AIS

Which of the following is not a financial transaction? UPDATE VALID VENDOR LIFE
Which of the following is not a database management task? SUMMARIZATION
Which of the following is not an objective of all information system? ALL OF THESE
ARE OBJECTIVES
Which is not an accountant’s primary role in information system? SYSTEM
PROGRAMMER
The objectives of the data collection activity of the general model for Accounting
Information System are to collect data that are: EFFICIENT AND RELEVANT
Which of the following is no a characteristic of effective information? PRECISION
Budgets = MANAGEMENT REPORTING SYSTEM
CVP Analysis = MANAGEMENT REPORTING SYSTEM
Sales order capture = TPS
Balance Sheet = FRS
Variance Reports = MRS
Purchase order preparation = TPS
Tax Returns = FRS
Customers = external user
SEC = external user
CEO = internal user
Suppliers = external user
Stockholders = external user
Inventory control manager = internal user
Lending institutions external user

Which statement is false? Manufacturing firms have a conversion cycle but retail firms
do not.
Which of the following files is a temporary file? TRANSACTION FILE
Which of the following is true of the relationship between subsidiary ledgers and general
ledger accounts? The relationship between the two provides an audit trail from the
financial statements to the source documents.
The production subsystem of the conversion cycle includes all of the following EXCEPT:
make or buy decisions on component parts.
TRANSACTION FILE:
 Hours each employee has worked during the current pay period
 Purchase orders
REFERENCE FILE:
 Tax tables
 List of authorized vendors
MASTER FILE:
 Customer ledgers
ARCHIVE FILE:
 Records related to prior periods
REVENUE CYCLE:
 Recording the receipt of payment for goods sold
 Recording the order placed by a customer
EXPENDITURE CYCLE:
 Preparing the weekly payroll for manufacturing personnel
 Ordering raw materials
CONVERSION CYCLE
 Releasing materials for use in the manufacturing cycle
7. STEWARDSHIP
Identify which department has stewardship over the following journals, ledgers, and
files.

a. Customer open order file = SALES

b. Sales journal = BILLING
c. Journal voucher file = GENERAL LEDGER
d. Cash receipts journal = CASH RECEIPTS
 e. Inventory subsidiary ledger = INVENTORY CONTROL
f. Accounts receivable subsidiary ledger = AR
g. Sales history file = SALES
h. Shipping report file = SHIPPING
i. Credit memo file = SALES
j. Sales order file = SALES
k. Closed sales order file = SALES

Multiple-Choice Questions
1. Which of the following is NOT a financial transaction?
a. purchase of products
b. cash receipts
c. update valid vendor file
d. sale of inventor
2. The following are subsystems of the Accounting Information System, EXCEPT
a. Transaction Processing System
b. Human Resources System.
c. General Ledger/Financial Reporting System.
d. Management Reporting System.
3. Which of the following is NOT a purpose of the Transaction Processing System?
a. managing and reporting on the status of financial investments
b. converting economic events into financial transactions
c. distributing essential information to operations personnel to support their
daily operations
d. recording financial transactions in the accounting records
4. The objectives of the data collection activity of the general model for Accounting
Information Systems are to collect data that are
a. relevant and redundant.
b. efficient and objective.
c. efficient and redundant.
d. efficient and relevant.
5. Which of the following is NOT a characteristic of effective information?
a. Relevance
b. Accuracy
c. Summarization
d. precision
6. Which of the following is NOT a database management task?
a. Retrieval
b. Storage
 c. Summarization
d. deletion
7. When viewed from the highest to most elemental level, the data hierarchy is
a. attribute, record, file.
b. record, attribute, key.
c. file, record, attribute.
d. file, record, key.
e. key, record, file.
8. Which is NOT an accountant’s primary role in information systems?
a. system user
b. system auditor
c. system designer
d. system programmer
9. Which of the following is NOT an objective of all information systems?
a. support for the stewardship function of management
b. support for management decision making
c. support for the day-to-day operations of the firm
d. all of the above are objectives
10. Which of the following best describes the activities of the materials management
function?
a. purchasing, receiving, and inventory control
b. receiving, sales, distribution, and purchasing
c. receiving, storage, purchasing, and accounts payable
d. purchasing, receiving, and storage
e. purchasing, storage, and distribution
11. Which of the following best describes the activities of the production function?
a. maintenance, inventory control, and production planning
b. production planning, quality control, manufacturing, and cost accounting
c. quality control, production planning, manufacturing, and payroll
d. maintenance, production planning, storage, and quality control
e. manufacturing, quality control, and maintenance
12. Which of the following best describes the activities of the accounting function?
a. inventory control, accounts payable, fixed assets, and payroll
b. fixed assets, accounts payable, cash disbursements, and cost accounting
c. purchasing, cash receipts, accounts payable, cash disbursements, and
payroll
d. inventory control, cash receipts, accounts payable, cash disbursements,
and payroll
e. inventory control, cost accounting, accounts payable, cash disbursements,
and payroll
13. Which statement best describes the issue of distributed data processing (DDP)?
a. The centralized and DDP approaches are mutually exclusive; an
organization must choose one approach or the other.
b. The philosophy and objective of the organization’s management will
determine the extent of DDP in the firm.
 c. In a minimum DDP arrangement, only data input and output are
distributed, leaving the tasks of data control, data conversion, database
management, and data processing to be centrally managed.
d. The greatest disadvantage of a totally distributed environment is that the
distributed information processing unit locations are unable to
communicate and coordinate their activities.
e. Although hardware (such as computers, database storage, and
input/output terminals) can be effectively distributed, the systems
development and maintenance tasks must remain centralized for better
control and efficiency.
14. Which of the following is a disadvantage of distributed data processing?
a. End-user involvement in systems operation is decreased.
b. Disruptions due to mainframe failures are increased.
c. The potential for hardware and software incompatibility across the
organization is increased.
d. The time between project request and completion is increased.
e. All of the above are disadvantages.

