Core Concepts Of Accounting

Information Systems 12th Edition

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 Chapter 7
Accounting Information Systems and Business Processes:
Part I

True-False Questions
1. A ledger is a chronological record of business events by account.

2. A company’s chart of accounts is used to organize its general ledger.

3. A cash disbursements journal is an example of a special journal.

4. Subsidiary ledgers are frequently maintained for accounts receivable and inventory
accounts.

5. The first trial balance produced by an AIS in the accounting cycle, is the adjusted trial
balance.

6. Managerial reports are the primary output of the financial accounting system.

7. Codes are seldom used in an AIS because they use excess space.

8. Block codes are commonly used in constructing charts of accounts.

9. Three major objectives of a data collection process are accuracy, timeliness, and
cost-effectiveness.

10. Debit/credit memoranda are issued when there is a discrepancy about the amount
owed or when goods are returned.

11. Block codes consist of a combination of a sequence code and a mnemonic code.

12. Group codes are very flexible in identifying accounting data.

13. A two-digit alphabetic code has many more different combinations of symbols than a
two-digit numeric code.

14. The sales process begins with placing an order with a vendor.

15. The AIS should bill customers for goods at the time they are ordered.

16. The purchasing process is complete when goods are received from vendors.

17. A shipping notice is a source document that accompanies goods sent to a customer.

18. The purchasing process begins with a request for goods or services and ends with
receipt of the goods or services.

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19. The purchasing process begins with a request for goods or services and ends with
payment to the vendor.

Multiple-Choice Questions
20. Which of the following is not one of the trial balances typically produced as part of
the financial accounting cycle?
a) Closing trial balance
b) Unadjusted trial balance
c) Adjusted trial balance
d) Post-closing trial balance

21. A general ledger:

a) Is a chronological listing of an organization’s transactions
b) Is a listing of an organization’s transactions, organized by account
c) Does not include every account in an organization’s chart of accounts
d) Is the same thing as a transaction listing

22. The financial accounting cycle ends with:

a) The production of financial statements
b) The production of a post closing trial balance
c) The production of an adjusted trial balance
d) Development of cash forecasts

23. Which of the following is not a primary objective of coding systems today?
a) To compress data
b) To uniquely identify objects
c) To convey special meanings that are not apparent to the public-at-large
d) To use numbers instead of alphabetic characters in order to save on
computer data storage costs

24. The Year 2000 problem was a prime example of:

a) Information overload
b) A coding problem
c) Poorly designed report structures
d) The short-sightedness of accountants

25. Which of the following is not usually a design consideration in coding systems?
a) Consistency
b) Standardization
c) Government regulation
d) Plans for future expansion

26. Well-designed output reports are characterized by all but which of the following?
a) They are useful
b) They are conveniently formatted
c) They never include graphs
d) They are easily identifiable

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27. Information overload:
a) Refers to a problem that can result when an AIS produces too many reports
b) Refers to the situation that occurs when a company’s database is too large
c) Almost always results when an AIS is computerized
d) Cannot be avoided in the Information Age

28. Which of the following is not an example of a source document?

a) Receiving report
b) Purchase order
c) Sales order
d) Aging report

29. Performance reports are:

a) Reports that compare budgets with actual performance
b) Reports that show any exceptional conditions in an organization
c) Never presented in an exception format
d) Transaction listings

30. The sales process begins with:

a) Placing an order with a vendor
b) A customer order for goods or services
c) Production of goods or services
d) Delivery of goods or services

31. The primary objective in processing revenues is to:

a) Sell as many goods as possible
b) Achieve timely and efficient cash collection
c) Maximize an organization’s sales orders
d) Only sell goods to customers who can pay their bills

32. An important input to the sales process is:

a) A customer sales order
b) The cash forecast
c) Aged accounts receivable information
d) A receiving report

33. To forecast cash receipts, information must be collected from:

a) The purchasing process
b) Payroll processing
c) Inventory control systems
d) The sales process

34. Which of the following is not an objective of the purchasing process?

a) Inventory control
b) Fastest possible processing of payments to vendors
c) Maintaining vendor records
d) Forecasting cash outflows

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35. Which source document is used to request goods?
a) Purchase order
b) Shipping notice
c) Purchase requisition
d) Sales order

36. The bill of lading:

a) Reflects freight charges on goods shipped
b) Signifies release of goods for shipment to customers
c) Is sent to the customer with the purchase invoice
d) Is used to control inventory

37. Inputs to transaction processing systems:

a) Are always in hard copy
b) Are best when input in a graphical format
c) May be in an electronic format when an EDI system is used
d) May never be audio

38. Forecasting cash flows:

a) Is an objective of transaction processing
b) Is never considered an objective of transaction processing
c) Is only possible in computerized AISs
d) Is considered as a risky activity with which accountants should not be
associated

39. Which of the following is not an objective of the sales process?

a) Controlling inventory
b) Tracking sales of goods and/or services to customers
c) Billing for goods and services
d) Forecasting sales and cash receipts

