Chapter 2: Introduction To Transaction Processing

Question 1

Expenditure Cycle

Answer 1

Business activities begin with the acquisition of materials, property, and labor in exchange for cash

Question 2

Purchases/Accounts Payable System

Answer 2

This system recognizes the need to acquire physical inventory and places an order with the vendor

Question 3

Cash Disbursements System

Answer 3

When the obligation created in the purchases system becomes due, the cash disbursement system authorizes the payment, disburses the funds to the vendor, and records the transaction by reducing the cash and accounts payable accounts

Question 4

Payroll System

Answer 4

The payroll system collects labor usage data for each employee, computes the payroll and disburses pay checks to the employees

Question 5

Fixed Asset System

Answer 5

A firm’s fixed asset system processes transactions pertaining to the acquisition, maintenance, and disposal of its fixed assets. These are relatively permanent assets that collectively represents the organizations largest financial investment

Question 6

Conversion Cycle

Answer 6

Is comprised of two major subsystems: the production system and the cost accounting system.

Question 7

Production System

Answer 7

Involves the planning, scheduling, and control of the physical product through the manufacturing process

Question 8

Cost Accounting System

Answer 8

Monitors the flow of cost information including labor, overhead, and raw materials related to production

Question 9

Revenue Cycle

Answer 9

Involves processing cash sales, credit sales, and the receipt of cash following a credit sale

Question 10

Sales Order Processing

Answer 10

The majority of business sales are made on credit and involve tasks such as preparing sales orders, granting credit, shipping products, and recording the transaction

Question 11

Cash Receipts

Answer 11

Some period of time passes between the point of sale and the receipt of cash. Cash receipt processing includes collecting cash, depositing cash, and recording these events in the accounts

Question 12

Source Documents

Answer 12

Economic events result in the creation of some documents at the beginning of the transaction. These are used to capture and formalize transaction data that the transaction cycle uses for processing

Question 13

Product Documents

Answer 13

Are the result of transactions processing rather than the triggering mechanism for the process.

Question 14

Turnaround Documents

Answer 14

Are product documents of one system that become source documents for another system

Question 15

Journal

Answer 15

Is a chronological record of a transaction. When all relevant facts of a transaction are known they are recorded in chronological order

Question 16

Special Journals

Answer 16

Are used to record specific classes of transactions that occur in high volume. Are processed more efficiently than a general journal permits

Question 17

Register

Answer 17

Is often used to denote certain types of special journals

Question 18

General Journals

Answer 18

Used to record nonrecurring, infrequent, and dissimilar transactions.

Question 19

Journal Voucher

Answer 19

Is a special source document that contains a single journal entry specifying the general ledger accounts that are affected

Question 20

Ledger

Answer 20

Is a book of accounts that reflects the financial effects of the firm’s transactions after they are posted from the various journals. Show activity by account type

Question 21

General Ledgers

Answer 21

Contain the firms account information in the form of highly summarized control accounts

Question 22

Subsidiary Ledgers

Answer 22

Contain the details of the individual accounts that constitute a particular control account

Question 23

Audit Trail

Answer 23

Accounting records provide a way of tracing account balances contained in the financial statements back to source documents and the economic events that created them

Question 24

Master File

Answer 24

Contains account data. The general ledger and subsidiary ledger are examples of master files

Question 25

Transaction File

Answer 25

Is a temporary file of transaction records used to update data in the master file. Ex. Sales orders and cash receipts

Question 26

Reference File

Answer 26

Stores data that are used as standards for processing transactions. Ex. Invoices, employee rosters, price lists

Question 27

Archive File

Answer 27

Contains records of past transactions that are retained for future reference and form an important part of the audit trail

Question 28

Flat File Model

Answer 28

Describes an environment in which individual data files are not related to other files. End users in this environment own their data files rather than share them with other users

Question 29

Data Storage

Answer 29

An efficient information system captures and stores data only once and makes this single source available to all users who need it

Question 30

Data Updating

Answer 30

Organizations have a great deal of data stored in files that require periodic updating to reflect changes

