AIS - Specialized subset of information systems that process financial transactions

attest function - function performed by an expert who expresses an opinion regarding

the presentation of financial statements. performed by Certified Public Accountants
(CPA)

auditing - an independent attestation

that expresses an opinion
about the fairness of a company's financial statements.

auditor - must have a thorough understanding of AIS functions and internal controls.

centralized data processing - all data processing is performed by one or more large
computers housed in a common data center that serves
users throughout the organization.

cloud computing - location-independent computing whereby shared data centers deliver

hosted IT services over the Internet

commercial software - available for both general accounting use and for industry
specific applications, such as medical billing.
sometimes called turnkey systems

conceptual system - involves specifying the criteria for identifying delinquent customers
and the information that needs to be reported.

custom software - developed through a formal process called systems development life
cycle

data - facts, which may or may not be processed (edited, summarized, or refined) and
have no direct effect on a user's actions.

data collection - first operational stage in the information system. The objective is to
ensure that
event data entering the system are valid, complete, and free from material errors.

data processing - Examples include mathematical algorithms used for production

scheduling applications, statistical techniques for sales forecasting, and posting and
summarizing procedures used for accounting applications.

data sources - financial transactions that enter the information system from either
internal or external sources.

data storage - medium to be used and the method for capturing and presenting the
information. included in the physical system
database - physical repository for financial and non-financial data.

database management - involves three fundamental tasks:

storage, retrieval, and deletion.

discretionary reporting - the organization can choose what information to report and how
to present it

distributed data processing - users process their transactions locally.

end users - fall into two general groups

enterprise resource planning - comprised of thousands of small program modules. From

this vast array of options the IT team selects those modules that support the
organization's specific information and data processing needs.

feedback - a form of output that is sent back to the system as a source of data.

financial transaction - an economic event that affects the assets and equities of the
organization, is reflected in its accounts, and is measured in monetary terms

general ledger/financial reporting system - produces the traditional financial statements,

such as the income statement, balance sheet, statement of
cash flows, tax returns, and other reports required by law

general model for AIS - describes all information systems, regardless of their underlying
technology. The elements are end users, data sources, data collection, data processing,
database management, information generation,
and feedback

independence - Information reliability rests heavily on this concept

information - processed data that causes the user to take an action that he or she
otherwise could not, or would not,
have taken.

information flows - out from the organization to external users, such as customers,
suppliers, and stakeholders who have an interest in the
firm

information generation - the process of compiling, arranging, formatting, and presenting

information
to users

information system - the set of formal procedures by which data are collected, stored,
processed
into information, and distributed to users

infrastructure as a service -

internal auditing - an independent appraisal function

established within an organization to examine and evaluate its activities as a service to
the organization

IT auditing - IT-related tests of controls

IT outsourcing - Under this practice the organization sells its IT resources to a third-
party outsourcing vendor

management reporting system - provides internal management with special-purpose

financial reports and information needed for decision making such as budgets, variance
reports, and responsibility reports

MIS - processes non-financial transactions that are not normally processed by

traditional AIS.

network - a collection of interconnected computers and communications devices that

allows users to communicate, access data and applications, and share information and
resources.

network administration - responsible for the effective functioning of the software and
hardware that constitute the organization's network.

non-discretionary reporting - the organization has few or no choices

in the information it provides

non-financial transactions - events that do not meet the narrow definition of a financial
transaction.

physical system - includes the data storage medium to be used and the method for
capturing and presenting the information.

platform as a service -

reliability - determines the value of information to a user

segments - derive from the flow of resources through the firm

software as a service -

stakeholders - external entities with a

direct or indirect interest in the firm.
substantive test - focus on data rather than
process.

systems development life cycle - process through which larger organizations with
unique information needs develop custom software.

tests of controls - focused on the system itself and the

controls built into it that reduce the risk of material errors and/or fraud.

trading partners - Exchanges with _____ include customer sales and billing information,
purchase information for suppliers, and inventory receipts information

transaction - an event that affects or is of interest to the organization and is processed

by its
information system as a unit of work.

transaction processing system - supports daily business operations with numerous

reports, documents, and messages for users throughout the organization

turnkey systems - another name for commercial software packages. Can often be
implemented by the user with little or no modification.

Data differ from information in which way? - Information is output and data is input

Which of the following is NOT a characteristic that makes information useful?

a.) It is reliable
b.) It is timely
c.) It is inexpensive
d.) It is relevant - c.) it is inexpensive

Which of the following is a primary activity in the value chain?

a.) Purchasing
b.) Accounting
c.) Post-sales service
d.) Human resource management - c.) Post-sales service

Which transaction cycle includes interactions between and organization and its
supplier? - Expenditure cycle

Which of the following is NOT a means by which information improves decision making?
a.) Increases in information overload
b.) Reduces uncertainty
c.) Provides feedback about the effectiveness of prior decisions
d.) Identifies situation requiring management action - a.) Increases in information
overload

In the value chain concept, upgrading IT is considered what kind of activity? - Support
Activity

In which cycle does a company ship goods to customers? - Revenue cycle

Which of the following is a function of an AIS?

a.) reducing the need to identify a strategy and strategic position
b.) Transforming data into useful information
c.) Allocating organizational resources
d.) Automating all decision making - b.) Transforming data into useful information

A firm, its suppliers, and its customers collectively form which of the following?
a.) Supply chain
b.) Value chain
c.) ERP system
d.) AIS - a.) Supply chain

A report telling how well all approved vendors have performed in the prior 12 months is
information that is MOST needed in which business process?
a.) Paying vendors
b.) Acquiring inventory
c.) Selling merchandise
d.) Paying employees - b.) Acquiring inventory

AIS - This is a collection of resources designed to transform data into information to be

communicated to decision makers

1. People
2. Processes
3. Data
4. Equipment - What are 4 examples of resources that are collected in an AIS?

1. Manual
2. Computerized - The transformation of data into information can be done in which 2
ways?

1. Internal
2. External - What are the 2 types of main accounting information users?

1. Managers
2. Supervisors
3. Employees - What are 3 examples of internal users?
1. Stockholders
2. Investors
3. Creditors
4. Government Agencies
5. Customers
6. Vendors - What are 6 examples of external users?

1. Strategic
2. Tactical
3. Operational
4. Transaction Oriented - What are the 4 levels of the Hierarchy of Internal Users?

Executive Management - What type of management would be included in the Strategic

level of the Hierarchy of Internal Users?

Middle Management - What type of management would be included in the Tactical level
of the Hierarchy of Internal Users?

Lower-Level Management - What type of management would be included in the

Operational level of the Hierarchy of Internal Users?

Staff - What type of management would be included in the Transaction Oriented level of
the Hierarchy of Internal Users?

Information Systems - This term suggests the use of information technology in an

organization to provide information to users

Information Technology - IT

1. Data
2. Hardware and Software
3. Information - What are the 3 steps of turning data into information?

1. EDP
2. MIS
3. DSS
4. ES
5. EIS
6. AIS - What are 6 different types of information systems?

Data Processing System - This is an example of an Electronic Data Processing System

Electronic Data Processing System - EDP

Data Processing System - DP

Dashboard Technology - This is an example of a Management Information System

Management Information System - MIS

Ad Hoc/What if Analysis - This is an example of a Decision Support System

Decision Support System - DSS

Ad Hoc/What if Analysis - This helps make a decision

Expert System - ES

Knowledge Base - An Expert System makes a decision based on its __________

Executive Information System - EIS

Accounting Information System - AIS

1. CRM
2. SCM
3. MRP
4. CIM
5. FMS - What are 5 examples of new ways to use computers to enhance functional
planning and control?

Customer Relation Management - CRM

Supply Chain Management - SCM

Material Requirements Planning - MRP/MRP II

Computer-Integrated Manufacturing - CIM

Flexible Manufacturing Systems - FMSs

Enterprise Resource Planning - What is the solution to integrate financial and

operational systems?

Enterprise Resource Planning - ERP

ERP II - This adds collaborative commerce to financial and operational systems

1. Revenue Cycle
2. Expenditure Cycle
3. Production Cycle
4. Finance Cycle - What are the 4 transaction processing cycles?

1. Organization Infrastructure
2. Human Resource Management
3. Technology Development
4. Procurement - According to the Porter Value Chain Model, what are the 4 support
processes?

1. Service
2. Marketing and Sales
3. Outbound Logistics
4. Production
5. Inbound Logistics - According to the Porter Value Chain Model, what are the 5
primary processes?

Internal Control - This is a process designed to provide reasonable assurance regarding

achievement of certain objectives

Reasonable Assurance - Internal Control is a process designed to provide __________

regarding achievement of certain objectives

1. Reliability of Financial Reporting

2. Effectiveness/Efficiency of Operations
3. Compliance with Laws/Regulations - Internal control is a process designed to provide
reasonable assurance regarding achievement of what 3 objectives?

1. Monitoring
2. Control Activities
3. Risk Assessment
4. Control Environment
5. Information and Communication - What are the 5 levels of the COSO-Internal Control
Framework?

Segregation of Duties - This helps to ensure no one individual or department controls

the accounting records relating to its own operation

Controllers - This office usually maintains recording functions

1. Budgeting/Tax Planning
2. Financial Reporting
3. Accounting - What are 3 examples of functions that a controllers' office usually
maintains?

