Accounting Information Systems, 13e (Romney/Steinbart)
Chapter 2 Overview of Transaction Processing and Enterprise Resource Planning
Systems
2.1 Describe the four parts of the data processing cycle and the major activities in each.
1) Which of the following commonly initiates the data input process?
A) a business activity
B) automatic batch processing
C) an accounting department source document
D) a trial balance query
2) A typical source document could be
A) some type of paper document.
B) a computer data entry screen.
C) the company’s financial statements.
D) both A and B
3) Which step below is not considered to be part of the data processing cycle?
A) data input
B) feedback from external sources
C) data storage
D) data processing
4) 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
A) revenue cycle.
B) expenditure cycle.
C) financing cycle.
D) production cycle.
5) John Pablo works in the accounting department of a multinational manufacturing company.
His job includes updating accounts payable based on purchase orders and checks. His
responsibilities are part of the company’s
A) revenue cycle.
B) expenditure cycle.
C) financing cycle.
D) production cycle.
6) Many small businesses choose to outsource their payroll activities to firms that specialize in
providing payroll services. Dolores Yu operates a payroll processing business in Calabasas,
California. When she sends bills out to her clients, her work is part of her firm’s
A) revenue cycle.
B) expenditure cycle.
C) financing cycle.
D) production cycle.
7) A delivery of inventory from a vendor, with whom a credit line is already established, would
be initially recorded in which type of accounting record and as part of what transaction cycle?
A) purchases journal; expenditure cycle
B) general journal; expenditure cycle
C) general ledger; expenditure cycle
D) cash disbursements journal; production cycle
8) Describe the basic cycles and business activities for a typical merchandising company.
9) Identify the four parts of the transaction processing cycle.
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
10) What is the most frequent revenue cycle transaction?
A) purchase of inventory
B) receipt of cash
C) sale to customer
D) billing
11) True or False: The existence of relevant data guarantees the data are useful.
12) Identify the item below that is not one of the four different types of data processing activities.
A) creating
B) reading
C) using
D) deleting
13) What is the final step in the data processing cycle?
A) output
B) storage
C) processing
D) input
2.2 Describe documents and procedures used to collect and process transaction data.
1) The general ledger
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.
2) 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?
A) purchases journal; expenditure cycle
B) general journal; expenditure cycle
C) general ledger; expenditure cycle
D) cash disbursements journal; production cycle
3) Data must be collected about three facets of each business activity. What are they?
A) the business activity, the resources it affects, the people who participate
B) the business activity, the transactions it creates, the impact on the financial statements
C) the inputs, outputs and processes used
D) who is involved, what was sold, how much was paid
4) Issuing a purchase order is part of which transaction cycle?
A) the revenue cycle
B) the expenditure cycle
C) the human resources cycle
D) the production cycle
5) The collection of employee time sheets is part of which transaction cycle?
A) the revenue cycle
B) the production cycle
C) the human resources cycle
D) the expenditure cycle
6) Common source documents for the revenue cycle include all of the following except
A) sales order.
B) receiving report.
C) delivery ticket.
D) credit memo.
7) Which of the following documents would be found in the expenditure cycle?
A) delivery ticket
B) time card
C) credit memo
D) purchase order
8) 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
A) turnaround documents.
B) source documents.
C) input documents.
D) transaction documents.
9) Which of the following is an example of source data automation?
A) a utility bill
B) POS (point-of-sale) scanners in retail stores
C) a bill of lading
D) a subsidiary ledger
10) Pre-numbering of source documents helps to verify that
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.
11) Source documents generally help to improve accuracy in transaction processing because
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 the above are correct.
12) In transaction processing, generally which activity comes first?
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
13) Which of the following statements is true?
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.
14) The data processing method used by FedEx to track packages is an example of
A) real-time processing.
B) batch processing.
C) online batch processing.
D) real-time batch processing.
15) Street Smarts (SS) is a retailer located in Naperville, Illinois. During the peak tourist season,
it has average daily cash and credit card sales in excess of $7,000. What is the best way for SS to
ensure that sales data entry is efficient and accurate?
A) well-designed paper forms
B) source data automation
C) turnaround documents
D) sequentially numbered sales invoices
16) 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?
A) well-designed paper forms
B) source data automation
C) turnaround documents
D) sequentially numbered bills
17) Data processing includes all of the following except
A) verifying subsidiary ledger balances.
B) changing customer addresses.
C) removing inventory items no longer offered.
D) adding the name of a new vendor.
18) 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?
A) well-designed paper forms
B) source data automation
C) turnaround documents
D) sequentially numbered forms
19) Which of the following statements about data processing methods is true?
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.
20) What is the purpose of source documents? What controls are embedded in source
documents? Give two examples of source documents.
21) Describe the methods used to collect data about business activities. Describe design and
control considerations for each of the data collection methods.
22) Source data automation refers to
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.
23) What is the first step in the data processing cycle?
A) input
B) output
C) storage
D) purchasing
24) A purchase requisition is a common source document used to facilitate which business
activity?
A) customer sale
B) receipt of goods
C) inventory purchase
D) purchase request
2.3 Describe the ways information is stored in computer-based information systems.
1) Identify the statement below that is not true with regards to the accounts receivable subsidiary
ledger.
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.
2) Which of the following is not usually a consideration when designing a coding system?
A) government coding regulations
B) standardization
C) future expansion needs
D) ease of reporting
3) Which of the following statements regarding special journals is not true?
A) The balances in a special journal must always reconcile to the general ledger.
B) Special journals are used to record large numbers of repetitive transactions.
C) Special journals are periodically summarized and posted to the general ledger.
D) Special journals provide a specialized format for recording similar transactions.
4) A change in an employee’s hourly pay would be recorded in
A) the payroll master file.
B) a payroll transaction file.
C) the employee master file.
D) the employee transaction file.
5) When the sum of all entries in the subsidiary ledger equals the balance in the corresponding
general ledger account, it is assumed that
A) the recording processes were accurate.
B) all source documents were recorded.
C) adjusting entries are not required.
D) no errors exist in the subsidiary ledger.
6) The general ledger account that corresponds to a subsidiary ledger account is known as a(n)
A) dependent account.
B) control account.
C) credit account.
D) attribute account.
7) Pre-numbered invoices and pre-numbered purchase orders are examples of
A) sequence codes.
B) block codes.
C) group codes.
D) mnemonic codes.
8) A chart of accounts is an example of (select all that apply)
A) sequence codes.
B) block codes.
C) group codes.
D) mnemonic codes.
9) Product items are often coded with (select all that apply)
A) sequence codes.
B) block codes.
C) group codes.
D) mnemonic codes.
10) Identify the statement below that is false with regards to effective coding practices.
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.
11) To be effective, the chart of accounts must
A) not use alpha-numeric characters.
B) contain sufficient detail.
C) utilize only one coding technique.
D) begin with account 001.
12) The chart of accounts of a movie theater would probably include
A) retained earnings.
B) a drawing account.
C) work-in-process.
D) both A and C
13) The efficiency of recording numerous business transactions can be best improved by the use
of
A) prenumbered source documents.
B) specialized journals.
C) posting references.
D) subsidiary ledgers.