Chapter 2- Transaction Processing Flashcards
Three major subsystems of the Transaction Processing System (TPS)
The revenue cycle, expenditure cycle, and the conversion cycle
What is a financial transaction?
An economic event that affects the assets and equities of the firm, is reflected in its accounts and is measured in monetary terms
The following are economic exchanges with external parties, EXCEPT one
a. sale of goods or services
b. purchase of inventory
c. discharge of financial obligations
d. receipt of cash on account from customers
e. depreciation of fixed assets
E. Depreciation of fixed assets
Transaction cycles exist in all types of business
Both profit-seeking and not-for-profit seeking
What are the subsystems of an Expenditure Cycle?
Purchasing/Accounts Payable
Cash Disbursements
Payroll
Fixed Assets
What are the two subsystems of the Conversion Cycle?
Production Planning and Control
Cost Accounting
What are the two subsystems of Revenue Cycle?
Sales Order Processing
Cash Receipts
Three factors that affect the expenditure and conversion cycle
Labor, Materials, and Physical Plant
Expenditure transactions are based on
credit relationship between trading parties
What are the two parts of Expenditure transactions?
Physical Component (acquisition of goods) and Financial Component (cash disbursement to the supplier)
This system recognizes the need to acquire physical inventory (such as raw materials) and places an order with the vendor.
Purchases/Accounts Payable System
When the obligation created in the purchases system is due, the cash disbursements system authorizes the payment, disburses the funds to the vendor, and records the transaction by reducing the cash and accounts payable accounts.
Cash Disbursements Systems
This is a special case Purchases
Payroll
This collects labor usage data for each employee, computes the payroll, and disburses paychecks to the employees.
Payroll System
These are relatively permanent items that collectively often represent the organization’s largest financial investment. Processes transactions pertaining to the acquisition, maintenance, and disposal
Fixed Assets System
This involves the planning, scheduling, and control of the physical product through the manufacturing process.
Production System
Monitors the flow of cost information related to production.
Cost Accounting System
Involves processing cash sales, credit sales, and the receipt of cash following a credit sale.
Revenue Cycle
The majority of business sales are made on credit and involve tasks such as preparing sales orders, granting credit, shipping products (or the rendering of service) to the customer, billing customers, and recording the transaction in the accounts (accounts receivable, inventory, expenses, and sales).
Sales order Processing
This processing includes collecting cash, depositing cash in the bank, and recording these events in the accounts (accounts receivable and cash).
Cash Receipt Processing
These are the traditional records used in manual systems
Documents, Journals, and Ledgers
This provides evidence of an economic event and may be used to initiate transaction processing.
Document
What are the three types of documents?
Source documents
Product documents
Turnaround documents
Economic events result in some documents being created at the beginning of the transaction. These are used to capture and formalize transaction data that the transaction cycle needs for processing.
Source Document
These are the result of transaction processing rather than the triggering mechanism for the process.
Product Documents
This contains important information about a customer’s account to help the cash receipts system process the payment. These are product documents of one system that become source documents for another system.
Turnaround Documents
This is where all relevant facts about the transactions are recorded in a chronological entry
Journal
Two primary types of journal
Special Journal and General Journal
These are used to record specific classes of transactions that occur in high volume.
Special Journal
This is often used to denote certain types of special journals. Also used to denote a log.
Register
Use to record nonrecurring, infrequent, and dissimilar transactions.
General Journal
A special source document that contains a single journal entry specifying the general ledger accounts that are affected. These are used to record summaries of routine transactions, nonroutine transactions, adjusting entries, and closing entries.
Journal Voucher
A book of accounts that reflects the financial effects of the firm’s transactions after they are posted in various journals. Show activity by account type.
Ledger
Two basic types of Ledger
General Ledger and Subsidiary Ledger
Contain the firm’s account information in the form of highly summarized control accounts.
General Ledger
Contain the details of the individual accounts that constitute a particular control account.
Subsidiary Ledger
The accounting records trace transactions from source documents to the financial statements.
Audit Trail
The procedure of contacting selected customers to determine if the transactions recorded in the accounts actually took place.
Confirmation
Accounting records in a computer-based system represent four different types of magnetic files, what are these?
Master File- generally contains account data, updated from transactions.
Transaction File- a temporary file of transaction records used to change or update data in a master file.
Reference File- stores data that are used as standards for processing transactions.
Archive File- contains records of past transactions that are retained for future reference.
Five basic documentation techniques
Data Flow Diagrams, Entity Relationship Diagrams, System Flowcharts, Program Flowcharts, and Record layout Diagrams
Uses symbols to represent the entities, processes, data flows, and data stores that pertain to a system.
Data Flow Diagrams (DFD)
A documentation technique used to represent the relationship between entities
Entity Relationship (ER) Diagram
These are physical resources, events, and agents that which organization wishes to capture data.
Entities
The degree of the relationship; numeric mapping between two entities. Maximum number of records in one file
Cardinality
This is the blueprint for what ultimately will become the physical database.
Data model
T/F
I. DFD is a model of system processes
II. ER diagram models the data used in or affected by the transaction
III. The two diagrams are related through data
IV. Each data store in the DFD doesn’t represent a corresponding data entity in the ER diagram
a. I, II, III are true, IV false
b. I and III are true, and II and IV are false
c. All of the statements are true
d. All of the statements are false
B. I and III are true, and II and IV are false.
DFD is a model of system processes and ER diagram models the data used in or affected by the SYSTEM. The two diagrams are related through data and each data stored in the DFD REPRESENTS a corresponding data entity in the ER diagram
The graphical representation of the physical relationships among key elements of a system.
System Flowchart
Which of the following are the key elements of a system?
a. Organizational Departments
b. Manual Activities
c. Computer Programs
d. Hard-copy accounting records
e. Digital records
f. All of the above
F. All of the above
These are used to reveal the internal structure of the records that constitute a file or database table.
Record Layout Diagrams
The layout diagram comprises of
Name, Data Type, and Length of each attribute
Classes of Computer-based accounting systems/ Data Processing Approaches used in Modern Systems
Batch Systems and Real-time Systems
Assemble transactions intro groups of processing
Batch Systems
Processes transactions individually at the moment the event occurs
Real-time Systems
Alternative Data Processing Approaches
Legal Systems- configurations no longer constitute the defining features of accounting information systems (AIS), they are still of marginal importance to accountants.
Modern Systems- client-server (network)–based and processes transactions in real-time.
This represents items in some sequential order (ascending to descending)
Sequential Codes
A variation on sequential coding that partly remedies the disadvantages just described
Block Coding
These are used to represent complex items or events involving two or more pieces of related data.
Group Codes
These are used for many of the same purposes as numeric codes. May be assigned sequentially (in alphabetic order) or may be used in block and group coding techniques.
Alphabetic Codes
These are alphabetic characters in the form of acronyms and other combinations that convey meaning.
Mnemonics Codes
T/F
Processing more transactions at a lower unit cost makes batch processing more efficient than real-time systems
T
T/F
The process of acquiring raw materials is part of the conversion cycle.
F- Expenditure Cycle
T/F
Directing work-in-process through its various stages of manufacturing is part of the conversion cycle
T
T/F
The general journal is used to record recurring transactions that are similar in nature
F- Non-recurring transactions
T/F
Document flowcharts are used to represent systems at different levels of detail
F-
Which system produces information use& for inventory evaluation/ budgeting/ cost control/ performance reporting/ and make-buy decisions
a. sales order processing
b.purchases accounts payable
c.cash disbursements
d. cost accounting
D- Cost Accounting