40. All of the following are inputs (source documents) to the sales process except:
a) Sales order
b) Shipping notice
c) Remittance advice
d) all of the above are source documents to the sales process

41. Business organizations are recognizing the value of sales data and are purchasing
software solutions to gather, maintain, and use these data to provide better service
and promote customer loyalty. These software solutions are called:
a) Customer relations data solutions
b) Customer relationship management solutions
c) Sales data management solutions
d) none of the above

42. Which of the following outputs (reports) are common to both the sales process and
the purchasing process?
a) Sales analysis reports
b) Financial statement information
c) both (a) and (b)
d) none of the above

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43. All of the following are inputs (source documents) to the purchasing process except:
a) Purchase order
b) Vendor listing
c) Bill of lading
d) all of the above are source documents to the purchasing process

44. Which of the following is an objective of the purchasing process?

a) Collecting information for the financial statements
b) Making timely and accurate vendor payments
c) Forecasting cash requirements
d) Tracking bills of lading

45. Which of the following statements best describes business process outsourcing?
a) A company focuses on its core business processes and contracts with
another firm to do the other processes
b) Companies frequently outsource core business processes
c) Due to networked enterprises and advanced technology, more employees
may work from their homes or alternate locations
d) Initially, companies engaged in business process outsourcing offered
employees more opportunities to travel and more career choices for
advancement

46. Networked enterprises and globalization have enabled a new business model called
“business-without-boundaries.” Which of the following statements describes this
business model?
a) Companies no longer have all of their employees in one location
b) It is called offshoring and companies contract with firms in other countries to
do such business processes as human resources, payroll, and accounting
c) Companies are under a great deal of scrutiny to manage costs and generate
revenue so they contract with foreign firms to do various business processes
at a lower cost to the company
d) all of the above statements describe this model

47. Which of the following statements best describes a business process?

a) It is a collection of activities in an organization that creates value
b) The nature and type of processes might vary from industry to industry
c) It is an activity that increases and/or decreases dollar amounts on the
financial statements
d) It is an economic event in the life of an organization

48. Which of the following Business Process Management (BPM) software solutions is
most often associated with the sales process?
a) Enterprise resource management
b) Integrated management
c) Customer relationship management
d) Supply chain management
e) none of the above

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49. Much of the input and output related to business processes is now electronic. Which
of the following technologies is becoming increasingly popular to manage inventory?
a) EDI
b) RFID tags
c) Magnetic ink characters that can be quickly and easily scanned
d) Bluetooth and wireless-enabled laptop computers

50. The information management wants to see in ______ determines many of the fields
in the firm’s ______.
a) Subforms, queries
b) Reports, database
c) Ledgers, journal entries
d) Business processes, EDI

51. In the sales process, in an online environment, ______ occurs before ______.
a) Customer payment, customer order
b) Customer payment, shipping notice
c) Vendor order, vendor payment
d) Work in process, finished goods

52. Why do firms like Walmart and Procter & Gamble create supply chain partnerships?
a) These firms are chain stores, and they need supply chains
b) Supply chains make inventory management more efficient
c) Supply chains make database designs more efficient
d) Supply chains allow the firms to be more independent

Matching Questions
For the following terms find the correct definition below and place the letter of that response
in the blank space provided before the term. Each definition is used only once – there are
four terms that are not used.

53. ______ business process

54. ______ BPM software
55. ______ BPO
56. ______ business-without-boundaries
57. ______ CRM software
58. ______ off-shoring
59. ______ RFID tags
60. ______ sales process
61. ______ mnemonic codes
62. ______ exception report
63. ______ business event

TB 7.6
Definitions:

A. Organizational structure for the general ledger

B. Codes that help the user remember what they represent
C. A sequential set of numbers used to identify customer accounts, employee payroll
checks, customer sales invoices, and so forth
D. A list of conditions – for example, a purchase order has an authorization signature
but contains some inaccurate or missing information
E. A collection of activities and work flows in an organization that creates value
F. An activity that does not impact the financial statements, but is nevertheless
important to the business
G. Maintaining customer records is an important function
H. Software to gather, maintain, and use these data to provide better customer service
and customer loyalty
I. Begins with a request (or an order) for goods or services
J. List of differences between quantities or amounts on the purchase order, the
receiving report, and the purchase invoice
K. A new technology that is used in the sales and the purchasing processes
L. This business model is a result of networked enterprises and globalization
M. When companies have production or work completed in countries like India, China,
Canada, Mexico, or Malaysia
N. When companies contract with other companies to do certain tasks, such as human
resources, finance and accounting, customer services, training, and IT
O. Software that collects corporate knowledge, data, and business rules to improve core
processes

Short Answer Questions

64. What are the purposes of accounting codes?

65. What is the difference between a data flow diagram for the sales process and a
system flowchart describing the sales process?

66. What does offshoring business processes mean?

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