CHAPTER 2
1. Which statement is NOT true?
a. Business activities begin with the acquisition of materials, property, and labor in
exchange for cash.
b. The conversion cycle includes the task of determining raw materials requirements.
c. Manufacturing firms have a conversion cycle but retail firms do not.
d. A payroll check is an example of a product document of the payroll system.
e. A journal voucher is actually a special source document.

2. A documentation tool that depicts the physical flow of information relating to a

particular transaction through an organization is a
a. system flowchart.
b. program flowchart.
c. decision table.
d. work distribution analysis.
e. systems survey.

3. Sequential file processing will not permit

a. data to be edited on a separate computer run.
b. the use of a database structure.
c. data to be edited in an offline mode.
d. batch processing to be initiated from a terminal.
e. data to be edited on a real-time basis.

4. The production subsystem of the conversion cycle includes all of the following
EXCEPT
a. determining raw materials requirements.
b. make or buy decisions on component parts.
c. release of raw materials into production.
d. scheduling the goods to be produced.

5. Which of the following files is a temporary file?

a. transaction file
b. master file
c. reference file
d. none of the above

6. A documentation tool used to represent the logical elements of a system is a(n)

a. programming flowchart.
b. entity relationship diagram.
c. system flowchart.
d. data flow diagram.

7. Which of the following is NOT an advantage of real-time processing files over batch
processing?
a. shorter transaction processing time
b. reduction of inventory stocks
c. improved customer service
d. all are advantages

8. Which statement is NOT correct?

a. Legacy systems may process financially significant transactions.
b. Some legacy systems use database technology.
c. Mainframes are exclusive to legacy systems, while modern systems use only the
client-server model.
d. All the above are true.
9. Which statement is NOT correct?
a. Indexed random files are dispersed throughout the storage device without regard for
physical proximity with related records.
b. Indexed random files use disk storage space efficiently.
c. Indexed random files are efficient when processing a large portion of a file at one
time.
d. Indexed random files are easy to maintain in terms of adding records.

10. Which statement is NOT correct? The indexed sequential access method
a. is used for very large files that need both direct access and batch processing.
b. may use an overflow area for records.
c. provides an exact physical address for each record.
d. is appropriate for files that require few insertions or deletions.

11. Which statement is true about a hashing structure?

a. The same address could be calculated for two records.
b. Storage space is used efficiently.
c. Records cannot be accessed rapidly.
d. A separate index is required.

12. In a hashing structure

a. two records can be stored at the same address.
b. pointers are used to indicate the location of all records.
c. pointers are used to indicate location of a record with the same address as another
record.
d. all locations on the disk are used for record storage.

