Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage

Chapter 8
ACCOUNTING INFORMATION SYSTEMS
AND BUSINESS PROCESSES: PART I

True-False Questions

27. A ledger is a chronological record of business events that impact the accounting equation.

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

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

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

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

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

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

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

35. Three primary concerns of a data collection process are accuracy, timeliness, and cost-
effectiveness.

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

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

38. Group codes are often used as product codes in a business.

39. The first step in the accounting cycle is to post a transaction to the ledger.

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

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

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

43. A shipping notice is a source document that serves as a packing slip and accompanies goods
sent to a customer.

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 Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage

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

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

Multiple-Choice Questions

46. 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

47. A general ledger:

48. Is a chronological listing of an organization’s transactions
b) Is a collection of an organization’s monetary 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

49. The financial accounting cycle ends with:

50. The production of financial statements
b) Closing journal entries and a post-closing trial balance
c) The production of an adjusted trial balance
d) Development of cash forecasts

51. Which of the following is not a primary objective of coding systems today?
) 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

52. An AIS includes certain source documents to control sales and accounts receivable. The most
complete set of documents for a manufacturer would include:
) Sales order, shipping notice, sales invoice, customer remittance advice, bank
deposit slip.
b) Purchase order, receiving report, shipping notice, sales invoice, customer
remittance advice, bank deposit slip.
c) Sales order, receiving report, sales invoice, customer remittance advice.
d) Inventory reports of goods needed, purchase order, receiving report, vendor
invoice.

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 Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage

25. Which of the following is not usually a design consideration in coding systems?
53. 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?
) They are useful
b) They are conveniently formatted
c) They never include graphs
d) They are easily identifiable

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?

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

29. Performance reports are:

) Reports that compare budgets with actual performance
b) Reports that show any exception conditions in an organization
c) Adjusted trial balance
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 revenue transactions is to:

) 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

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 Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage

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:

) 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?

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

35. Which source document is used to request goods?

) Purchase order
b) Shipping notice
c) Purchase requisition
d) Sales order

36. The bill of lading:

) 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:

) 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:

) 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

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 Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage

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) result from both the sales process and the
purchasing process?
a) Sales analysis reports
b) Financial statement information
c) both cash flow forecasts and financial statement information
d) none of the above

43. All of the following are inputs (source documents) to the purchasing process except:
a) Purchase order
b) Vendor invoice
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 accounts payable processing?

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

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 Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage

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) Companies engaged in business process outsourcing to offer 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 related business 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

49. Much of the input and output related to business processes is now electronic. Which of
the following technologies is 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

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 Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage

50. When companies outsource business processes to other countries, such as India, and the
Philippines, it is often the case that workers in those countries:
a) Gain job prestige
b) Enjoy a better quality of life
c) Have higher income
d) all the above

51. Which of the following is a benefit to corporate executives when a process is outsourced?
a) Day-to-day process management responsibilities are deleted
b) More time to explore new revenue generation activities
c) More time to focus on recruiting and training personnel
d) Changing customer demands are no longer a problem

Matching Questions

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

52. ______ business process

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

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 Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage

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. Combining two or more codes to create a new code
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

63. What are the purposes of accounting codes?

64. What is the difference between a data flow diagram and a system flowchart?

65. What does offshoring business processes mean?

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