CHAP 2

Question 1

What is a Financial Transaction?

Answer 1

an economic event that affects the assets and equities of the firm, is reflected in its accounts, and is measured in monetary terms.

Question 2

Type of transactions grouped into 3 transaction cycles are?

Answer 2

1. Expenditure Cycle
2. Conversion Cycle
3. Revenue Cycle

Question 3

What are included in the Expenditure Cycle subsystems?

Answer 3

Purchasing/Accounts Payable
Cash Disbursements
Payroll
Fixed Assets

Question 4

What are included in the Conversion Cycle subsystems?

Answer 4

Production Planning and Control
Cost Accounting

Question 5

What are included in the Revenue Cycle subsystems?

Answer 5

Sales Order Processing
Cash Receipts

Question 6

Each Cycle has 2 subsystems, for Expenditure and Revenue Cycle, they have physical and financial component. What does this components represent for each cycle?

Answer 6

Expenditure Cycle
Physical Component: acquiring goods
Financial Component: cash disbursement to suppliers
Revenue Cycle
Physical Component: Sales Order Processing
Financial Component: Cash Receipts

Question 7

What are the 2 subsystem for Conversion Cycle ?

Answer 7

Production System: planning, scheduling, and control of physical product to the manufacturing process
Cost Accounting System: Flow of cost information related to production

Question 8

Component of Manual System Accounting
Records

Answer 8

Source Documents
Product Documents
Turnaround Documents
Journal (general, special)
Ledger (general, subsidiary)

Question 9

Use to capture and formalize transaction data need for transaction processing?

Answer 9

Source Document

Question 10

Product of transaction processing?

Answer 10

Product Documents

Question 11

Product document of one system become the source document of another system?

Answer 11

Turnaround Document

Question 12

The record of chronological process?

Answer 12

Journal

Question 13

Differentiate General and Special Journal

Answer 13

General Journal - dissimilar, infrequent, nonrecurring transactions.
Special Journal - transactions that are occur in high frequencies

Question 14

Differentiate General and Subsidiary ledger

Answer 14

General - shows activity of each accounts listed in the chart of accounts
Subsidiary - shows activity of each accounts in detail

Question 15

Flow of Economic Events into the General Ledger

Answer 15

1. Customer Order
2. Sales Order ((journal entry to_)
   2.1. post to Accounts Receivable subsidiary
   ledger
3. Sales Journal (post to_)
4. General Ledger

Note: Subsidiary Ledger is periodically reconciled with the general ledger

Question 16

What is the Audit Trail
(What is tracing and vouching?)

Answer 16

Order:
Tracing = Test of Accuracy
1. Source Document
2. Journal
3. General Ledger
4. Financial Statements

Vouching = Test of whether FS is supported by evidence
1. Financial Statements
2. General Ledger
3. Journal
4. Source Document

Question 17

Where is audit trail less observable?

Answer 17

computer-based system, since audit trail is more observable in traditional manual systems

Question 18

Data entry and computer programs are considered __?

Answer 18

physical trail, where data is stored in magnetic files.

Question 19

Generally contains account data (eg. general ledger and subsidiary file)

Answer 19

Master File

Question 20

Temporary file containing transactions since the last update?

Answer 20

Transaction File

Question 21

What file contains relatively constant information used in processing?

Answer 21

Reference File

Question 22

What file contains past transactions for reference purposes?

Answer 22

Archive File

Question 23

Five Common Documentation Techniques?

Answer 23

Entity Relationship Diagram (ERD)
Data Flow Diagrams
Document Flowcharts
System Flowcharts
Program Flowcharts

Question 24

Documentation technique used to represent relationship between entities in a system

Answer 24

Entity Relationship Diagram (ERD)

Question 25

A widely used model version of (ERD) in AIS

Answer 25

REA Model Resources (cash, raw mats.) Events (release of raw mats. to production) Agents (inventory control clerk, vendor, production worker)

Question 26

Represents the numerical mapping between entities

Answer 26

Cardinalities (One to one) (One to many) (Many to many)