Question 31

Currency of Information

Answer 31

If update information is not properly disseminated the change will not be reflected in some of the users data resulting in decisions based on outdated information

Question 32

Task Data Dependency

Answer 32

The users information set is constrained by the data that he or she possesses and controls. Users act independently rather than as members of a user community

Question 33

Database Management System

Answer 33

Is a software system that permits users to access authorized data only. This system authorizes access based on the users level of authority

Question 34

Data Flow Diagram

Answer 34

Uses symbols to represent the entities, processes, data flows, and data stores that pertain to a system

Question 35

Entity Relationship Diagram

Answer 35

Is a documentation technique used to represent the relationship between business entities

Question 36

Cardinality

Answer 36

The labeled connecting line represents the nature of the relationship between two entities such as one to one, one to many, or many to many

Question 37

Data Model

Answer 37

Is the blueprint for what ultimately will become the physical database

Question 38

System Flowchart

Answer 38

Is the graphical representation of the physical relationships among key elements of a system

Question 39

Program Flowchart

Answer 39

Every program represented in a system flowchart should have a supporting program flowchart that describes its logic

Question 40

Record Layout Diagrams

Answer 40

Used to reveal the internal structure of digital records in a flat file or database table. Usually shows the name, data type, and length of each attribute in the record

Question 41

Batch Systems

Answer 41

Assemble transactions into groups for processing, a time lag will always exist between the point at which an economic event occurs and the point at which it is processed by the system and reflected in the firms accounts

Question 42

Real Time Systems

Answer 42

Process transactions individually at the moment the event occurs therefore no time lags exist between occurrence and processing

Question 43

Sequential Codes

Answer 43

Represent items in some sequential order. Common application is the pre numbering of source documents to track each transaction

Question 44

Advantages of Sequential Codes

Answer 44

If the transaction processing system detect any gaps in the sequence of transaction numbers it alerts to the possibility of a missing or misplaced transaction

Question 45

Disadvantages of Sequential Codes

Answer 45

Sequential codes carry no information content beyond their order in the sequence. Entering new information is also difficult

Question 46

Block Code

Answer 46

Is a variation on sequential coding that partly remedies the disadvantages of sequential coding. This approach can be used to represent whole classes of items by restricting each class to a specific range within the coding scheme

Question 47

Advantages of Block Codes

Answer 47

Allows for the insertion of new codes within a block without having to reorganize the entire coding structure

Question 48

Disadvantages of Block Coding

Answer 48

The information content of block codes are not readily apparent

Question 49

Group Codes

Answer 49

Are used to represent complex items or events involving two or more pieces of related data. The code consists of zones or fields that possess specific meaning

Question 50

Advantages of Group Codes

Answer 50

They facilitate the representation of large amounts of diverse data. They allow complex data structures to be represented in a hierarchal form that is logical and more easily remembered by humans. They permit detailed analysis and reporting both within an item class and across different classes of items

Question 51

Disadvantages of Group Codes

Answer 51

Group codes effectively present diverse information they tend to be overused. Unnecessary information can also be added to make group codes not interpretable

Question 52

Alphabetic Codes

Answer 52

Are used for many of the same purposes as numeric codes. May be assigned sequentially or may be used in block or group coding

Question 53

Advantages of Alphabetic Codes

Answer 53

Alphanumeric codes increases the number of codes possible

Question 54

Disadvantages of Alphabetic Coding

Answer 54

There is difficulty rationalizing the meaning of codes that have been assigned and users tend to have difficulty sorting records that are coded alphabetically

Question 55

Mnemonic Codes

Answer 55

Are alphabetic characters in the form of acronyms and other combinations that convey meaning

Question 56

Advantages of Mnemonic Codes

Answer 56

Does not require the user to memorize the meaning of the code because the code conveys a high degree of information about the item being represented

Question 57

Disadvantages of Mnemonic Codes

Answer 57

They have limited ability to represent items within a class. Ex. Accounts Receivable code is AR but does not say what is receivable