13. An advantage of a physical address pointer is that

a. it points directly to the actual disk storage location.
b. it is easily recovered if it is inadvertently lost.
c. it remains unchanged when disks are reorganized.
d. all of the above are advantages of the physical address pointer.

14. Which of the following is NOT true of a turn-around document?

a. They may reduce the number of errors made by external parties.
b. They are commonly used by utility companies (gas, power, water).
c. They are documents used by internal parties only.
d. They are both input and output documents.

15. Which of the following is NOT a true statement?

a. Transactions are recorded on source documents and are posted to journals.
b. Transactions are recorded in journals and are posted to ledgers.
c. Infrequent transactions are recorded in the general journal.
d. Frequent transactions are recorded in special journals.

16. Which of the following is true of the relationship between subsidiary ledgers and
general ledger accounts?
a. The two contain different and unrelated data.
b. All general ledger accounts have subsidiaries.
c. The relationship between the two provides an audit trail from the financial statements
to the source documents.
d. The total of subsidiary ledger accounts usually exceeds the total in the related
general ledger account.
17. Real-time systems might be appropriate for all of the following EXCEPT
a. airline reservations.
b. payroll.
c. point-of-sale transactions.
d. air traffic control systems.
e. all of these applications typically utilize real-time processing.

18. is the system flowchart symbol for:

a. on-page connector.
b. off-page connector.
c. home base.
d. manual operation.
e. document.

19. A chart of accounts would best be coded using a(n) ______________ coding
scheme.
a. alphabetic
b. mnemonic
c. block
d. sequential

20. Which of the following statements is NOT true?

a. Sorting records that are coded alphabetically tends to be more difficult for users than
sorting numeric sequences.
b. Mnemonic coding requires the user to memorize codes.
c. Sequential codes carry no information content beyond their order in the sequence.
d. Mnemonic codes are limited in their ability to represent items within a class.

21. A coding scheme in the form of acronyms and other combinations that convey
meaning is a(n)
a. sequential code.
b. block code.
c. alphabetic code.
d. mnemonic code.

CHAPTER 3
1. Management can expect various benefits to follow from implementing a system of
strong internal control. Which of the following benefits is least likely to occur?
a. reduction of cost of an external audit
b. prevention of employee collusion to commit fraud
c. availability of reliable data for decision-making purposes
d. some assurance of compliance with the Foreign Corrupt Practices Act of 1977
e. some assurance that important documents and records are protected

2. Which of the following situations is NOT a segregation of duties violation?

a. The treasurer has the authority to sign checks but gives the signature block to the
assistant treasurer to run the check-signing machine.
b. The warehouse clerk, who has custodial responsibility over inventory in the
warehouse, selects the vendor and authorizes purchases when inventories are low.
c. The sales manager has the responsibility to approve credit and the authority to write
off accounts.
d. The department time clerk is given the undistributed payroll checks to mail to absent
employees.
e. The accounting clerk who shares the recordkeeping responsibility for the accounts
receivable subsidiary ledger performs the monthly reconciliation of the subsidiary ledger
and the control account.

3. The underlying assumption of reasonable assurance regarding implementation of

internal control means that
a. auditor is reasonably assured that fraud has not occurred in the period.
b. auditors are reasonably assured that employee carelessness can weaken an internal
control structure.
c. implementation of the control procedure should not have a significant adverse effect
on efficiency or profitability.
d. management assertions about control effectiveness should provide auditors with
reasonable assurance.
e. a control applies reasonably well to all forms of computer technology.

4. To conceal the theft of cash receipts from customers in payment of their accounts,
which of the following journal entries should the bookkeeper make?
DR CR
a. Miscellaneous Expense Cash
b. Petty Cash Cash
c. Cash Accounts Receivable
d. Sales Returns Accounts Receivable
e. None of the above

5. Which of the following controls would best prevent the lapping of accounts
receivable?
a. Segregate duties so that the clerk responsible for recording in the accounts
receivable subsidiary ledger has no access to the general ledger.
b. Request that customers review their monthly statements and report any unrecorded
cash payments.
c. Require customers to send payments directly to the company’s bank.
d. Request that customers make checks payable to the company.

6. Providing timely information about transactions in sufficient detail to permit proper

classification and financial reporting is an example of
a. the control environment.
b. risk assessment.
c. information and communication.
d. monitoring.