Treasurers - These people are responsible for the financing and custody function
related to transactions
1. Credit
2. Cash
3. Insurance - What are 3 examples of functions that a treasurer usually maintains?

1. Traditional Approach
2. End User Computing
3. Cloud Computing Approach - What are the 3 types of computing approaches?

Traditional Approach - The Batch Processing Method falls under which computing
approach?

Traditional Approach - Which computing approach?: A user creates a file (cards of

electronic) and submits to IS for processing

End User Approach - Which computing approach allows hands-on use by an end user?

End User Approach - Which computing approach allows an end user to conduct their
own processing activity without IS Function?

Cloud Computing Approach - Which computing approach uses data processing via the
internet?

Cloud Computing Approach - Which computing approach allows a user to access data
anytime/anywhere?

Cloud Computing Approach - Which computing approach is the newest technology?

Cloud Computing Approach - Which computing approach uses data processing and
computing costs based on usage?

Total Quality Performance - TQP

Total Quality Management - TQM

1. High Quality Production

2. Operational Efficiency
3. Continuous Improvement - TQP=TQM emphasizes on customer satisfaction through
what 3 ways?

Lean Manufacturing - This is the general class of production improvement principles

Efficiency - What is the main focus of lean manufacturing?

Just-in-Time Inventory - What is an example of lean manufacturing?

Pull vs. Push - What is an example of Just-in-Time Inventory?

1. Eliminate Waste
2. Improve Production Flow - Lean manufacturing is focused on accomplishing what 2
ideas?

1. Hardware/Software Standardizations
2. Movement Toward Open Systems - Quick Response Systems rely on what 2 things?

1. No Waiting
2. Quick Response
3. Enhanced Security
4. Lower Costs
5. Increased Variety - What are 5 examples of consumer benefits due to web
commerce?

1. Cost Savings
2. Automated Transaction Entry
3. Low Overhead
4. Worldwide/Around the Clock
5. Rapid Updates and Marketing - What are 5 examples of merchant benefits due to
web commerce?

1. Improve Quality of Information

2. Improve Internal Control
3. Improve Process - What are the 3 general objectives of systems analysis?

Systems Approach - This is a general six step process for administration of an IS

project

1. Statement of System Objectives

2. Creation of Alternatives
3. Systems Analysis
4. Systems Design
5. Systems Implementation
6. Systems Evaluation - What are the 6 steps in the Systems Approach?

Blueprinting - This is often more cost-effective than designing a system from the ground
up

1. New Work Relationships

2. Job Content Changes
3. Organizational Structure Changes - New IS may create what 3 things in a work-
related environment?

1. Energy Usage
2. Virtualization
3. E-Waste - Utilization of IT resources in an environmentally friendly manner can be
done in what 3 ways?

Define: Business Process - Prescribed sequence of work steps performed in order to

produce a desired result for the organization.

What are the 4 general types of business processes? What are examples of each? -
1.Revenue Process (Sales Processes, Sales Return Processes, Cash Collection
Processes)

2.Expenditure Processes (Purchasing Processes, Purchase Return Processes, Cash

Disbursement Processes, Payroll Processes, Fixed Asset Processes)

3.Conversion Processes (Planning Processes, Resource Management Processes,

Logistics Processes)

4.Administrative Processes (Capital Processes, Investment Processes, General Ledger

Processes)

Define: Internal Controls - The set of procedures and policies adopted within an
organization to safeguard its assets, check the accuracy and reliability of its data,
promote operational efficiency, and encourage adherence to prescribed managerial
practices.

Define: Accounting Information System - Comprises the processes, procedures, and

systems that capture accounting data from business processes; record the accounting
data in the appropriate records; process the detailed accounting data by classifying,
summarizing, and consolidating; and report the summarized accounting data to internal
and external users.

Define: IT Enablement - Using IT systems to enhance efficiency and effectiveness of

internal or supply chain processes.

What is the data hierarchy in order from smallest to largest? - 1. Bit, or binary digit
2. Byte
3. Field
4. Record
5. File
6. Database

Define: Bit - The smallest unit of information in a computer system. Value is 0 or 1.

Define: Byte - A unit of storage that represents one character. 8 bits are 1 byte

Define: Field - One item within a record. Ex. Last Name in payroll record
Define: Record - A set of related fields for the same entity.

Ex. Employee number, last name, first name, social security number, all these together
form a record.

Define: File - The entire set of related records form a file.

The set of all employee records forms a payroll file.

Define: Database - The entire collection of files.

Define: Relational Database - Stores data in several small two-dimensional tables that
can be joined together in many varying ways to represent many different kinds of
relationships among the data.

Define: Master Files - The relatively permanent files that maintain the detailed data for
each major process.

Define: Transaction File - The set of relatively temporary records that will be processed
to update the master file.

Define: Sequential Access (1st way files can be accessed) - Files store records in
sequence.

Ex. In order of employee number

Define: Random Access (2nd way files can be accessed) - Not written or read in
sequential order

Random Access is more efficient than Sequential Access

Define: Indexed Sequential Access Method - (ISAM) Both access methods are
necessary.

Filed sequentially, but can be accessed randomly

Define: Batch Processing (1st mode of processing transactions) - Requires that all
similar transactions be grouped together for a specified time; then this group of
transactions is processed as a batch.

Best for large number of transactions Ex. Payroll

Define: Online Processing (2nd mode of processing transactions) - Opposite of batch

processing
Transactions entered and processed one at a time.

Define: Real-Time Processing - Online processing system are sometimes real time
processing

Transaction is processed immediately, in real time, so that the output is available right
away.

Best: Large volume of records, but only a few records are needed to process any
individual transactions.

What is batch processing is best suited to? Online processing?

A. Sequential Access Files
B. Random Access Files - Batch Processing:Sequential Access Files

Online Processing:Random Access Files

Define: Data Warehouse - An integrated collection of enterprise-wide data that includes

5 to 10 fiscal years of unchangeable data, used to support management in decision
making and planning.

Define: Operational Database - Contains the data that are continually updated as
transactions are processed.

Define: Data Mining - The process of searching data within the data warehouse for
identifiable patterns that can be used to predict future behavior.

Define: Network - 2 or more computers linked together to share information and/or

resources.

(LAN) Local Area Network, Internet, Extranet, Intranet

Define: LAN - A computer network that spans a relatively small area

Usually single building, connect computers within an organization

WAN- LAN's that are connected

Define: Internet - The global computer network. (WWW) World Wide Web

Define: Intranet - A company's private network accessible only to the employees of that
company.

Similar to Internet, only accessible by company computers

Define: Extranet - Similar to Intranet......except, Offers access to selected outsiders,
such as buyers, suppliers, distributors, and wholesalers in the supply chain.

Define: E-Business - The use of electronic means to enhance business processes.

Ex. Trading with customers, servicing customers/vendors, swapping information with

customers/vendors

Define: Electronic Data Interchange (EDI) - The intercompany, computer-to-computer

transfer of business documents in a standard business format.

1. Intercompany=2 or more companies conducting business electronically

2. Computer-to-Computer= Each companies computers are connected via a network
3. Standard business format= Various companies/vendors/sellers can interact on the
EDI software.

Define:Point of sale system (POS) - System of hardware and software that captures
retail sales transactions by standard bar coding.

Ex. Grocery Store/Large Retail cash register bar code

Define: Automated Matching - Computer hardware and software system in which the
software matches an invoice to its related purchase order and receiving report.

Online Files/Database

Define: Evaluated Receipt Settlement (ERS) - An invoice-less system in which

computer hardware and software complete an invoice-less match comparing the
purchase order with the goods received.

Define: E-Payable/Electronic invoice presentment and payment (EIPP) - Both terms that
refer to Web-enabled receipt and payment of vendor invoices.

Define: Enterprise Resource Planning (ERP) - Multi-module software system designed

to manage all aspects of an enterprise.

Broken down into modules, financials, sales, purchasing, inventory, etc.

Enterprise Risk Management (ERM) Sections of? - *Internal Environment- Sets basis
how risk is viewed
Objective Setting- Objectives must exist before potential events occur
Event Identification- Internal/External events affecting objectives
*Risk Assessment- Risks are analyzed
Risk Response- Management selects avoiding, accepting, reducing, sharing
*Control Activities- Policies/Procedures
*Information and Communication- Information identified, captured and communicated
*Monitoring- Monitored and Modified as necessary

*are COSO- "Internal Controls-Integrated Framework"

IT Controls Divided into 2 categories. What are the 2? - General Controls- apply to the
overall IT accounting systems Ex. Passwords for authorized users

Application Controls- Used specifically to control inputs, processing and outputs

Define: Corporate Governance - An elaborate system of checks and balances whereby

a company's leadership is held accountable for building shareholder value and creating
confidence in the financial reporting processes.

Sarbanes-Oxley Act of 2002 after Enron and WorldCom

Define: IT Goverance - Leadership, structure and processes that the company uses to
add value while balancing risk versus return.

