3.2 Accounting Information System and Accounting Cycle

Question 1

What is an Accounting Information System (AIS)?

Answer 1

A system that a business uses to collect, store and process accounting data and prepare financial reports so that that information can be used by stakeholders for decision making.

Question 2

State the four stages of the Accounting Cycle.

or

List the stages of the accounting cycle.

Or

State the order in which each type of transaction is processed through the accounting information system.

Answer 2

i. identifying and recording transactions in the journal and post the journal entries to the ledger accounts
ii. adjusting the accounts
iii. reporting by preparing the financial statements based on the adjusted trial balance
iv. closing the temporary / nominal accounts with journal entries

Please refer to Page 19 of your POA Textbook.

Question 3

What does a computerised accounting information system generally comprise of?

Answer 3

1. Source documents
2. Journal
3. Ledgers
4. Trial Balance
5. Statement of Financial Performance
6. Statement of Financial Position

Question 4

State the purposes of source documents.

Answer 4

1. provides proof / evidence (objectivity theory) to capture the occurrence of a transaction.
2. Provides details of a business transaction that are needed for recording.

Question 5

State the purpose of a receipt.

Answer 5

Acknowledges payment received from customers immediately after the business has sold goods or provided services. Receipts are issued for cash purchases and sales.

Question 6

State the purpose of a remittance advice.

Answer 6

Informs credit supplier / seller / trade payable that payment by cheque has been made for a specific invoice / bill.

Question 7

State the purpose of an invoice.

Answer 7

Informs credit customers / buyers / Trade Receivables of the amount owed after the business sold goods or provided services on credit.

Question 8

State the purpose of a credit note.

Answer 8

Reduces the amount owed by credit customers / buyers / consumers / Trade Receivables:

• who were previously overcharged; or
• after goods were returned.

OR

Corrects an overcharge

Question 9

State the purpose of a debit note.

Answer 9

Increases the amount owed by credit customers / buyers / consumers / Trade Receivables who were previously undercharged.

OR

Corrects an undercharge.

Question 10

State the purpose of a payment voucher.

Answer 10

Processes payment to credit suppliers / sellers / Trade Payables:

• must be approved by authorised personnel; and
• must be supported by original supplier’s invoice.

Question 11

State the purpose of a bank statement.

Answer 11

Checks and tallies against the business records of its cash at bank account.

Question 12

State the source document for credit purchases and sales.

Answer 12

Invoice

Question 13

State the source document for cash purchases and sales.

Answer 13

Receipts

Question 14

What are business transactions?

Answer 14

Activities carried out by the business.

Question 15

What is a cash transaction?

Answer 15

Payment is made at the same time or immediately during a cash sale or purchase.

Question 16

What is a credit transaction?

Answer 16

Payment is delayed or postponed during a credit sale or purchase.

Question 17

What is the main difference between cash and credit transactions?

Answer 17

The timing of the payment.

Cash transactions refer to events where payment is made at the same time during a cash sale or purchase while credit transactions refer to events where payment is delayed during a credit sale or purchase.

Question 18

How are transactions recorded?

Answer 18

At the original cost that it occurred (historical cost theory)

Question 19

Identify the source document for the following transaction:

Credit sale of goods

Answer 19

Invoice

Question 20

Identify the source document:

Undercharged customer for goods sold earlier.

Answer 20

Debit Note

Question 21

Identify the source document:

Customer returned wrong / spoilt / damaged goods to credit supplier / seller / goods provider.

Answer 21

Credit note

Question 22

State the source document:

Business deposited cash into the business bank account.

Answer 22

Bank statement

Question 23

What are the commonly seen exam questions for source documents?

Answer 23

https://quizizz.com/join?gc=31310796

Question 24

According to the historical cost concept, state the value of the item to be recorded:

Business bought a mini fridge to store its perishable goods costing $500.

Answer 24

$500

Question 25

According to the historical cost theory, state the value that should be recorded for the following:

Business bought goods costing $200. Due to the goods’ popularity with customers, they are now worth $300.

Answer 25

$200.

Question 26

According to the monetary theory, explain whether the following case should be recorded:

Business sponsored a two-day training workshop for its sales personnel to improve their sales pitching techniques.

Answer 26

Yes, the cost of the training can be measured in monetary terms.

Question 27

According to the monetary theory, explain whether the following case should be recorded.

Business created new designs which may possibly / potentially bring in additional revenue / income / sales.

Answer 27

No, the uniqueness of the designs cannot be measured in monetary terms.

Question 28

Chapter 5.1 Trial Balance

What is a trial balance?

Answer 28

A list of all the ledger accounts and their ending balances at a point in time.

Question 29

Chapter 5.1 Trial Balance

Explain the purposes of the Trial Balance.

Answer 29

1. facilitate the preparation of the financial statements; and
2. ensure arithmetic accuracy in recording

Question 30

Chapter 5.1 Trial Balance

Explain the limitation of the Trial Balance.

Answer 30

A balanced trial balance is not an absolute proof of accuracy. There may be errors not revealed by a trial balance.