7. Ensuring that all material transactions processed by the information system are valid
and in accordance with management’s objectives is an example of
a. transaction authorization.
b. supervision.
c. accounting records.
d. independent verification.

8. Which of the following is often called a compensating control?

a. transaction authorization
b. supervision
c. accounting records
d. independent verification

9. Which of the following is NOT an element of the fraud triangle?

a. ethics
b. justifiable reliance
c. situational pressure
d. opportunity

10. The fraud scheme that is similar to the ‘‘borrowing from Peter to pay Paul’’ scheme
is
a. expense account fraud.
b. bribery.
c. lapping.
d. transaction fraud.

1. Which document is NOT prepared by the sales department?

a. packing slip
b. shipping notice
c. bill of lading
d. stock release
2. Which document triggers the update of the inventory subsidiary ledger?
a. bill of lading
b. stock release
c. sales order
d. shipping notice

3. Which function should the billing department NOT perform?

a. record the sales in the sales journal
b. send the ledger copy of the sales order to accounts receivable
c. send the stock release document and the shipping notice to the billing department as
proof of shipment
d. send the stock release document to inventory control

4. When will a credit check approval most likely require specific authorization by the
credit
department?
a. when verifying that the current transaction does not exceed the customer’s credit limit
b. when verifying that the current transaction is with a valid customer
c. when a valid customer places a materially large order
d. when a valid customer returns goods

5. Which type of control is considered a Compensating control?

a. segregation of duties
b. access control
c. supervision
d. accounting records

6. Which of the following is NOT an independent verification control?

a. The shipping department verifies that the goods sent from the warehouse are correct
in type
and quantity.
b. General ledger clerks reconcile journal vouchers that were independently prepared in
various departments.
c. The use of prenumbered sales orders.
d. The billing department reconciles the shipping notice with the sales invoice to ensure
that customers are billed for only the quantities shipped.

7. Which function or department below records the decrease in inventory due to a sale?
a. warehouse
b. sales department
c. billing department
d. inventory control

8. Which situation indicates a weak internal control structure?

a. the AR clerk authorizes the write off of bad debts
b. the record-keeping clerk maintains both AR and AP subsidiary ledgers
c. the inventory control clerk authorizes inventory purchases
d. the AR clerk prepares customer statements every month

9. The bill of lading is prepared by the

a. sales clerk.
b. warehouse clerk.
c. shipping clerk.
d. billing clerk.
10. Which of following functions should be segregated?
a. opening the mail and recording cash receipts in the journal
b. authorizing credit and determining reorder quantities
c. shipping goods and preparing the bill of lading
d. providing information on inventory levels and reconciling the bank statement

CHAPTER 6
1. The document that captures the total amount of time that individual workers spend on
each production job is called a
a. time card.
b. job ticket.
c. personnel action form.
d. labor distribution form.

2. An important reconciliation in the payroll system is when

a. the general ledger department compares the labor distribution summary from cost
accounting to the disbursement voucher from accounts payable.
b. the personnel department compares the number of employees authorized to receive
a paycheck to the number of paychecks prepared.
c. the production department compares the number of hours reported on job tickets to
the number of hours reported on time cards.
d. the payroll department compares the labor distribution summary to the hours reported
on time cards.

3. Which internal control is not an important part of the payroll system?

a. supervisors verify the accuracy of employee time cards
b. paychecks are distributed by an independent paymaster
c. the accounts payable department verifies the accuracy of the payroll register before
transferring payroll funds to the general checking account
d. the general ledger department reconciles the labor distribution summary and the
payroll disbursement voucher

4. The department responsible for approving pay rate changes is

a. payroll
b. treasurer
c. personnel
d. cash disbursements

5. Which function should distribute paychecks?

a. personnel
b. timekeeping
c. paymaster
d. payroll

6. Which transaction is not processed in the fixed asset system?

a. purchase of building
b. repair of equipment
c. purchase of raw materials
d. sale of company van

7. Depreciation
a. is calculated by the department that uses the fixed asset.
b. allocates the cost of the asset over its useful life.
c. is recorded weekly.
d. results in book value approximating fair market value.