Potential Unethical Behaviors include.... - 1. Fraudulent financing reporting

2. Revenue inflation
3. Expense account fraud
4. Inflating hours worked for payroll purposes
5. Computer fraud
6. Hacking
7. Browsing Confidential Data

System - 1. two or more interrealted components that interact to achieve a goal, often
composed of subsystems that support the larger system. 2. the equipment and
programs that comprise a complete computer installation. 3. the program and related
procedures that perform a single task on a computer

Goal conflict - occures when a subsystem is inconsistent with the goals of another
subsystem or the system as a whole

Goal congruence - achieved when a subsystem achieves its goals while contributing to
the organization's overall goal

Data - facts that are collected, recorded, stored, and processed by a system

Information - data that has been organized and processed to provide meaning and
improve the decision-making process

Information technology (IT) - help decision makers more effectively filter and condense
information
Information overload - occurs when the limits of how much the human mind can absorb
and process are passed; resulting in a decline in decision-making quality and an
increase in the cost of providing that information

Value of information - the benefit produced by the information minus the cost of
producing it

Business process - a set of related, coordinated, and structured activities and tasks that
are performed by a person, a computer, or a machine, and that help accomplish a
specific organizational goal

Transaction - an agreement between two entities to exchange goods or services or any

other event that can be measured in economic terms by an organization

Transaction processing - the major give-get exchanges that occur frequently in most
companies. This process that begins with capturing transaction data and ends with
informational output.

Give-get exchange - transactions that happen a great many times, such as giving up
cash to get inventory from a supplier and giving employees a paycheck in exchange for
their labor

Revenue cycle - Activties where goods and services are sold for cash or a future
promise to receive cash

Expenditure cycle - Activities where companies purchase inventory for resale or raw
materials to use in producing products in exchange for cash or a future promise to pay
cash

Production (conversion) cycle - Activities where raw materials are transformed into
finished goods

Human resource/payroll cycle - Activities where employees are hired, trained,

compensated, evaluated, promoted, and terminated

Financing cycle - Activities where companies sell shares in the company to investors
and borrow money, and where investors are paid dividends and interest is paid on loans

General ledger and reporting system - Information-processing operations involved in

updating the general ledger and preparing reports for both management and external
parties

Accounting information system (AIS) - A system that collects, records, stores, and
processes data to produce information for decision makers
Predictive analytics - The use of data warehouses and complex algorithms to forecast
future events, based on historical trends and calculated probabilities

Value chain - Linking together of all the primary and support activities in a business

Primary activities - Value chain activities that produce, market, and deliver products and
services to customers and provide post-delivery service and support
Operations, outbound logistics, marketing and sales, and service

Support activities - Value chain activities such as firm infrastructure, technology,

purchasing, and human resources that enable primary activities to be performed
efficiently and effectively

Supply chain - An extended system that includes and organization's value chain, as well
as its suppliers, distributors, and customers

Enterprise Resource Planning Systems - integrates business process functionality and

information from all of an organization's functional areas (marketing and sales, cash
receipts, purchasing, cash disbursements, human resources, production and logistics,
and business and financial reporting).

E-business - use of networks (the internet) to undertake business processes.

Internal Control - a system of integrated elements that provide reasonable assurance

that a business will reach its business process goals.

information system (IS) or management information system (MIS) - is a manmade

system that consists of an integrated set of computer-based and manual components
established to collect, store, and manage data and to provide output information to
users.

Computerized accounting systems - from simple spreadsheets to software packages to

handle all the accounting and finance functions of a business

Purpose of AIS - Collect, process and report information related to the financial aspects
of business events.

Data - are facts that are recorded and stored.

Insufficient for decision making.

Information - is processed data used in decision making.

What makes information useful - Relevant

"The capacity of information to make a difference in a decision by helping users to form
predictions about the outcomes of past, present, and future events or to confirm or
correct prior expectations."
Reliable
"The quality of information that assures that information is reasonably free from error
and bias and faithfully represents what it purports to represent."
Complete
"The inclusion in reported information of everything material that is necessary for faithful
representation of the relevant phenomena."

Timely
"Having information available to a decision maker before it loses its capacity to influence
decisions."
Understandable
"The quality of information that enables users to perceive its significance."
Verifiable
"The ability through consensus among measurers to ensure that information represents
what it purports to represent or that the chosen method of measurement has been used
without error or bias."
Accessible
Available when needed (see Timely) and in a useful format (see Understandable).

Businness Process Cycles - Revenue

Expenditure
Production
Human Resources
Financing

AIS Value Added - Improve Quality and Reduce Costs

Improve Efficiency
Improve Sharing Knowledge
Improve Supply Chain
Improve Internal Control
Improve Decision Making

Value Chain - The set of activities a product or service moves along before as output it
is sold to a customer

Enterprise Systems - Integrates business processes and information from entire

enterprise.
Helps coordinate the operation of business functions.

Customer Relationship Management (CRM) - builds and maintains customer related

data.

Customer Self-Service (CSS - allows customers to complete tasks without assistance.

Sales Force Automation (SFA) - automates sales tasks such as order processing and
tracking.

Sales and Distribution (SD) - Records customer orders

Shipping
Billing
Connections to
Materials management module (MM)
Financial accounting module (FI)
Controlling module (CO)

Supply Chain Management (SCM) - plans and executes demand planning, inventory
acquisition, manufacturing, distributing and selling.

Product Lifecycle Management (PLM) - manages product data from design through
disposal of product.

Supplier Relationship Management (SRM) - manages the interactions with

organizations that supply the goods and services to an enterprise; includes procurement
and contract management.

Materials Management (MM) - Materials Management (MM)

Acquisition and management of goods from vendors
Purchase order preparation
Receiving
Recording invoice
Interacts with
Sales and distribution module (SD)
Financial accounting module (FI)
Controlling module (C00)

Human Resources (HR) - Recruiting, management and administration of personnel

Payroll processing
Training and travel
Benefits
Reports

Controlling (CO) or Controlling and Profitability Analysis (CO/PA) - Handles internal

accounting including:
Cost center accounting
Profitability analysis for sales
Activity-based accounting
Budgeting
System - An entity consisting of two or more components or subsystems that interact to
achieve a goal, the equipment and programs that comprise a complete computer
installation, and the programs and related procedures that perform a single task on a
computer.

Systems Concept - A systems analysis principle that states that changes in subsystems
cannot be made without considering the effect on other subsystems and the system as
a whole

Goal Conflict - Occurs when a decision or action of a subsystem is inconsistent with

another subsystem or the system as a whole

Goal Congruence - Is achieved when a subsystem achieves its goals while contributing
to the organization's overall goal

Integration - Eliminating duplicate recording, storage, reporting, and other processing

activities in an organization. For example, companies that used to have separate
programs to prepare customer statements, collect cash, and maintain accounts
receivable records now combine these functions into a single application.

Data - Facts that are collected, recorded, stored, and processed by an information
system to produce information

Information - Data that have been organized and processed to provide meaning to a
user. Information can be classified as mandatory, essential, or discretionary.

Information Overload - The state in which additional information cannot be used

efficiently and has no marginal value

Value of Information - The benefit produced by in the information minus the cost of
producing it

Mandatory Information - Information required by a governmental entity (such as a report

to the IRS on taxable income and withholdings)

Essential Information - Information required to conduct business with external parties

(such as purchase orders and customer billings)

Discretionary Information - Information that is available only to certain internal users.

Accounting Information System (AIS) - A system that collects, records, stores, and
processes data to produce information for decision makers. An AIS has six
components: people, procedures and instructions, data, software, information
technology infrastructure, and internal controls and security measures.
Value Chain - The linking together of all the primary and support activities in a business.
Value is added as a product passes through the chain.

Primary Activities - Activities in the value chain that are performed to create, market,
and deliver products and services to customers and provide post-delivery service and
support. Primary activities include production, shipping and receiving, and marketing

Support Activities - Activities in the value chain the enable the primary activities to be
performed efficiently and effectively. Examples include administration, purchasing, and
human resources.

Supply Chain - An extended system that includes an organization's value chain as well
as its suppliers, distributors, and customers.

Structured Decision - Decisions that are repetitive, routine, and understood well enough
that they can be delegated to the lower-level employees of an organization

Semistructured Decision - Decisions that require subjective assessment and judgement

to supplement formal data analysis.

Unstructured Decision - Nonrecurring and nonroutine decisions that require

considerable judgement and intuition. No framework or model exists to solve such
problems

Operational Control - Decisions that are concerned with the efficient and effective
performance of specific tasks in an organization

Management Control - Activities by management designed to motivate, encourage, and

assist officers and employees in achieving corporate goals and objectives as effectively
and efficiently as possible.

Strategic Planning - Decisions that establish the organization's objectives and policies
for accomplishing those objectives

Product Differentiation Strategy - Adding features or services not provided by

competitors to a product to be able to charge customers a premium price

Low-cost strategy - Striving to be the most efficient producer of a product or service

Variety-based strategic position - Producing or providing a subset of the industry's

products or services

Needs-based strategic position - Trying to serve most or all of the needs of a particular
group of customers in a target market
Access-based strategic position - A strategic position that serves a subset of customers
who differ from other customers in terms of factors such as geographic location or size

Synergy - When an entire system of organizational activities is greater that the sum of
each individual part

Predictive Analysis - Uses data warehouses and complex algorithms to forecast future
events, based on historical trends and calculated probabilities

Access method - Technique used to locate records and navigate through the database.

