59 Questions
What is the primary purpose of the conversion cycle in an accounting information system?
To plan, schedule, and control the physical production process
Which of the following is a key difference between the expenditure cycle and the revenue cycle in an accounting information system?
The expenditure cycle has a time lag between the physical and financial components, while the revenue cycle does not
Which of the following is a key benefit of using a computer-based accounting information system compared to a manual system?
Faster processing of transactions and generation of accounting records
What is the primary purpose of source documents in an accounting information system?
To capture and formalize transaction data needed for transaction processing
Which of the following is a key characteristic of the general journal in a manual accounting information system?
It is used to record nonrecurring, infrequent, and dissimilar transactions
What is the primary purpose of the cost accounting system within the conversion cycle of an accounting information system?
To monitor the flow of cost information related to production
What is the first step in verifying accounts receivable?
Compare the accounts receivable balance in the balance sheet with the accounts receivable control account balance in the master file
What is the purpose of an entity relationship diagram (ERD) in an accounting information system?
To represent the relationship between entities in the system
Which of the following is NOT a common technique used in the audit trail process?
Regression analysis
What is the purpose of a reference file in a computer-based accounting system?
To store relatively constant information used in processing, such as tax tables and customer addresses
In a computer-based accounting system, which file is a temporary file containing transactions since the last update?
Transaction file
Which of the following documentation techniques is used to illustrate the sequence of operations within a program?
Program flowchart
Which of the following is NOT one of the three types of entities used in REA?
Transactions
What does the cardinality 'one-to-many' represent in the REA model?
One entity is associated with multiple instances of another entity
Which of the following statements about Data Flow Diagrams (DFDs) is NOT true?
They represent the physical elements of the system
Which of the following symbols is NOT used in a Document Flowchart?
Computer process
What is the primary purpose of System Flowcharts?
To represent the relationship between key elements of computer systems
Which symbol is used in a System Flowchart to represent a direct access storage device?
A rectangle
What is the primary purpose of Program Flowcharts?
To illustrate the logic used in programs
Which symbol is used in a Program Flowchart to represent a decision?
A diamond
Which of the following is NOT a characteristic of modern systems mentioned in the text?
Use only batch processing
Why do accountants need to understand legacy systems?
Because some firms employ legacy systems for certain aspects of their data processing
What type of environment does data storage systems in legacy systems promote?
Single-user environment
Which characteristic differentiates batch processing from real-time processing?
Time lag between the event and processing
What is a batch in the context of batch processing?
Group of similar transactions processed together
Which step in batch processing identifies clerical errors and places them in an error file?
Edit Run
What is one advantage of batch processing over real-time systems?
Provides control over the transaction process via control figures
Why do many AIS use batch processing according to the text?
High-volume independent transactions
What do real-time systems typically require more than batch processing systems?
Greater resources
The audit trail is more observable in computer-based systems than in traditional manual systems.
False
Entity Relationship Diagram (ERD) is a documentation technique used to represent the relationship between entities in a system.
True
The master file in computer-based systems generally contains transactions since the last update.
False
Data Flow Diagrams (DFDs) are not commonly used in accounting information systems according to the text.
False
The REA model version of ERD is widely used in computer-based systems for documenting relationships.
True
Document Flowcharts are one of the five common techniques for documenting in a computer-based environment.
True
Accountants do not need to understand legacy systems according to the text.
False
The revenue cycle involves the planning, scheduling, and control of the physical product through the manufacturing process.
False
General journals are used for specific classes of transactions that occur in high frequency.
False
A financial transaction is an economic event that affects the liabilities and equities of the firm.
False
Turnaround documents are a product document of one system that becomes a source document for another system.
True
In a computer-based accounting system, a general ledger shows activity by detail for each account type listed on the chart of accounts.
False
Batch processing is generally associated with real-time processing technologies in terms of transaction processing speed.
False
Source documents are used to capture and formalize transaction data in manual systems but are unnecessary in computer-based accounting systems.
False
Data Flow Diagrams (DFDs) represent the physical system of a business.
False
Document Flowcharts contain less detail than Data Flow Diagrams.
False
System Flowcharts depict the type of media being used in a system.
False
Program Flowcharts illustrate the relationship between key elements of computer systems.
False
Modern systems are mainly characterized by batch processing.
False
Legacy systems are no longer used in data processing by firms.
False
Batch processing systems typically require more resources than real-time systems.
True
Batch processing requires transactions to be independent of each other during the time over which they are accumulated.
True
Real-Time processing generally requires fewer resources compared to batch processing.
False
In a batch processing system, a recovery program uses the original master file to create a pre-update version.
False
Legacy systems that use hierarchical and network databases encourage a multi-user environment.
False
Batch systems process transactions individually at the moment the economic event occurs.
False
The purpose of a backup procedure in batch processing is to ensure that destructive updates leave no backup.
False
In Batch Processing/Sequential File, the Old Master (father) file is updated by directly inputting new transactions.
False
Computer-Based Accounting Systems can be classified into two categories: manual systems and automated systems.
False
Legacy systems that use flat files for data storage are usually real-time systems.
False
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.
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.
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