8. Depreciation records include all of the following information about fixed assets
EXCEPT the
a. economic benefit of purchasing the asset.
b. cost of the asset.
c. depreciation method being used.
d. location of the asset.
9. Which control is not a part of the fixed asset system?
a. formal analysis of the purchase request
b. review of the assumptions used in the capital budgeting model
c. development of an economic order quantity model
d. estimates of anticipated cost savings

10. Objectives of the fixed asset system do NOT include

a. authorizing the acquisition of fixed assets.
b. recording depreciation expense.
c. computing gain and/or loss on the disposal of fixed assets.
d. maintaining a record of the fair market value of all fixed assets.

11. Which of the following is NOT a characteristic of the fixed asset system?
a. acquisitions are routine transactions requiring general authorization
b. retirements are reported on an authorized disposal report form
c. acquisition cost is allocated over the expected life of the asset
d. transfer of fixed assets among departments is recorded in the fixed asset subsidiary
ledger

1. General journal system serves as a hub connected to the other systems of the
firm true spokes of information flows. FALSE
2. it contains the revenues expenditures and other resources utilization data for
each responsibility center in the organization. RESPONSIBILITY CENTER FILE
3. it provides relevant details about each journal voucher posted to the GL.
JOURNAL VOUCHER LISTING
4. Which of the following statements is true? Journal vouchers summarizing
transaction activity flow from various operational departments into the gls, where
they are independently reconciled and posted to the general ledger accounts.
5. Its objective is to facilitate the publication, exchange, and processing of financial
and business information. XBRL
6. Post closing trial balance contains only balance sheet accounts. TRUE
7. SOZ legislation requires that management design and implement controls over
the financial and management reporting process. FALSE
8. The bulk of the information flows in the general ledger system comes from the
transaction processing sub systems. TRUE
9. When posting closing entries to the GL, net income or loss are transferred to
retained earnings. TRUE
10. Which task should the general ledger perform? UPDATE THE GENERAL
LEDGER
11. Which of the following is NOT a potential exposure of the FRS?
UNAUTHORIZED ACCESS TO THE GENERAL LEDGER
12. Which of the following statements best describes a computer-based GL/FRS? A
batch system with direct access files recreates the entire database each time the
file is updated.
13. Which file has as its primary purpose to provide historical financial data for
comparative financial reports? GENERAL LEDGER HISTORY
14. A clerk who has access to GL accounts should also have record-keeping
responsibility for subsidiary ledgers. FALSE
15. Both unadjusted and adjusted trial balance are used in preparing financial
statements. FALSE

1) The Ozment Corporation uses a performance reporting system that shows online
the data for each subordinate who reports to a supervisor. The data presented
show the actual costs incurred during the period, the budgeted costs, and all
variances from budget for that subordinate’s department. The name of this
system of reporting is: RESPONSIBILITY ACCOUNTING
2) At what level of management is the long-range planning function most important?
AT TOP MANAGEMENT LEVELS.
3) Which statements best describes a profit center? The authority to make
decisions affecting the major determinants of profit including the power to choose
its markets and sources of supply
4) The following are all output reports of the financial reporting system except :
VARIANCE ANALYSIS REPORT
5) problems are unstructured when either the data requirements are uncertain, the
procedures are not specified, or the solution objectives have been fully
developed. FALSE
6) Its purpose is to avoid an organizational structure in which the organization’s
performance, stability, end continued existence depends on specific individuals.
FORMALIZATION of tasks
7) which statement below best describes an investment center? the authority to
make decisions affecting the major determinants of profit, including the power to
choose it's markets and sources of supply, end significant control over the
amount of invested capital.
8) it refers to an individual's obligation to achieve desired results. RESPONSIBILITY
AND AUTHORITY
9) there are uncertainties on operational control decisions since it is difficult to
separate the manager's performance from that of his or her operational unit.
FALSE
10) which of the following budgeting processes is LEAST likely to motivate
managers the words organizational goals?
11)Practical decisions are brought in school and have a profound impact on the firm.
FALSE
12) Which of the following would normally be considered an strategic plan?
maintaining the image of the company as the industry leader
13) Broad span of controls remove managers from details of operation and specific
decisions. TRUE
14) Which of the following is not a characteristic of the strategic planning process?
emphasis on both the short and long run
15) managers delegate responsibility that authority downwards through the
transitional heater key from subordinates to superiors. FALSE