Accounting record - Document, journal or ledger used in transaction cycles

Alphabetic codes - Alphabetic characters assigned sequentially

Alphanumeric codes - Codes that allow the use of pure alphabetic characters
embedded within numeric codes

Archive file - File that contains records of past transactions that are retained for future
reference

Audit trail - Accounting records that trace transactions form their source documents to
the financial statements

Batch systems - Systems that assemble transactions into groups for processing

Block code - Coding scheme that assigns ranges of values to specific attributes such as
account classifications

Cardinality - Numerical mapping between entity instances

Chart of accounts - Listing of an organization's accounts showing the account number

and name

Conversion cycle - Cycle composed of the production system and the cost accounting
system

Currency of information - Problem associated with the flat-file model because of its
failure to update all the user files affected by a change in status; may result in decisions
based on outdated information

Data flow diagram - Use of a set of symbols in a diagram to represent the processes,
data sources, data flows, and process sequences of a current or proposed system

Data model - Blueprint for what ultimately will become the physical database
Data storage - Efficient information system that captures and stores data only once and
makes this single source available to all users who need it

Data structures - Techniques for physically arranging records in a database

Data updating - Periodic updating of data stored in the files of an organization

Database management system - Software system that controls access to the data
resource

Database model - Symbolic model of the structure of, and the associations between, an
organization's data entities

Direct access structures - Storage of data at a unique location, known as an address,

on a hard disk or floppy disk

Entity relationship diagram - Documentation technique used to represent the

relationship among data entities in a system

Expenditure cycle - Acquisition of materials, property, and labor in exchange for cash

Flat-file approach - Organizational environment in which users own their data

exclusively

Flat-file model - Environment in which individual data files are not related to other files

Group codes - Codes used to represent complex items or events involving two or more
pieces of related data

Hashing structure - Structure employing an algorithm that converts the primary key of a
record directly into a storage address

Indexed random file - Randomly organized file accessed via an index

Indexed structure - Class of file structure that uses indexes for its primary access
method

Journal - Record of a chronological entry

Ledger - Book of accounts that reflects the financial effects of the firm's transactions
after they are posted from various journals

Legacy systems - Large mainframe systems implemented in the late 1960's through the
1980's. Still exist today, associated with flat-file systems
Logical key pointer - Pointer containing the primary key of the related record

Master file - File containing account data

Mnemonic codes - Alphabetic characters in the form of acronyms that convey meaning

Organization - Refers to the way records are physically arranged on the secondary
storage device (a disk)

Physical address pointer - Contains the actual disk storage location (cylinder, surface,
and record number) that the disk controller needs

Pointer structure - Structure in which the address of one record is stored in the field on a
related record

Product documents - Documents that result from transaction processing

Program flowchart - Diagram providing a detailed description of the sequential and

logical operations of the program

Real-time systems - Systems that process transactions individually at the moment the
economic event occurs

Record layout diagrams - Used to reveal the internal structure of the records that
constitute a file or database table. Usually shows the name, data type, and length of
each attribute (or field) in the record

Reference file - File that stores the data used as standards for processing transactions

Register - Often used to denote certain types of special journals. For example, the
payroll journal is often called the payroll _______

Relative address pointer - Contains the relative position of a record in the file. For
example it could specify the 135th record in the file

Revenue cycle - Cycle composed of sales order processing and cash receipts

Sequential access method - Method in which all records in the file are accessed
sequentially

Sequential codes - Codes that represent items in sequential order

Sequential files - Files that are structured sequentially and must be accessed
sequentially
Sequential structure - A data structure in which all records in the file lie in contiguous
storage spaces in a specified sequence arranged by their primary key

Source documents - Documents that capture and formalize transaction data needed for
processing by their respective transaction cyle

System flowchart - Used to show the relationship between the key elements - input
sources, programs, and output products - of computer systems

Task-data dependency - User's inability to obtain additional information as his or her

needs change

Transaction file - Temporary file that holds transaction records that will be used to
change or update data in a master file

Turnaround documents - Product documents of one system that become source

documents for another system

Virtual storage access method - Structure used for very large files that require routine
batch processing and a moderate degree of individual record processing

Which system is not part of the expenditure cycle?

a. cash disbursements
b. payroll
c. production planning/control
d. purchases/accounts payable - c.

Which system produces information used for inventory valuation, budgeting, cost
control, performance reporting, and make-buy decisions?

a. sales order processing

b. purchases/accounts payable
c. cash disbursements
d. cost accounting - d.

Which of the following is a turn-around document?

a. remittance advice
b. sales order
c. purchase order
d. payroll check - a.

The order of the entries made in the ledger is by

a. transaction number
b. account number
c. date
d. user - b.

The order of the entries made in the general journal is by

a. date
b. account number
c. user
d. customer number - a.

In general a special journal would not be used to record

a. sales
b. cash disbursements
c. depreciation
d. purchases - c.

Which account is least likely to have a subsidiary ledger?

a. sales
b. accounts receivable
c. fixed assets
d. inventory - a.

Subsidiary ledgers are used in manual accounting environments. What file is

comparable to a subsidiary ledger in a computerized environment?

a. archive file
b. reference file
c. transaction file
d. master file - d.

A journal is used in manual accounting environments. What file is comparable to a

journal in a computerized environment?

a. archive file
b. reference file
c. transaction file
d. master file - c.

In a computerized environment, a list of authorized suppliers would be found in the

a. master file
b. transaction file
c. reference file
d. archive file - c.

Which of the following is an archive file?

a. an accounts payable subsidiary ledger

b. a cash receipts file
c. a sales journal
d. a file of accounts receivable that have been written off - d.

Which document is not a type of source document?

a. a sales order
b. an employee time card
c. a paycheck
d. a sales return receipt - c.

The most important purpose of a turn-around document is to

a. serve as a source document

b. inform a customer of the outstanding amount payable
c. provide an audit trail for the external auditor
d. inform the bank of electronic funds deposits - a.

Which type of graphical documentation represents systems at different levels of detail?

a. data flow diagram

b. document flowchart
c. system flowchart
d. program flowchart - a.

Data flow diagrams

a. depict logical tasks that are being performed, but not who is performing them
b. illustrate the relationship between processes, and the
documents that flow between them and trigger activities
c. represent relationships between key elements of the computer system
d. describe in detail the logic of the process - a.

Document flowcharts

a. depict logical tasks that are being performed, but not who is performing them
b. illustrate the relationship between processes, and the
documents that flow between them and trigger activities
c. represent relationships between key elements of the computer system
d. describe the logic of the process - b.
When determining the batch size, which consideration is the least important?

a. achieving economies by grouping together large numbers of transactions

b. complying with legal mandates
c. providing control over the transaction process
d. balancing the trade off between batch size and error detection - b.

In contrast to a real-time system, in a batch processing system

a. there is a lag between the time when the economic event occurs and the financial
records are updated
b. relatively more resources are required
c. a greater resource commitment per unit of output is required
d. processing takes place when the economic event occurs - a.

In contrast to a batch processing system, in a real-time system

a. a lag occurs between the time of the economic event and when the transaction is
recorded
b. relatively fewer hardware, programming, and training resources are required
c. a lesser resource commitment per unit of output is required
d. processing takes place when the economic event occurs - d.

The type of transaction most suitable for batch processing is

a. airline reservations
b. credit authorization
c. payroll processing
d. adjustments to perpetual inventory - c.

The type of transaction most suitable for real-time processing is

a. recording fixed asset purchases

b. recording interest earned on long-term bonds
c. adjusting prepaid insurance
d. recording a sale on account - d.

Which step is not found in batch processing using sequential files?

a. control totals
b. sort runs
c. edit runs
d. immediate feedback of data entry errors - d.
Both the revenue and the expenditure cycle can be viewed as having two key parts.
These are

a. manual and computerized

b. physical and financial
c. input and output
d. batch and real-time - b.

All of the following can provide evidence of an economic event except

a. source document
b. turn-around document
c. master document
d. product document - c.

Which method of processing does not use the destructive update approach?

a. batch processing using direct access files

b. real-time processing
c. batch processing using sequential files
d. all of the above use the destructive update approach - c.

The characteristics that distinguish between batch and real-time systems include all of
the following except

a. time frame
b. resources used
c. file format
d. efficiency of processing - c.

A file that stores data used as a standard when processing transactions is

a. a reference file
b. a master file
c. a transaction file
d. an archive file - a.

Sequential storage means

a. data is stored on tape

b. access is achieved through an index
c. access is direct
d. reading record 100 requires first reading records 1 to 99 - d.

Real-time processing would be most beneficial in handling a firm's

a. fixed asset records
b. retained earning information
c. merchandise inventory
d. depreciation records - c.

Which accounting application is least suited for batch processing?

a. general ledger
b. vendor payments
c. sales order processing
d. payroll - c.

Which accounting application is best suited for batch processing?

a. general ledger
b. vendor payments
c. sales order processing
d. payroll - d.

Operational inefficiencies occur because

a. accounts both common and unique to many concurrent transactions need to be

updated in real time.
b. accounts common to many concurrent transactions need to be updated in real time.
c. accounts unique to many concurrent transactions need to be updated in real time.
d. None of the above are true statements - b.

Operational efficiencies can be improved by

a. updating accounts both common and unique to many concurrent transactions in real
time.
b. updating accounts both common and unique to many concurrent transactions in
batch mode.
c. updating accounts unique to many concurrent transactions in real time and updating
common accounts in batch mode.
d. None of the above are true statements - c.

