Chapter 6

Question 1

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

Answer 1

Financial transaction

Question 2

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

Answer 2

Expenditure Cycle

Question 3

Firms sell their finished goods to customers
through the __________, which involves
processing cash sales, credit sales, and the
receipt of cash following a credit sale.

Answer 3

Revenue Cycle

Question 4

describes the purpose of each type of accounting record used in transaction cycles.

Answer 4

Manual Systems

Question 5

The accounting records described previously
provide an audit trail for tracing transactions from
source documents to the financial statements.
* The auditor’s responsibility involves, in part, the
review of selected accounts and transactions to
determine their validity, accuracy, and
completeness.

Answer 5

Audit Trail

Question 6

allows transaction tracing.

Answer 6

Digital Audit Trail

Question 7

• Input source or output destination of data
• external objects at the boundary of the system
  being modeled.
• labeled as nouns, such as customer or supplier.

Answer 7

A. Entities

Question 8

• A ________ that is triggered or supported by data.
• should be labeled with a descriptive verb such
  as Ship Goods, Update Records, or Receive
  Customer Order.

Answer 8

B. Processes

Question 9

A store of data such as a transaction file, a
master file, or a reference file

Answer 9

data stores

Question 10

Direction of data flow

Answer 10

Arrow Symbol

Question 11

✓ degree of relationship
✓ numerical mapping between entity
instances
✓ relationship can be:
▪ one-to-one (1:1)
▪ one-to-many (1:M)
▪ many-to-many (M:M

Answer 11

cardinality

Question 12

usually shows the name, data type,
and length of each attribute (or field) in the record.

Answer 12

Layout diagram

Question 13

tend to be client-server (network)–based and
process transactions in real time.

Answer 13

Modern Systems

Question 14

Distinguishing features:
✓ they are mainframe-based applications;
✓ they tend to be batch oriented;
✓ early legacy systems use flat files for data
storage, but hierarchical and network
databases are often associated with laterera legacy systems.

Answer 14

Legacy Systems

Question 15

Firms process large volumes of transactions that are
similar in their basic attributes.
* To process transactions accurately against the
correct accounts, the firm must be able to
distinguish one John Smith from anothe

Answer 15

System without Codes

Question 16

These problems are solved, or at least greatly
reduced, by using codes to represent each item in the inventory and supplier accounts.

Answer 16

System with Codes

Question 17

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

Answer 17

Mnemonic codes

Question 18

classification schemes that are
compliant with XBRL specifications to
accomplish a specific information exchange or
reporting objective such as filing with the SEC.

Answer 18

Taxonomies

Question 19

is the final step in the overall
accounting process that begins in the transaction
cycles

Answer 19

Financial reporting

Question 20

It is vital to the integrity of the accounting
records that the journal vouchers be properly
authorized by a responsible manager at the
source department

Answer 20

Transaction Authorization

Question 21

The task of updating the general ledger must be
separate from all accounting and asset custody
responsibility within the organization.

Answer 21

Segregation of Duties

Question 22

Unauthorized access to the GL accounts can
result in errors, fraud, and misrepresentations in financial statements

Answer 22

Access Controls

Question 23

This involves a network of documents, journals,
and ledgers designed to ensure that a
transaction can be accurately traced through
the system from initiation to final disposition.

Answer 23

Accounting Records

Question 24

The general ledger function serves as an
independent verification step within the
accounting information system.

Answer 24

Independent Verification

Question 25

provides relevant details about each journal
voucher posted to the GL.

Answer 25

Journal Voucher Listing

Question 26

presents the effects of journal voucher postings
to the GL accounts.

Answer 26

General Ledger Change Report

Question 27

Taxonomy may be generated incorrectly,
which results in an incorrect mapping between
data and taxonomy elements that could result
in material misrepresentation of financial data.

Answer 27

Taxonomy Creation

Question 28

The process of mapping the internal database
accounts to the taxonomy tags needs to be
controlled.

Answer 28

Taxonomy Mapping Error

Question 29

Independent verification procedures need to
be established to validate the instance
documents to ensure that appropriate
taxonomy and tags have been applied before
posting to a Web server

Answer 29

validation of Instance Documents

Question 30

Manufacturing firms convert raw materials into
finished products.

Answer 30

Conversion Cycle