in the REA model?
What does the cardinality 'one-to-many' represent in the REA model?
Which of the following statements about Data Flow Diagrams (DFDs) is NOT true?
Which of the following statements about Data Flow Diagrams (DFDs) is NOT true?
Which of the following symbols is NOT used in a Document Flowchart?
Which of the following symbols is NOT used in a Document Flowchart?
What is the primary purpose of System Flowcharts?
What is the primary purpose of System Flowcharts?
Which symbol is used in a System Flowchart to represent a direct access storage device?
Which symbol is used in a System Flowchart to represent a direct access storage device?
What is the primary purpose of Program Flowcharts?
What is the primary purpose of Program Flowcharts?
Which symbol is used in a Program Flowchart to represent a decision?
Which symbol is used in a Program Flowchart to represent a decision?
Which of the following is NOT a characteristic of modern systems mentioned in the text?
Which of the following is NOT a characteristic of modern systems mentioned in the text?
Why do accountants need to understand legacy systems?
Why do accountants need to understand legacy systems?
What type of environment does data storage systems in legacy systems promote?
What type of environment does data storage systems in legacy systems promote?
Which characteristic differentiates batch processing from real-time processing?
Which characteristic differentiates batch processing from real-time processing?
What is a batch in the context of batch processing?
What is a batch in the context of batch processing?
Which step in batch processing identifies clerical errors and places them in an error file?
Which step in batch processing identifies clerical errors and places them in an error file?
What is one advantage of batch processing over real-time systems?
What is one advantage of batch processing over real-time systems?
Why do many AIS use batch processing according to the text?
Why do many AIS use batch processing according to the text?
What do real-time systems typically require more than batch processing systems?
What do real-time systems typically require more than batch processing systems?
The audit trail is more observable in computer-based systems than in traditional manual systems.
The audit trail is more observable in computer-based systems than in traditional manual systems.
Entity Relationship Diagram (ERD) is a documentation technique used to represent the relationship between entities in a system.
Entity Relationship Diagram (ERD) is a documentation technique used to represent the relationship between entities in a system.
The master file in computer-based systems generally contains transactions since the last update.
The master file in computer-based systems generally contains transactions since the last update.
Data Flow Diagrams (DFDs) are not commonly used in accounting information systems according to the text.
Data Flow Diagrams (DFDs) are not commonly used in accounting information systems according to the text.
The REA model version of ERD is widely used in computer-based systems for documenting relationships.
The REA model version of ERD is widely used in computer-based systems for documenting relationships.
Document Flowcharts are one of the five common techniques for documenting in a computer-based environment.
Document Flowcharts are one of the five common techniques for documenting in a computer-based environment.
Accountants do not need to understand legacy systems according to the text.
Accountants do not need to understand legacy systems according to the text.
The revenue cycle involves the planning, scheduling, and control of the physical product through the manufacturing process.
The revenue cycle involves the planning, scheduling, and control of the physical product through the manufacturing process.
General journals are used for specific classes of transactions that occur in high frequency.
General journals are used for specific classes of transactions that occur in high frequency.
A financial transaction is an economic event that affects the liabilities and equities of the firm.
A financial transaction is an economic event that affects the liabilities and equities of the firm.
Turnaround documents are a product document of one system that becomes a source document for another system.
Turnaround documents are a product document of one system that becomes a source document for another system.
In a computer-based accounting system, a general ledger shows activity by detail for each account type listed on the chart of accounts.
In a computer-based accounting system, a general ledger shows activity by detail for each account type listed on the chart of accounts.
Batch processing is generally associated with real-time processing technologies in terms of transaction processing speed.
Batch processing is generally associated with real-time processing technologies in terms of transaction processing speed.
Source documents are used to capture and formalize transaction data in manual systems but are unnecessary in computer-based accounting systems.
Source documents are used to capture and formalize transaction data in manual systems but are unnecessary in computer-based accounting systems.
Data Flow Diagrams (DFDs) represent the physical system of a business.
Data Flow Diagrams (DFDs) represent the physical system of a business.
Document Flowcharts contain less detail than Data Flow Diagrams.
Document Flowcharts contain less detail than Data Flow Diagrams.
System Flowcharts depict the type of media being used in a system.
System Flowcharts depict the type of media being used in a system.
Program Flowcharts illustrate the relationship between key elements of computer systems.
Program Flowcharts illustrate the relationship between key elements of computer systems.
Modern systems are mainly characterized by batch processing.
Modern systems are mainly characterized by batch processing.
Legacy systems are no longer used in data processing by firms.
Legacy systems are no longer used in data processing by firms.
Batch processing systems typically require more resources than real-time systems.
Batch processing systems typically require more resources than real-time systems.
Batch processing requires transactions to be independent of each other during the time over which they are accumulated.
Batch processing requires transactions to be independent of each other during the time over which they are accumulated.
Real-Time processing generally requires fewer resources compared to batch processing.
Real-Time processing generally requires fewer resources compared to batch processing.
In a batch processing system, a recovery program uses the original master file to create a pre-update version.
In a batch processing system, a recovery program uses the original master file to create a pre-update version.
Legacy systems that use hierarchical and network databases encourage a multi-user environment.
Legacy systems that use hierarchical and network databases encourage a multi-user environment.
Batch systems process transactions individually at the moment the economic event occurs.
Batch systems process transactions individually at the moment the economic event occurs.
The purpose of a backup procedure in batch processing is to ensure that destructive updates leave no backup.
The purpose of a backup procedure in batch processing is to ensure that destructive updates leave no backup.
In Batch Processing/Sequential File, the Old Master (father) file is updated by directly inputting new transactions.
In Batch Processing/Sequential File, the Old Master (father) file is updated by directly inputting new transactions.
Computer-Based Accounting Systems can be classified into two categories: manual systems and automated systems.
Computer-Based Accounting Systems can be classified into two categories: manual systems and automated systems.
Legacy systems that use flat files for data storage are usually real-time systems.
Legacy systems that use flat files for data storage are usually real-time systems.
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.