Accounting record - Document, journal or ledger used in transaction cycles

Alphabetic codes - Introduce letters into the sequential, block, or group codes to
increase the number of possible values

Archive file - File that contains records of past transactions that are retained for future
reference
Audit trail - Accounting records that trace transactions form their source documents to
the financial statements

Batch systems - Systems that assemble transactions into groups for processing

Block code - Coding scheme that assigns ranges of values to specific attributes such as
account classifications used in a chart of accounts

Chart of accounts - Listing of an organization's accounts showing the account number

and name

Conversion cycle - Cycle composed of the production system and the cost accounting
system

Data flow diagram - Use of a set of symbols in a diagram to represent the processes,
data sources, data flows, and process sequences of a current or proposed system

Data updating - Periodic updating of data stored in the files of an organization

Database management system - Software system that controls access to the data
resource

Expenditure cycle - Acquisition of materials, property, and labor in exchange for cash

Group codes - Codes used to represent complex items or events involving two or more
pieces of related data

Journal - Record of a chronological entry

Ledger - Book of accounts that reflects the financial effects of the firm's transactions
after they are posted from various journals

Master file - File containing account data

Mnemonic codes - Alphabetic characters in the form of acronyms that convey meaning

Product documents - Documents that result from transaction processing

Program flowchart - Diagram providing a detailed description of the sequential and

logical operations of the program

Real-time systems - Systems that process transactions individually at the moment the
economic event occurs
Record layout diagrams - Used to reveal the internal structure of the records that
constitute a file or database table. Usually shows the name, data type, and length of
each attribute (or field) in the record

Register - Often used to denote certain types of special journals. For example, the
payroll journal is often called the payroll _______

Revenue cycle - Cycle composed of sales order processing and cash receipts

Sequential access method - Method in which all records in the file are accessed
sequentially

Sequential codes - Codes that represent items in sequential order

Source documents - Documents that capture and formalize transaction data needed for
processing by their respective transaction cyle

System flowchart - Used to show the relationship between the key elements - input
sources, programs, and output products - of computer systems

Task-data dependency - User's inability to obtain additional information as his or her

needs change

Transaction file - Temporary file that holds transaction records that will be used to
change or update data in a master file

Turnaround documents - Product documents of one system that become source

documents for another system

Processing more transactions at a lower unit cost makes batch processing more
efficient than real-time systems. - True

The process of acquiring raw materials is part of the conversion cycle. - False

Directing work-in-process through its various stages of manufacturing is part of the

conversion cycle. - True

The top portion of the monthly bill from a credit card company is an example of a turn-
around document. - True

The general journal is used to record recurring transactions that are similar in nature. -
False

Document flowcharts are used to represent systems at different levels of detail. - False
Data flow diagrams represent the physical system. - False

Document flowcharts are often used to depict processes that are handled in batches. -
True

Program flowcharts depict the type of media being used (paper, magnetic tape, or
disks) and terminals. - False

System flowcharts represent the input sources, programs, and output products of a
computer system. - True

Program flowcharts are used to describe the logic represented in system flowcharts -
True

Batch processing systems can store data on direct access storage devices. - True

Backups are automatically produced in a direct access file environment. - False

The box symbol represents a temporary file. - False

Auditors may prepare program flowcharts to verify the correctness of program logic. -
True

A control account is a general ledger account which is supported by a subsidiary ledger.

- True

The most significant characteristic of direct access files is access speed. - True

Real time processing is used for routine transactions in large numbers. - False

Batch processing is best used when timely information is needed because this method
processes data efficiently. - False

An inverted triangle with the letter "N" represents a file in "name" order. - False

Real-time processing in systems that handle large volumes of transactions each day
can create operational inefficiencies. - True

Operational inefficiencies occur because accounts unique to many concurrent

transactions need to be updated in real time. - False

Operational inefficiencies occur because accounts common to many concurrent

transactions need to be updated in real time. - True

Batch processing of noncritical accounts improves operational efficiency. - True

Batch processing of accounts common to many concurrent transactions reduces
operational efficiency. – False

An Enterprise Resource Planning (ERP) system can help integrate... - All aspects of a
company's operations with its traditional AIS.

The Data Processing Cycle is composed of... - Data input, data storage, data
processing, and information output.

The data processing cycle helps the operations performed on data to... - Generate
meaningful and relevant information.

The first step in processing input is to... - Capture transaction data and enter them into
the system.

The data capture process is triggered by three facets of each business activity
including... - Each activity of interest, the resources affected by each activity, and the
people who participate in each activity.

Source documents are documents used to.. - Capture transaction data at its source,
when a transaction takes place.

Turnaround documents are... - Records of company data sent to an external party and
the returned to the system as input.

Turnaround documents are formatted in... - Machine-readable form to facilitate their

subsequent processing as input records.

Source data automation derives capture... - Transaction data in machine-readable form

at the time and place of their origin.

The second step in processing input is to make sure captured data are.. - Accurate and
complete.

Well-Designed documents and entry screens improve accuracy and completeness by...
- Providing instructions or prompts about what data to collect, grouping logically related
pieces of information close together, using checkoff boxes or pull-down menus to
present the available options, and using appropriate shading and borders to clarify
separate data items.

Users can improve control by... - Using pre-numbered source documents or by having
the system automatically assign a sequential number to each new transaction.

The third step in processing input is to... - Make sure company policies are followed,
such as approving or verifying a transaction.
To function properly, a company must have ready and easy access to its... - Data.

Cumulative accounting information is stored in... - General and subsidiary ledgers.

A general ledger contains summary-level data for every... - Asset, equity, revenue, and
expense account.

A subsidiary ledger contains detailed data for... - Any general ledger account with many
individual sub-accounts.

Subsidiary ledgers are often used for... - Accounts receivable, inventory, fixed assets,
and accounts payable.

A control account is... - The general ledger account corresponding to a subsidiary

ledger.

The sum of all subsidiary ledger account balances should equal... - The amount in the
corresponding general ledger control account.

Coding is defined as... - The systematic assignment of numbers or letters to items to

classify and organize them.

With sequence codes, items are... - Numbered consecutively to account for all items.

In a sequence code, any missing items cause... - A gap in the numerical sequence.

With a block code, blocks of... - Numbers are reserved for specific categories of data.

Group codes are... - Two or more subgroups of digits used to code items.

Group codes are often used in conjunction with... - Block codes.

Using a Mnemonic code... - Letters and numbers are interspersed to identify an item.

For a better coding system, a code should... - Be consistent, allow for growth, be simple
as possible to minimize costs, and be consistent with the company's organizational
structure.

The chart of accounts is... - A list of the numbers assigned to each general ledger
account.

Account numbers allow transaction data to be... - Coded, classified, and entered into
the proper accounts.
Using a three digit blocking system, the first digit typically represents... - The major
account category and indicates where it will appear on financial statements.

Using a three digit blocking system, the second digit typically represents... - The primary
financial sub-accounts within each category.

Using a three digit blocking system, the third digit typically represents... - The specific
account to which the transaction data will be posted.

Subsidiary ledger accounts often have longer... - Account codes than general ledger
accounts.

A general journal is used to... - Record infrequent or non-routine transactions.

A specialized journal records... - Large numbers of repetitive transactions such as sales,

cash receipts, and cash disbursements.

An Audit trail is... - A traceable path of a transaction through a data processing system
from point of origin to final output, or backward from final output to point of origin.

An audit trail is used to check... - The accuracy and validity of ledger postings.

An entity is something about which... - Information is stored, such as employees,

inventory items, and customers.

Each entity has Attributes, or characteristics of... - Interest that are stored.

A field is... - Where computers store data. (Column).

A Record is... - A field containing data about entity attributes. (Row).

A Data value is... - The corresponding fields of a record. (Specific column + row).

A File is... - A group of related records.

A Master file stores... - Cumulative information about an organization.

Master files are... - Permanent.

A transaction file contains records of... - Individual business transactions that occur
during a specific time.

A database is... - A set of interrelated, centrally coordinated files.

CRUD refers to the four different types of... - Data processing activities.
In CRUD, the C represents... - Creating new data records.

In CRUD, the R represents... - Reading, retrieving, or viewing existing data.

In CRUD, the U represents... - Updating previously stored data.

In CRUD, the D represents... - Deleting data no longer necessary for the company to
hold on to.

Batch processing is... - Accumulating transaction records into groups or batches for
processing at a regular interval such as daily or weekly.

Online, real-time processing is... - Processing data as soon as it is captured and

providing updated information to users on a timely basis.

The final step in a data processing cycle is... - Information output.

Output displayed on a monitor is referred to as... - A soft copy.

Output displayed on a printed sheet of paper is referred to as... - A hard copy.

The three forms information is usually presented are... - Documents, reports, or query
responses.

Documents are... - Records of transaction or other company data.

Reports are used by employees to... - Control operational activities and by managers to
make decisions and to formulate business strategies.

External users need reports to... - Evaluate company profitability, judge

creditworthiness, or comply with regulatory requirements.

A database query is used to... - Provide the information needed to deal with problems
and questions that need rapid action or answers.

Enterprise Resource Planning (ERP) systems coordinate and manage a company's... -

Data, business processes, and resources.

The ERP system collects, processes, and stores data and... - Provides the information
managers and external parties need to asses the company.

