Chapter 2

Overview of Transaction Processing and Enterprise Resource Planning Systems

1) A collection of facts such as test scores, drawings, photographs, and inventory figures is called
____________.
Quantity
Product
Data
Information

2) Which of the following is NOT true about accounting information systems (AISs)?
a. all AIS are computerized
b. . AIS may report both financial and nonfinancial information
c. AIS, in addition to collecting and distributing large amounts of data and information, also
organize and store data for future uses
d. a student who has an interest in both accounting and IT, will find many job opportunities that
combine these knowledge and skills areas

3) The value of information can best be defined as

a) how useful it is to decision makers.
b) the benefits produced by possessing and using the information minus the cost of producing it.
c) how relevant it is.
d) the extent to which it maximizes the value chain.

4) Regardless of the kind of data processed or the kind of device or equipment used, all data
processing systems involve _______.
Analyzing, logic determination, and coding
Input, storage, and processing
Processing, storage, and distribution
Input, processing, and output
 5) This results when a subsystem achieves its goals while contributing to the organization's overall
goal.
a) Goal conflict
b) Goal congruence
c) Value of information
d) Systems congruence

6) Goal conflict may result when

a) A decision or action of a subsystem is inconsistent with the system as a whole.
b) A subsystem achieves its goals while contributing to the organization's overall goal.
c) Duplicate recording, storage and processes are eliminated.
d) The data exceeds the amount the human mind can absorb and process.

7) All computers have common basic functions which are:

Recording, processing, and output
Input, storage, and merging
Processing, sorting, classifying, and output
Input, processing, storage, and output

8) Which of these option is not included in a data processing cycle steps?

Input
Processing
Output
None of the above

9) Which of these are categories of data processing

Mechanical Data Processing
Electronic Data Processing
Scientific Data Processing
All of the above

10) Which of the following statements below shows the contrast between data and information?
A) Data is the output of an AIS.
B) Information is the primary output of an AIS.
C) Data is more useful in decision making than information.
D) Data and information are the same.

11) Information is ________ when two knowledgeable people independently produce the same
information.
A) verifiable
B) relevant
C) reliable
D) completd

12) One person's information may be another person's data.

True
False?

13) The value of information can best be determined by

A) its usefulness to decision makers.
B) its relevance to decision makers.
C) the benefits associated with obtaining the information minus the cost of producing it.
D) the extent to which it optimizes the value chain

14) The value chain concept is composed of two types of activities known as
a) primary and support.
b) primary and secondary.
c) support and value.
d) technology and support.
 15) Information is unfinished data.
True
False?

16) Name the process that returns to its beginning and repeats itself in the same sequence.
Repeater
Sequential
Cycle
None of the above

17) Name the data processing type that processes data by providing actions to multiple data sets
through a single command
Manual Data processing
Online data processing
Real-time processing
Batch data processing

18) Real-time data processing and online data processing are the same concepts..
True
False?

19) The contents of __________ are lost when the computer turns off.
Storage
Input
Output
Memory

20) Which of the following is NOT true of a turn-around document?

It may reduce errors made by external parties.
It is used as internal documents only.
It is commonly used by utility companies (gas, power, water).
It is bot input and output document.

21) A documentation tool used to represent the logical elements of a system is a (n)
data flow diagram.
programming flowchart.
entity relationship diagram.
system flowchart.
all of the above.

22) Which of the following is NOT a true statement?

Transactions are recorded on ledgers and are posted to journals.
Transactions are recorded in journals and are posted to ledgers
Infrequent transactions are recorded in the general journal.
Frequent transactions are recorded in special journal.

23) Documentation tool that depicts the physical flow of information relating to a particular
transaction through an organization is a
ER diagram
System flowchart
Program flowchart
Decision table
Data flow diagram

24) 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.

25) 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.

26) What is the final step in the data processing cycle?

A) output
B) storage
C) processing
D) input

27) 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
28) 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

29) 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

30) 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

31) 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 invoice

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

A) sequence codes.
B) block codes.
C) group codes.
D) mnemonic codes.
 33) The general ledger
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.

34) Which of the following is conceptually similar to a journal in a manual AIS?

A) database
B) master file
C) record
D) transaction file

35) 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)
A) entity.
B) attribute.
C) field.
D) record

36) 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 represents a(n)
A) entity.
B) attribute.
C) field.
D) record.
 37) 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)
A) entity.
B) attribute.
C) field.
D) record

38) Which reduces the size of the data?

a) Source coding
b) Channel coding
c) Source & Channel coding
d) None of the mentioned

39) How are transactions in real-time processing systems edited?

