Horngren’s Financial and Managerial Accounting, 6e (Miller-Nobles)
1) An accounting information system collects, records, stores, and processes accounting data to produce
information that is useful for decision makers.
2) The collection of time records for company employees is an accounting information system activity
that is classified as a business transaction involving the sale of merchandise inventory.
3) Which of the following is an accounting information system activity that can be classified as a payroll
business transaction?
A) approval of new employees
B) receipt of customer payment
C) processing of vendor invoices
D) payment for goods or services
4) Which of the following accounting information system activities is completed when merchandise
inventory is sold?
A) preparation and payment of payroll
B) receipt of customer payment
C) receipt of goods or services
D) payment for goods or services
5) For each of the following business transactions, list two examples of related accounting information
system (AIS) activities:
Business Transactions
Accounting Information System Activities
Sell merchandise inventory
Purchase of goods or
services
Payroll
Business Transactions
Accounting Information System Activities
Sell merchandise inventory
Receipt of customer order
Approval of credit sale
Check availability of merchandise inventory
Shipment of inventory to customer
Processing of sales invoice
Receipt of customer payment
Purchase of goods or
services
Receipt for purchase of goods or services
Approval of vendor
Receipt of goods or services
Processing of vendor invoice
Payment for goods or services
Payroll
Approval of new employees
Collection of time records
Preparation and payment of payroll
Preparation and payment of payroll taxes
Diff: 2
LO: APP. B-1
AACSB: Information technology
AICPA Functional: Leverage technology to develop and enhance functional competencies
PE Question Type: Application
H2: What Is an Accounting Information System? (H1)
6) An accounting information system creates the structure to encourage adherence to management
policies.
7) A business must invest only in an accounting information system in which the benefits received
outweigh the cost of the system.
8) To safeguard a business‘s assets and reduce the likelihood of fraud and errors, its accounting
information system ________.
A) should be manual
B) must be flexible to accommodate changes in a business over time
C) should work smoothly with the business’s employees
D) must provide adequate controls of a business’s assets and data
9) An accounting information system is said to have good compatibility, if it ________.
A) works smoothly with the business’s employees and organizational structure
B) safeguards a business’s assets and reduces the likelihood of fraud and errors
C) provides information that will improve decision making and reduce uncertainty
D) accommodates changes in the business over time
10) An accounting information system is said to have good flexibility, if it ________.
A) works smoothly with the business’s employees and organizational structure
B) safeguards a business’s assets and reduces the likelihood of fraud and errors
C) provides information that will improve decision making and reduce uncertainty
D) accommodates changes in the business over time
11) An accounting information system is said to be relevant, if it ________.
A) works smoothly with the business’s employees and organizational structure
B) safeguards a business’s assets and reduces the likelihood of fraud and errors
C) provides information that will improve decision making and reduce uncertainty
D) accommodates changes in the business over time
12) An accounting information system is said to have good control characteristics, if it ________.
A) works smoothly with the business’s employees and organizational structure
B) safeguards a business’s assets and reduces the likelihood of fraud and errors
C) provides information that will improve decision making and reduce uncertainty
D) accommodates changes in the business over time
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13) Which of the following is true of an effective accounting information system?
A) It has little influence in improving a company’s internal control activities.
B) The cost of using an accounting information system is the same for both small and large businesses.
C) A compatible accounting information system works smoothly with the business’s employees and
organizational structure.
D) Large private companies prefer a manual accounting information system since their financial
statements are not audited.
14) An effective accounting information system that provides relevant information ________.
A) increases the likelihood of fraud and errors
B) reduces the cost of employing an accounting information system
C) improves decision making and reduces uncertainty
D) improves the accuracy of data entry when manual
15) List and describe two features of an effective accounting information system.
Match the benefit of an effective accounting information system with the definition.
A) Provides information that will improve decision making and reduce uncertainty.
B) Benefits received outweigh the cost of the system.
C) Works smoothly with the business’s employees and organization structure.
D) Can accommodate changes in the business over time.
E) Provides safeguards for a business’s assets and reduces the likelihood of fraud and errors.
16) Control
Diff: 2
LO: APP. B-1
AACSB: Application of knowledge
AICPA Functional:
PE Question Type: Application
Leverage technology to develop and enhance functional competencies
H2: Effective Accounting Information Systems
17) Relevance
Diff: 2
LO: APP. B-1
AACSB: Application of knowledge
AICPA Functional: Leverage technology to develop and enhance functional competencies
PE Question Type: Application
H2: Effective Accounting Information Systems
18) Flexibility
Diff: 2
LO: APP. B-1
AACSB: Application of knowledge
AICPA Functional: Leverage technology to develop and enhance functional competencies
PE Question Type: Application
H2: Effective Accounting Information Systems
19) Compatibility
Diff: 2
LO: APP. B-1
AACSB: Application of knowledge
AICPA Functional: Leverage technology to develop and enhance functional competencies
PE Question Type: Application
H2: Effective Accounting Information Systems
20) Positive cost/benefit relationship
Diff: 2
LO: APP. B-1
AACSB: Application of knowledge
AICPA Functional: Leverage technology to develop and enhance functional competencies
PE Question Type: Application
H2: Effective Accounting Information Systems
21) List and briefly discuss the three basic components of an accounting information system.
Answer:
22) An accounting information system has three basic components: source documents and input devices,
processing and storage, and internal controls.
23) Examples of source documents in an accounting information system include the statement of cash
flows and sales journal.
24) Prenumbered source documents provide necessary control in a system by automatically assigning a
sequential number to each new transaction.
25) A source document provides the evidence and data for accounting transactions.
26) In a computerized accounting information system, all data are contained in paper documents that are
often stored in filing cabinets and off-site document warehouses.
27) Companies are now spending less amounts of cash to ensure that their data and information are
secure.
28) Because of the risk of fraud, electronic invoices and electronic receiving reports are seldom used in
accounting information systems.
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29) In an accounting information system, outputs are the reports used for decision making, which include
the financial statements.
30) In a manual accounting information system, reports and financial statements must be created using
Word documents, Excel spreadsheets, or PowerPoint.
31) The main computer where data are stored, which can be accessed from many different computers, is
known as software.
32) A computerized system uses software to process transactions. Thus employees are no longer required
to manually journalize and post transactions to the accounts.