A properly configured ERP system uses a centralized database to... - Share information
across business processes and coordinate activities.

An activity that is part of one business process often triggers... - A complex series of
activities throughout many different parts of the organization.
Typical ERP modules include... - Financial, Human Resources and payroll, order to
cash (revenue), purchase to pay (disbursement), manufacturing (production), project
management, customer relationship management, and system tools.

The Financial module of an ERP includes... - General ledger, accounts receivable,

accounts payable, fixed assets, budgeting, cash management, and preparation of
managerial reports and financial statements.

The Human Resources and Payroll module of an ERP includes... - Human Resources,
payroll, employee benefits, training, time and attendance, benefits, and government
reporting.

The Order to Cash (or the Revenue Cycle) module of an ERP includes... - Sales order
entry, shipping, inventory, cash receipts, commission calculation.

The Purchase to Pay (or the Disbursement cycle) module of an ERP includes... -
Purchasing, receipt and inspection of inventory, inventory and warehouse management,
and cash disbursements.

The Manufacturing (or the Production Cycle) module of an ERP includes... -

Engineering, production scheduling, bill of materials, work-in-processes, workflow
management, quality control, cost management, and manufacturing processes and
projects.

The Project Management module of an ERP includes... - Costing, billing, time and
expense, performance units, activity management, and manufacturing processes and
projects.

The Customer Relationship Management module of an ERP includes... - Sales and

marketing, commissions, service, customer contact, and call center support.

The System Tools module of an ERP includes... - Tools for establishing master file data,
specifying flow of information, access controls, and so on.

An ERP provides an integrated, enterprise-wide, single view of... - The organization's

data and financial situation.

Data input is captured or keys once, rather than multiple times, as it is... - Entered into
different systems.

Management gains greater visibility into every area of... - The enterprise and greater
monitoring capabilities.

Procedures and reports are standardized across... - Business units.

Customer service improves because employees can quickly access... - Orders,
available inventory, shipping information, and past customer transaction details.

The disadvantages of an ERP system include... - Cost, amount of time required,

changes to business processes, complexity, and resistance.

What are the 3 cycles of transaction processing? - Expenditure

Conversion
Revenue

Define the 2 components of the expenditure cycle. Why is there a time lag between the
components? - 1. Physical-acquisition of goods/services
2. Financial-cash to the supplier
There is a time lag between components due to credit relationship with supplier

What are the 4 accounting record documents of a manual system? - 1. Source

documents
2. Product Documents
3. Turnaround documents
4. Journals

Define source documents and provide an example - formalize transaction data for
processing. sales receipt, remittance.

Define product documents and provide an example - results of transaction processing.

invoice

Define turnaround documents and provide an example - Product document of one

system and source document for another. bottom portion of the remittance.

Define journals and name the 3 types - Chronological records of transactions

1. special
2. register
3. general journal

Define a special journal - used to record specific classes of transactions that occur in
high frequency - Sales Journal

Define register journal - certain types of special journals

Define a general journal - used to record nonrecurring, infrequent, and dissimilar

transactions.

What is a ledger - book of accounts that reflect effects of transactions as they are
posted from journals
Name the two types of Ledgers - 1. General Ledger
2. Subsidiary Ledger

Define general ledger - contains account information in highly summarized control

accounts

Define subsidiary ledger - contains details for each individual account that constitute a
particular control account

What do the GL and subsidiary ledger accounting records provide? - an audit trail for
tracing account balances contained in the financial system back to the source
documents and events that created them.

Name the 4 types of digital accounting records (mart) - 1. master file

2. transaction file
3. reference file
4. archive file

What does the master file contain? - contains account data

Define the transaction file - A temporary file of transaction records used to update the
master file (sales order, AR)

What does the reference file do - Stores data that are used as a standard for processing
transactions (to accurately post such as sales tax)

What does the Archive file contain - Contains records of past transactions retained for
future use (such as a journal - important part of audit trail-digital record audit trails are
less observable than hard copy documents but they still exist)

What is a flat file structure - an environment where individual data files are not related to
other files. Not shareable

What are the 5 issues with flat file - 1. Data storage - cost of multiple collection and
storage procedures.
2. Data updating - an change or update must be performed multiple times
3. Currency of information - if the update is not properly disseminated, the changes will
not be reflected in some users' data.
4. Task-Data Dependency - The information set is constrained by the data user. leads
to the inability to obtain additional info as needs change.
5. Data Integration - Separate files are difficult to integrate across multiple users.

What are the 2 types of documentation techniques - 1. Data Flow Diagram

2. Entity relationship diagram
They diagram different system aspects but are related
Define Data flow diagram - uses symbols to represent entities, processes, data flows,
and data stores (used by systems analysts to represent the logical elements of the
system but doesn't show the physical system) (models systems processes-where
documents go)

Define entity relationship diagram - used to represent the relationship between business
entities (cardinality 1:1, 1:m, m:m). A data model is blueprint for the physical database
(diagrams system data-how data flows)

Name the 3 document techniques - 1. system flowchart

2. program flowchart
3. record layout diagrams

Define system flowchart - -graphical representation of the physical relationships among

key elements of system. Elements are depts., manual activities, computer pgms, hard-
copy and digital acctg records.
-describes the physical computer media being employed
-shows the processing of a single transaction only

Define program flowchart - Operational details for every program represented in the
system flowchart (sometimes used to verify the correctness of program logic)

Define Record layout diagrams - reveals the internal structure of the digital records in a
database table.

Identify the statement below that is not true with regards to the accounts receivable
subsidiary ledger.
Question options:

A) Every credit sale is entered individually into the subsidiary ledger.

B) Debits and credits in the subsidiary ledger must always equal.

C) The subsidiary ledgers play an important role in maintaining the accuracy of the data
stored in the AIS.

D) The total of the subsidiary ledgers must equal the control account. - B

Which of the following is not usually a consideration when designing a coding system?
Question options:

A) government coding regulations

B) standardization
C) future expansion needs

D) ease of reporting - A

Which of the following is an example of source data automation?

Question options:

A) a utility bill

B) POS (point-of-sale) scanners in retail stores

C) a bill of lading

D) a subsidiary ledger - B

Pre-numbering of source documents helps to verify that

Question options:

A) documents have been used in order.

B) company policies were followed.

C) all transactions have been recorded.

D) source data automation was used to capture data. - C

Identify the statement below that is false with regards to effective coding practices.
Question options:

A) Codes should allow for growth.

B) Codes should be consistent with intended use.

C) Codes should be customized for each division of an organization.

D) Codes should be as simple as possible. - C

he coding technique most likely used for sales orders is

Question options:

A) block code.

B) group code.

C) sequence code.
D) data code. - C

Data processing includes all of the following except

Question options:

A) verifying subsidiary ledger balances.

B) changing customer addresses.

C) removing inventory items no longer offered.

D) adding the name of a new vendor. - A

A general journal
Question options:

A) would be used to record monthly depreciation entries.

B) simplifies the process of recording large numbers of repetitive transactions.

C) records all detailed data for any general ledger account that has individual sub-
accounts.

D) contains summary-level data for every account of the organization. - A

A specialized journal would be most likely to be used to enter

Question options:

A) sales transactions.

B) monthly depreciation adjustments.

C) annual closing entries.

D) stock issuance transactions. - A

John Pablo works in the accounting department of a multinational manufacturing

company. His job includes updating accounts receivable based on sales orders and
remittance advices. His responsibilities are part of the company's
Question options:

A) revenue cycle.

B) expenditure cycle.
C) financing cycle.

D) production cycle. - A

Catarina Boards is a skateboard retailer located in Pueblo, New Mexico. Catarina

Boards is a sole proprietorship that stocks an inventory of between 30 and 50 different
skateboards. Inventory is updated in real time by the AIS. If Catarina wishes to keep
detailed information about the purchase price of each skateboard in a place outside of
the general ledger, it might use a
Question options:

A) relational ledger.

B) transaction file.

C) master file.

D) specific ledger. - B

The collection of employee time sheets is part of which transaction cycle?

Question options:

A) the revenue cycle

B) the production cycle

C) the human resources cycle

D) the expenditure cycle - C

Which of the following information would most likely be reviewed by management on an

exception report?
Question options:

A) monthly cash budget

B) quality control system failures

C) unit sales by territory and salesperson

D) income statement - B

The general ledger

Question options:

A) is the initial place to record general expenses.

B) is posted in total to the general journal.

C) only includes balance sheet accounts.

D) summarizes the transactions in journals. - D

A purchase requisition is a common source document used to facilitate which business

activity?
Question options:

A) customer sale

B) receipt of goods

C) inventory purchase

D) purchase request - D

All of the following situations would likely be communicated in an exception report

except
Question options:

A) production stoppages.

B) weekly credit and cash sales comparison.

C) low inventory level.

D) expense variances outside acceptable range. - B

Which of the following statements is true?

Question options:

A) Batch processing ensures that stored information is always current.

B) Batch input is more accurate than on-line data entry.

C) On-line batch processing is a combination of real-time and batch processing.

D) Batch processing is not frequently used. - C

What is the most frequent revenue cycle transaction?

Question options:

A) purchase of inventory
B) receipt of cash

C) sale to customer

D) billing - C

A subsidiary ledger
Question options:

A) is used to record infrequent or non-routine transactions.