In a separate computer run
In online mode as transactions are entered
During a backup procedure
Not edited due to time constraints

40) batch processing will not permit

a.) data to be edited on a separate computer run
b.) the use of a database structure
c.) decision table
d.) data flow diagram
e.) systems survey

41) Which of the following files is a temporary file?

a.) transaction file
b.) master file
c.) reference file
d.) none of the above
42) Which of the following is NOT an advantage of real-time processing of files over batch
processing?
a.) shorter transaction processing time
b.) reduction of inventory stocks
c.) improved customer service
d.) all are advantages

43) Which of the following is NOT true of a turnaround document?

a.) they may reduce the number of errors made by external parties.
b.) they are commonly used by utility companies (gas, power, water)
c.) they are documents used by internal parties only.
d.) they are both input and output documents

44) Which of the following is not a true statement?

a.) Transactions are recorded on source documents and are posted to journals
b.) transactions are recorded in journal and are posted to ledgers
c.) infrequent transaction are recorded in the general journal
d.) Frequent transactions are recorded in special journals.

45) Which of the following is true and the relationship between subsidiary ledgers and general
ledger accounts?
a.) the two contain different and unrelated data
b.) all general ledger accounts have subsidiaries
c.) the relationship between the two provides an audit trail from the financial statements to the
source documents.
d.) the total of subsidiary ledger accounts usually exceeds the total in the related general ledger
account.

46) A chart of accounts would be best be coded using a(n)_______ coding scheme
a.) alphabetic
b.) mnemonic
c.) block
d.) sequential

47) Which of the following statements is NOT true?

a.) Sorting records that are coded alphabetically tends to be more difficult for users than sorting
numeric sequences.
b.) Mnemonic coding requires the user to memorize codes.
c.) sequential codes carry no information content beyond their order in the sequence.
d.) Mnemonic codes are limited in their ability to represent items within a class.
48) A coding scheme in the form of acronyms and other combinations that convey meaning is a(n)
49) a.) sequential codes
b.) block code
c.) alphabetic code
d.) mnemonic code

50) How does one explain a value chain?

a. Coordinating accounting activities.

b. Coordinating activities with suppliers and customers
c. Linking business values like a chain
d. Everything we do in a business

51) 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

52) When items are numbered consecutively to account for all of them, and the missing items
cause a gap in the sequence, it is a
a. sequence code.
b. block code.
c. group code.
d. mnemonic code.

53) 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

54) How does the chart of accounts list general ledger accounts?
a. alphabetical order
b. chronological order
c. size order
d. the order in which they appear in financial statements
 55) 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

56) What kind of processing involves entering transaction data and editing them as they occur?
a. batch processing
b. online batch processing
c. online real-time processing
57) Which of the following causes the majority of computer security problems?
a. human errors
b. software errors
c. natural disasters
d. power outages

58) Which of the following is not one of the responsibilities of auditors in detecting fraud according
to SAS No. 99?
a. evaluating the results of their audit tests
b. incorporating a technology focus
c. discussing the risks of material fraudulent misstatements
d. catching the perpetrators in the act of committing the fraud

59) Your current system is deemed to be 90% reliable. A major threat has been identified with an
impact of $3,000,000. Two control procedures exist to deal with the threat. Implementation of
control A would cost $100,000 and reduce the likelihood to 6%. Implementation of control B
would cost $140,000 and reduce the likelihood to 4%. Implementation of both controls would
cost $220,000 and reduce the likelihood to 2%. Given the data, and based solely on an
economic analysis of costs and benefits, what should you do?
a. Implement control A only.
b. Implement control B only.
c. Implement both controls A and B.
d. Implement neither control.

60) Which one of the following is not a form to present information?

Document
Report
Application program interface
Oral presentation.
 61) ________________ integrates the planning, management, and use of all of an organization's
resources and is designed to integrate its functional areas tightly.
Transaction processing systems
Enterprise resource planning systems
Supply chain management systems
Functional area information systems

62) Enterprise resource planning systems are very ____ software products, meaning that companies
typically have to change their ___ to accommodate how the software functions.
Unstructured, business processes
Structured, accounting processes
Structured, business processes
Structured, reporting relationships

63) Which of the following statements is (are) true?

a. Well-designed documents and screens improve accuracy and completeness by providing
instructions or prompts about what data to collect
b. Online batch processing is where transaction data are entered, edited, and processed as
they occur.
c. ERP implementation costs for large companies with multiple sites are usually about half
the cost of the ERP user license.
d. In an ERP system, data entry controls such as validating data item and checking them
for accuracy at the time of initial entry are not needed.
e. Data in ledgers is organized logically using coding techniques that assign numbers or
letters to items to classify and organize them.