Question 27

Give the example of the Cardinalities relationship

Answer 27

ONE TO ONE (SALES PERSON) ASSIGNED (CAR TYPE) ONE TO MANY (CUSTOMER) PLACES (ORDER) MANY TO MANY (VENDOR) SUPPLY (INVENTORY)

Question 28

This documentation technique uses symbols to represent processes, data sources, data flows, and entities in a system

Answer 28

Data Flow Diagram (DFD)

Question 29

Data Flow Diagram (DFD) represent the _____ in a system

Answer 29

Logical elements

Question 30

Data Flow Diagram (DFD) do not represent ___ system

Answer 30

physical

Question 31

What documentation technique illustrate the relationship among processes and the documents that flow between them? this is considered to contain more details than (DFD)

Answer 31

Documents Flowcharts

Question 32

Documents Flowchart ____ ____ the separation of functions in a system

Answer 32

clearly depict

Question 33

What documentation technique is used to represent the relationship between key elements and input source, programs, and output product of computer system?

Answer 33

System Flowcharts

Question 34

In practice, it is said that in system flowcharts there is _____ difference with this technique and that of document flowchart

Answer 34

not much

Question 35

The documentation technique that illustrate the logic used in programs

Answer 35

Program Flowchart

Question 36

What are the characteristics of Modern Systems?

Answer 36

* Client-sever based and process transactions in real time *Use relational database tables *Have high degree of process integration and data sharing *Some are mainframe based and use batch processing

Question 37

Why do accountants need to understand legacy systems?

Answer 37

because some firms uses legacy systems for certain aspects of data processing

Question 38

What are the characteristics of Legacy Systems?

Answer 38

*Mainframe based applications *Batch oriented *Early legacy systems use flat file for data storage *Later legacy systems use hierarchical and network databases *data storage systems promote single-user environment that discourage information integration

Question 39

____ updates leaves ___ backup

Answer 39

(destructive) updates leaves (no) backup.

Question 40

To preserve adequate records, what backup procedures must be implemented?

Answer 40

Master file being updated is copied as a backup A recovery program uses the backup to create pre-update version of the master file

Question 41

Computer-Based Accounting systems has two broad classes namely?

Answer 41

Batch Systems Real-time Systems

Question 42

A group of similar transactions accumulated overtime and then processed together?

Answer 42

Batch

Question 43

In batch processing, the difference in economic event and processing occurs when there is ___?

Answer 43

Time Lag

Question 44

This is where source documents are transcribed by clerks to magnetic tapes for processing later

Answer 44

Keystoke

Question 45

Identifies clerical error in batch and put then into an error file

Answer 45

Edit Run

Question 46

Places the transaction file in the same order as the master file using a primary key

Answer 46

Sort Run

Question 47

Changes the value in appropriate fields in the master file to reflect transactions

Answer 47

Update Run

Question 48

The original master file continues to exist and a new master file is created

Answer 48

Backup Procedure

Question 49

Advantages of Batch Processing

Answer 49

*(Increase efficiency) by grouping large number of transactions into batches rather than processing each event separately. *(Provides control) over the transaction process via control figures.

Question 50

Process transactions individually at the moment the economic event occurs

Answer 50

Real-Time Systems

Question 51

Since real-time system have no time lag, generally they require _____ resources than batch processing, requiring _____ processing capacity; however, these cost differentials are decreasing.

Answer 51

greater, dedicated

Question 52

Real-Time systems oftentimes have _______

Answer 52

longer system development time

Question 53

Characteristics Differences between Batch and Real-Time Processing: Distinguish difference in information time frame, resources, and operational efficiency

Answer 53

Batch: Lag exist between occurrence of economic event and processing Fewer resources (hardware, programming, training) Certain processes are processed after the event to avoid operational delays. Real-Time: No time lag between occurrence of economic event and processing More resources are required compared to batch processing Processing takes places immediately (All records pertaining to events)

Question 54

Why Do So Many AIS Use Batch Processing?

Answer 54

AIS processing is characterized by high-volume, independent transactions, such are recording cash receipts checks received in the mail. The processing of such high-volume checks can be done during an off-peak computer time. This is one reason why batch processing maybe done using real-time data collection.