B) simplifies the process of recording large numbers of repetitive transactions.

C) records all detailed data for any general ledger account that has individual sub-
accounts.

D) contains summary-level data for every account of the organization. - C

In transaction processing, generally which activity comes first?

Question options:

A) recording data in a journal

B) posting items to special journals

C) capturing data on source documents

D) recording data in a general ledger - C

A specialized journal
Question options:

A) is used to record infrequent or non-routine transactions.

B) simplifies the process of recording large numbers of repetitive transactions.

C) records all detailed data for any general ledger account that has individual sub-
accounts.

D) contains summary-level data for every account of the organization. - B

ERP stands for

Question options:

A) enterprise resource planning.

B) enterprise resource program.

C) enterprise reporting program.

D) None of these - A

Identify the output below that an accounting information system can provide.
Question options:

A) income statement

B) list of sales returns

C) exception reports

D) All of these - D

All of the following are ERP vendors except

Question options:

A) Dell.

B) SAP.

C) Oracle.

D) Microsoft. - A

Source documents generally help to improve accuracy in transaction processing

because
Question options:

A) they specify which information to collect.

B) logically related data can be grouped in the same area of the document.

C) they provide directions and steps for completing the form.

D) All of these are correct. - D

Which of the following statements is not correct?

Question options:

A) The audit trail is intended to verify the validity and accuracy of transaction recording.
B) The audit trail consists of records stored sequentially in an audit file.

C) The audit trail provides the means for locating and examining source documents.

D) The audit trail is created with document numbers and posting references. - B

Documents that are sent to customers or suppliers and then sent back to the company
in the course of a business transaction are known as
Question options:

A) turnaround documents.

B) source documents.

C) input documents.

D) transaction documents. - A

For a retail business, a delivery of inventory, from a vendor (with whom there is an
established credit relationship) would be initially recorded in which type of accounting
record as part of which transaction cycle?
Question options:

A) purchases journal; expenditure cycle

B) general journal; expenditure cycle

C) general ledger; expenditure cycle

D) cash disbursements journal; production cycle - A

A chart of accounts is an example of (select all that apply)

Question options:

sequence codes.

block codes.

group codes.

mnemonic codes. - Block codes and Group codes

All of the following are advantages of an ERP system except

Question options:

A) in an ERP, data input is captured or keyed once.

B) ERPs permit management to gain greater visibility into every area of the enterprise.

C) it takes considerable experience and training to use an ERP system effectively.

D) ERPs permit manufacturing plants to receive new orders in real time. - C

In Petaluma, California, electric power is provided to consumers by Pacific Power. Each

month Pacific Power mails bills to 86,000 households and then processes payments as
they are received. What is the best way for this business to ensure that payment data
entry is efficient and accurate?
Question options:

A) well-designed paper forms

B) source data automation

C) turnaround documents

D) sequentially numbered bills - C

What is the first step in the data processing cycle?

Question options:

A) input

B) output

C) storage

D) purchasing - A

In an ERP system, the module used to record data about transactions in the production
cycle is called
Question options:

A) order to cash.

B) purchase to pay.

C) manufacturing.

D) logistics. - C

Which of the following documents would be found in the expenditure cycle?

Question options:
A) delivery ticket

B) time card

C) credit memo

D) purchase order - D

Identify the four parts of the transaction processing cycle.

Question options:

A) data input, data storage, data processing, information output

B) data input, data recall, data processing, information output

C) data input, data recall, data transmission, information output

D) data input, data recall, data transmission, data storage - A

Source data automation refers to

Question options:

A) using devices to capture transaction data in machine-readable form at the time the
transaction is initiated.

B) using the internet as the operating platform of an accounting information system.

C) using an accounting information system to electronically bill customers.

D) using an accounting information system to automate a previously manual transaction

process. - A

Pre-numbered invoices and pre-numbered purchase orders are examples of

Question options:

A) sequence codes.

B) block codes.

C) group codes.

D) mnemonic codes. - A
The quality assurance department at a large manufacturing business enters data into
the AIS that is used to produce a weekly report that summarizes the proportion of
defective units in each product line. This is an example of
Question options:

A) internal financial information.

B) internal nonfinancial information.

C) external financial information.

D) external nonfinancial information. - B

Which of the following statements about a master file is false?

Question options:

A) A master file is conceptually similar to a ledger in a manual AIS.

B) A master file's individual records are rarely, if ever, changed.

C) A master file exists across fiscal periods.

D) A master file stores cumulative information. - B

Which statement below is true with regards to an audit trail?

Question options:

A) An audit trail begins with the general journal.

B) An audit trail provides the means to check the accuracy and validity of ledger
postings.

C) An audit trail is a summary of recorded transactions.

D) An audit trail is automatically created in every computer-based information system. -

B

The existence of multiple systems which provide information can result in all of the
following except
Question options:

A) redundancies.

B) discrepancies.

C) integration issues.
D) efficiency. - D

The general ledger account that corresponds to a subsidiary ledger account is known as
a(n)
Question options:

A) dependent account.

B) control account.

C) credit account.

D) attribute account. - B

Implementation of an ERP system requires increased focus on all except which of the
following controls?
Question options:

A) segregation of duties between custody, authorization, and recording

B) data entry controls on validity and accuracy

C) controls over access to data

D) appropriate disposal of hard copy reports - D

Antia Carmie is the largest collector and retailer of Japanese fans in the St. Louis area.
Antia uses computer technology to provide superior customer service. The store's
database system was designed to make detailed information about each Japanese fan
easily accessible to her customers. Accordingly, the fan price and condition are
provided for each fan, along with many pictures of each fan. In Antia's database, the
data about each Japanese fan's price is stored in a(n)
Question options:

A) entity.

B) attribute.

C) field.

D) record. - C

Changing an employee's hourly wage rate would be recorded where?

Question options:
A) employee master file

B) employee transaction file

C) special journal

D) employee update file - C

Product items are often coded with (select all that apply)
Question options:

sequence codes.

block codes.

group codes.

mnemonic codes. - Group codes and Mnemonic codes

What is the final step in the data processing cycle?

Question options:

A) output

B) storage

C) processing

D) input - A

An ERP system might facilitate the purchase of direct materials by all of the following
except
Question options:

A) selecting the best supplier by comparing bids.

B) preparing a purchase order when inventory falls to reorder point.

C) routing a purchase order to a purchasing agent for approval.

D) communicating a purchase order to a supplier. - A

Antia Carmie is the largest collector and retailer of Japanese fans in the St. Louis area.
Antia uses computer technology to provide superior customer service. The store's
database system was designed to make detailed information about each Japanese fan
easily accessible to her customers. Accordingly, the fan price and condition are
provided for each fan, along with many pictures of each fan. In Antia's database, the
Japanese fans (as a whole) represent a(n)
Question options:

A) entity.

B) attribute.

C) field.

D) record. - A

In an ERP system, the module used to record data about transactions in the revenue
cycle is called
Question options:

A) order to cash.

B) purchase to pay.

C) financial.

D) customer relationship management. - A

The general ledger

Question options:

A) is used to record infrequent or non-routine transactions.

B) simplifies the process of recording large numbers of repetitive transactions.

C) records all detailed data for any general ledger account that has individual sub-
accounts.

D) contains summary-level data for every account of the organization. - D

Which step below is not considered to be part of the data processing cycle?
Question options:

A) data input

B) feedback from external sources

C) data storage

D) data processing - B
Which statement below regarding the AIS is false?
Question options:

A) The AIS must be able to provide managers with detailed and operational information
about the organization's performance.

B) Both traditional financial measures and operational data are required for proper and
complete evaluation of performance.

C) The AIS was often just one of the information systems used by an organization to
collect and process financial and nonfinancial data.

D) Traditionally, most AIS have been designed so that both financial and operational
data are stored in a manner that facilitates their integration in reports. - D

All of the following are reasons that implementing a new ERP may fail except
Question options:

A) employees may resist using the ERP system.

B) ERPs can take years to fully implement.

C) employees may refuse to share sensitive information with different departments.

D) ERPs may require procedures and reports to be standardized across business units.
-D

Data about which of the following facets of a business activity is most likely to be
recorded in a transaction file?
Question options:

A) business activity

B) resources affected by the business activity

C) people who participate in the business activity

D) place the business activity occurs - A

Common source documents for the revenue cycle include all of the following except
Question options:

A) sales order.

B) receiving report.
C) delivery ticket.

D) credit memo. - B

Which statement below regarding the AIS and managerial reports is false?
Question options:

A) The AIS is best utilized for financial data while the management information system
is best utilized for operational data.

B) The AIS must be able to provide managers with detailed operational information
about the organization's performance.

C) Both financial and nonfinancial data are required for proper and complete evaluation
of organizational performance.

D) Most source documents capture both financial and nonfinancial data about business
transactions. - A

Which of the following is an example of an ERP system?

Question options:

A) Alexis uses a computerized information system to keep track of all the financial data
generated by her bakery. She is considering opening a new bakery on the east side of
town.

B) Betty has a system that keeps track of the accounts payable and receivable for her
plumbing business. At the end of the year, the system helps her to prepare her taxes in
just two hours.

C) Charlie keeps records of all his business records in a shoe box. Each week he enters
all of the data into spreadsheets that automatically generate purchase orders, based on
predetermined inventory reorder points. Production quotas for the coming week are also
automatically generated based on customer orders.