64) Which of the following statements is (are) true?

a. With sequence codes, items are numbered consecutively to account for all items, and
missing items cause a gap in the numerical sequence.
b. The data capture or input process is usually triggered by a top management decision.
c. Updating done periodically, such as daily or weekly, is referred to as batch processing.
d. Cumulative accounting information is stored in general and subsidiary journals.
e. Computers store data in a field; the fields containing data about entity attributes
constitute a record.

65) Which of the following statements is (are) true?

 a. A chart of accounts facilitates preparing financial statements because data stored in
individual accounts can easily be summed for presentation.
b. Repetitive and frequently used database queries are usually developed by users; one-
time queries are usually developed by information systems specialists.
c. A database query can provide the information needed to deal with problems and
questions that need rapid action or answers.
d. A journal entry shows the accounts and amounts to be debited and credited.
e. Transaction files are permanent and must be maintained for several years for backup
purposes.

66) Which of the following statements is (are) true?

a. A group code is derived from the description of the item and is usually easy to
memorize.
b. Using source data automation or well-designed turnaround documents and data entry
screens helps ensure captured data are accurate and complete
c. It is usually best to let a user determine what data to input rather than have data input
screens list the data the user needs to enter
d. If the sum of all subsidiary ledger account balances does not equal its general ledger
control account balance, a recording error has occurred.
e. Real-time processing updates transactions as they occur, helping ensure stored
information is current and useful in making decision.

67) Which of the following statements is (are) true?

a. With mnemonic codes, blocks of numbers are reserved for specific categories of data.
b. Input controls are improved by using pre-numbered source documents or by the system
automatically assigning a sequential number to each transaction.
c. In an integrated ERP system, undetected data entry errors can automatically propagate
throughout the system.
d. As ERP modules do not automatically trigger additional actions in other modules, it is
less important to understand business processes and their interactions.
e. A purchase to pay ERP module facilitates production scheduling, work-in-process,
quality control, cost management, and manufacturing processes.

68) Which of the following statements is (are) true?

a. Data is one of a company’s most important resources but to function properly most
organizations do not have to have the data readily and easily accessible.
b. Turnaround documents are company output sent to an external party and returned as an
input document.
c. Each type of entity possesses the same set of attributes or characteristics of interest that
are stored, but the specific data values for those attributes will differ depending on the
entity.
d. Reaping the potential benefits of ERP systems and mitigating their disadvantages
requires conscious effort and involvement by top management.
e. Real-time data processing is almost always cheaper and more efficient than batch
processing.
69) Which of the following statements is (are) true?
a. Source data automation devices capture transaction data in paper form at the time and
place of their origin.
b. Master files are permanent and exist across fiscal periods; individual master file records
may change frequently.
c. General ledgers are often used for accounts receivable, inventory, fixed assets, and
accounts payable.
d. If an ERP system does not meet your needs, it can almost always be inexpensively
modified to meet your unique needs
e. When choosing an ERP system, make sure it has a module for every critical company
process and you are not paying for modules you do not need.

70) Which of the following statements is (are) true?

a. Documents are records of transaction or other company data that can be printed out or
stored as electronic images in a computer
b. Transaction data are almost always recorded in a ledger before they are entered into a
journal
c. Since batch processing data are current and accurate only immediately after processing,
it is used for applications that do not need frequent updating.
d. ERP systems are not effective in integrating non-financial company operations with a
traditional accounting system.
e. Well-designed screens improve accuracy and completeness by using checkoff boxes or
pull-down menus to present the available options

71) Which of the following statements is (are) true?

a. A transaction file contains records of individual business transactions and is similar to a
general ledger in a manual AIS.
b. To ensure credit sales policies are followed, the system can be programmed to check a
customer’s credit limit and payment history.
c. Use of pre-numbered documents makes it harder to verify that all transactions have been
recorded and that none has been misplaced.
d. An ERP system uses a centralized database to share information across business
processes and coordinate activities.
e. It is difficult for an ERP system to provide management with the up-to-date information
needed to plan, control, and evaluate an organization’s business

72) Which of the following statements is (are) true?

a. The need for reports should be periodically assessed because they are often prepared
long after they are needed---wasting time, money, and resources.
b. An audit trail is a transaction path through a data processing system from point of origin
to final output, but not backward from final output to point of origin.
c. Accountants and systems developers do not need to understand how data are captured,
organized, stored, processed, or accessed.
 d. An AIS has traditionally been referred to as a transaction processing system because its
only concern was financial data and accounting transactions.
e. A master file, like a ledger in a manual AIS, stores cumulative information about an
organization.

73) What kind of processing involves entering transaction data and editing them as they occur?
a. batch processing
b. ▶ b. online batch processing
c. online real-time processing

74) Records of company data sent to an external party and then returned to the system as input are
called .
a. turnaround documents
b. source data automation documents
c. source documents
d. external input documents