D) Doug is a freelance photographer. He keeps records of all expenses and revenues

on his cell phone and then e-mails them to himself every month. The files are stored on
his personal computer and backed up to CD quarterly. - C

In an ERP system, the module used to record data about transactions in the
disbursement cycle is called
Question options:

A) order to cash.
B) purchase to pay.

C) financial.

D) customer relationship management. - B

Which of the following statements about data processing methods is true?

Question options:

A) Online real-time processing does not store data in a temporary file.

B) Batch processing cannot be used to update a master file.

C) Control totals are used to verify accurate processing in both batch and online batch
processing.

D) Online real-time processing is only possible with source data automation. - A

The business activity, the resources it affects, the people who participate. - Data must
be collected about three facets of each business activity. What are they?

Antia Carmie is the largest collector and retailer of Japanese fans in the St. Louis area.
Antia uses computer technology to provide superior customer service. The store's
database system was designed to make detailed information about each Japanese fan
easily accessible to her customers. Accordingly, the fan price and condition are
provided for each fan, along with many pictures of each fan. In Antia's database, the
price of the Japanese fans is a(n) - attribute

Build Smarts is a supplier of building materials to more than 150 builders in the state of
Illinois. What is the best way for Build Smarts to ensure that all sales are recorded? -
Sequentially numbered sales invoices

Issuing a purchase order is part of which transaction cycle? - expenditure

Street Smarts is a retailer located in Naperville, Illinois. During the peak tourist season,
it has average daily cash and credit card sales in excess of $10,000. What is the best
way for Street Smarts to ensure that sales data entry is efficient and accurate? - source
data automation

The Cape Fear Rocket Club heads out to the dunes of Cape Fear, Oregon every
August to pierce the sky with their fiery projectiles. An enterprising seller of t-shirts has
devised a series of designs that capture the spirit of the event in silk-screened splendor.
His employees can be found on many of the major intersections selling his products out
of the backs of pickup trucks. What is the best way for this business to ensure that sales
data entry is efficient and accurate? - sequentially numbered forms
Identify the four parts of the transaction processing cycle. - data input, data storage,
data processing, information output

Data Processing Cycle - The operations performed on data to generate meaningful and
relevant information. It has four stages: data input, data storage, data processing, and
information output.

Source Documents - Contain the initial record of a transaction that takes place.
Examples which are usually recorded on preprinted forms, include sales invoices,
purchase orders, and employee time cards.

Turnaround Documents - records of company data sent to an external party and then
returned to the system as input. When paper documents are exchanged with customers
or suppliers, data input accuracy and efficiency are improved by turnaround documents
which are prepared in machine readable form to facilitate their subsequent processing
as input records. i.e. utility bill

Source Data Automation - The collection of transaction data in machine readable form
at the time and place of origin. Example: optical scanners and ATMs.

General Ledger - Contains summary-level data for every asset, liability, equity, revenue,
and expense account.

Subsidiary ledger - Contains detailed data for any general ledger account with many
individual subaccounts

Control Account - A general ledger account that summarizes the content of a specific
subsidiary ledger.

Coding - The systematic assignment of numbers or letters to items to classify and

organize them.

Sequence Codes - Items are numbered consecutively to account for all items

Block Code - Blocks of numbers are reserved for specific categories of data.

Group Codes - Two or more subgroups of digits used to code items, are often used in
conjunction with block codes Ex. p49

Mnemonic Codes - Letter and numbers are interspersed to identify an item

Chart of Accounts - List of accounts used by a company; includes an identification

number for each account.
General Journal - Used to record infrequent or non routine transactions, such as loan
payments and end-of-period adjusting and closing entries

Audit Trail - A traceable path of a transaction through a data processing system from
point of origin to final output, or backwards from final output to point of origin.

Entity - Something about which information is stored.

Attributes - Characteristics of interest about an entity

Field - Contain data about entity attributes...constitutes a record

Transaction File - Contins records of individual business transactions that occur during
a specific time.

Database - A set of interrelated, centrally coordinated files

Batch Processing - Updating done periodically, such as daily

Online, Real-Time Processing - Ensures that stored info is always current, thereby
increasing its decision-making usefulness.

Documents - Records of transaction or other company data

Reports - Used by employees to control operational activities and by managers to make

decisions and to formulate business strategies

Query - Used to provide the info needed to deal with problems and questions that need
rapid actions or answers

Enterprise Resource Planning (ERP) Systems - They integrate all aspects of a

company's operations with a traditional AIS.

data processing cycle - operations performed on data to generate meaningful and

relevant information

4 steps in the data processing cycle - data input, data storage, data processing, and
information output

data input - 1st step in processing input is to capture data and enter them into the
system. data must be collected about 3 facets of the business activity: each activity of
interest, the resource(s) affected by each activity, the people who participate in each
activity. 2nd step is to make sure captured data are accurate and complete. 3rd step is
to make sure company policies are followed
turnaround documents - company output sent to an external party, who often adds data
to the document, and then are returned to the company as an input document

source data automation - devices that capture transaction data in machine-readable

form at the time and place of their origin (ATMs, point-of-sale scanners, barcode
scanners)

general ledger - contains summary-level data for every asset, liability, equity, revenue,
and expense account

subsidiary ledger - contains detailed data for any general ledger account with many
individual subaccounts

control account - the general ledger account corresponding to a subsidiary ledger

coding - the systematic assignment of numbers and letters to items to classify and
organize them

sequence codes - items are numbered consecutively to account for all items. any
missing items cause a gap in the numerical sequence

block code - blocks of numbers are reserved for specific categories of data. users can
identify an item's type and model using the code numbers

group codes - two or more subgroups of digits used to code items, and are often used in
conjunction with block codes

mnemonic codes - letters and numbers are interspersed to identify an item. derived
from the description of the item and is usually easy to memorize

guidelines for a coding system - be consistent with its intended use, allow for growth, be
as simple as possible to minimize costs, facilitate memorization and interpretation, and
ensure employee acceptance, and be consistent with the company's organizational
structure and across the company's divisions

chart of accounts - a list of the numbers assigned to each general ledger account

general journal - used to record infrequent or nonroutine transactions, such as loan

payments and end-of-period adjusting and closing entries

specialized journal - records large numbers of repetitive transactions such as sales,

cash receipts, and cash disbursements

audit trail - a traceable path of a transaction through a data processing system from
point of origin to final output, or backwards from final output to point of origin
entity - something about which information is stored, such as employees, inventory
items, and customers

attributes - characteristics of interest, that are stored, such as a pay rate and address, of
each entity

field - the part of the data record that contains the data value for a particular attribute

record - the fields containing data about entity attributes constitute a ______

data value - the contents of each intersecting row and column in a field within a record

file - a group of related records

master file - stores cumulative information about an organization

transaction file - contains records of individual business transactions that occur during a
specific time

database - a set of interrelated, centrally coordinated files

4 different type of data processing - creating new data records such as adding a newly
hired employee to the payroll. reading, retrieving, or viewing existing data. updating
previously stored data. deleting data, such as purging the vendor master file of all
vendors the company no longer does business with

batch processing - updating done periodically, such as daily

online, real-time processing - updating each transaction as it occurs. ensures that

stored information is always current, thereby increasing its decision-making usefulness

documents - records of transaction or other company data

reports - used by employees to control operational activities and by managers to make

decisions and to formulate business strategies

database query - used to provide the information needed to deal with problems and
questions that need rapid action or answers

enterprise resource planning (ERP) systems - uses a centralized database to share

information across business processes and coordinate activities. well-designed systems
provide management with easy access to up-to-date information about all of these
activities in order to plan, control, and evaluate the organization's business processes
more effectively
Which of the following is NOT a step in the data processing cycle?
a.) Data collection
b.) Data input
c.) Data storage
d.) Data processing - a.) Data collection

All of the information (name, GPA, Major, etc.) about a particular student is stored in the
same_. - Record

Which of the following would contain the total value of all inventory owned by an
organization?
a.) Source document
b.) General ledger
c.) Cash budget - b.) General ledger

Which of the following is most likely to be a general ledger control account?

a.) Accounts receivable
b.) Petty cash
c.) Prepaid rent
d.) Retained earnings - a.) Accounts receivable

Which of the following documents is most likely to be used in the expenditure cycle?
a.) Sales orders
b.) Credit memo
c.) Receiving report
d.) Job time ticket - c.) Receiving report

Which of the following is LEAST likely to be a specialized journal?

a.) Sales journal
b.) Cash receipts journal
c.) Prepaid insurance journal
d.) Cash disbursements journal - c.) Prepaid insurance journal

How does the chart of accounts list general ledger accounts? - The order in which they
appear in financial statements

Which of the following is NOT an advantage of an ERP system?

a.) Better access control
b.) Standardization of procedures and reports
c.) Improved monitoring capabilities
d.) Simplicity and reduced costs - d.) Simplicity and reduced costs

Records of company data sent to an external party and then returned to the system as
input are called_. - Turnaround documents
Recording and processing information about a transaction at the time it takes place is
referred to as which of the following?
a.) Batch processing
b.) Online, real-time processing
c.) Captured transaction processing
d.) Chart of accounts processing - b.) Online, real-time processing