College of St. Scholastica

ACCTNG 101

Chapter 2-Introduction to Transaction Processing

TRUE/FALSE

1)Processing more transactions at a lower unit cost makes batch processing more efficient than real-time systems.

2. The process of acquiring raw materials is part of the conversion cycle.

3. Directing work-in-process through its various stages of manufacturing is part of the conversion cycle.

4. The top portion of the monthly bill from a credit card company is an example of a turn-around document.

5. The general journal is used to record recurring transactions that are similar in nature.

6. Document flowcharts are used to represent systems at different levels of detail.

7. Data flow diagrams represent the physical system.

8. Document flowcharts are often used to depict processes that are handled in batches.

9. Program flowcharts depict the type of media being used (paper, magnetic tape, or disks) and terminals.

10. System flowcharts represent the input sources, programs, and output products of a computer system.

11. Program flowcharts are used to describe the logic represented in system flowcharts.

12. Batch processing systems can store data on direct access storage devices.

13. Backups are automatically produced in a direct access file environment.

14. The box symbol represents a temporary file.

15. Auditors may prepare program flowcharts to verify the correctness of program logic.

16. A control account is a general ledger account which is supported by a subsidiary ledger.

17. The most significant characteristic of direct access files is access speed.

18. Real time processing is used for routine transactions in large numbers.

19. Batch processing is best used when timely information is needed because this method processes data efficiently.

20. An inverted triangle with the letter “N” represents a file in “name” order.

21. Real-time processing in systems that handle large volumes of transactions each day can create operational inefficiencies.

22. Operational inefficiencies occur because accounts unique to many concurrent transactions need to be updated in real time.

23. Operational inefficiencies occur because accounts common to many concurrent transactions need to be updated in real time.

24. Batch processing of noncritical accounts improves operational efficiency.

25. Batch processing of accounts common to many concurrent transactions reduces operational efficiency.

MULTIPLE CHOICE

1. Which system is not part of the expenditure cycle?
   1. cash disbursements
   2. payroll
   3. production planning/control
   4. purchases/accounts payable
2. Which system produces information used for inventory valuation, budgeting, cost control, performance reporting, and make-buy decisions?
   1. sales order processing
   2. purchases/accounts payable
   3. cash disbursements
   4. cost accounting
3. Which of the following is a turn-around document?
   1. remittance advice
   2. sales order
   3. purchase order
   4. payroll check
4. The order of the entries made in the ledger is by
   1. transaction number
   2. account number
   3. date
   4. user
5. The order of the entries made in the general journal is by
   1. date
   2. account number
   3. user
   4. customer number
6. In general a special journal would not be used to record
   1. sales
   2. cash disbursements
   3. depreciation
   4. purchases

7. Which account is least likely to have a subsidiary ledger?
   1. sales
   2. accounts receivable
   3. fixed assets
   4. inventory
8. Subsidiary ledgers are used in manual accounting environments. What file is comparable to a subsidiary ledger in a computerized environment?
   1. archive file
   2. reference file
   3. transaction file
   4. master file
9. A journal is used in manual accounting environments. What file is comparable to a journal in a computerized environment?
   1. archive file
   2. reference file
   3. transaction file
   4. master file
10. In a computerized environment, a list of authorized suppliers would be found in the
    1. master file
    2. transaction file
    3. reference file
    4. archive file
11. Which of the following is an archive file?
    1. an accounts payable subsidiary ledger
    2. a cash receipts file
    3. a sales journal
    4. a file of accounts receivable that have been written off
12. Which document is not a type of source document?
    1. a sales order
    2. an employee time card
    3. a paycheck
    4. a sales return receipt
13. The most important purpose of a turn-around document is to
    1. serve as a source document
    2. inform a customer of the outstanding amount payable
    3. provide an audit trail for the external auditor
    4. inform the bank of electronic funds deposits

14. Which type of graphical documentation represents systems at different levels of detail?
    1. data flow diagram
    2. document flowchart
    3. system flowchart
    4. program flowchart
15. Data flow diagrams
    1. depict logical tasks that are being performed, but not who is performing them
    2. illustrate the relationship between processes, and the documents that flow between them and trigger activities
    3. represent relationships between key elements of the computer system
    4. describe in detail the logic of the process
16. Document flowcharts
    1. depict logical tasks that are being performed, but not who is performing them
    2. illustrate the relationship between processes, and the documents that flow between them and trigger activities
    3. represent relationships between key elements of the computer system
    4. describe the logic of the process
17. When determining the batch size, which consideration is the least important?
    1. achieving economies by grouping together large numbers of transactions
    2. complying with legal mandates
    3. providing control over the transaction process
    4. balancing the trade off between batch size and error detection
18. In contrast to a real-time system, in a batch processing system
    1. there is a lag between the time when the economic event occurs and the financial records are updated
    2. relatively more resources are required
    3. a greater resource commitment per unit of output is required
    4. processing takes place when the economic event occurs
19. In contrast to a batch processing system, in a real-time system
    1. a lag occurs between the time of the economic event and when the transaction is recorded
    2. relatively fewer hardware, programming, and training resources are required
    3. a lesser resource commitment per unit of output is required
    4. processing takes place when the economic event occurs
20. The type of transaction most suitable for batch processing is
    1. airline reservations

20. 2. credit authorization
    3. payroll processing
    4. adjustments to perpetual inventory
21. The type of transaction most suitable for real-time processing is
    1. recording fixed asset purchases
    2. recording interest earned on long-term bonds
    3. adjusting prepaid insurance
    4. recording a sale on account
22. Which step is not found in batch processing using sequential files?
    1. control totals
    2. sort runs
    3. edit runs
    4. immediate feedback of data entry errors
23. Both the revenue and the expenditure cycle can be viewed as having two key parts. These are
    1. manual and computerized
    2. physical and financial
    3. input and output
    4. batch and real-time
24. All of the following can provide evidence of an economic event except
    1. source document
    2. turn-around document
    3. master document
    4. product document
25. Which method of processing does not use the destructive update approach?
    1. batch processing using direct access files
    2. real-time processing
    3. batch processing using sequential files
    4. all of the above use the destructive update approach

26. 

    Which symbol represents a data store? a.

d.

27. 

    Which symbol represents a manual operation? a.

d.

28. 

    Which symbol represents accounting records? a.

29. 

    Which symbol represents a document? a.

c.

30. 

    Which symbol represents a magnetic tape (sequential storage device)? a.

31. 

    Which symbol represents a decision? a.

b.

c.

32. The characteristics that distinguish between batch and real-time systems include all of the following except
    1. time frame
    2. resources used
    3. file format
    4. efficiency of processing
33. A file that stores data used as a standard when processing transactions is
    1. a reference file
    2. a master file
    3. a transaction file
    4. an archive file
34. Sequential storage means
    1. data is stored on tape
    2. access is achieved through an index
    3. access is direct
    4. reading record 100 requires first reading records 1 to 99
35. Real-time processing would be most beneficial in handling a firm’s
    1. fixed asset records
    2. retained earning information
    3. merchandise inventory
    4. depreciation records
36. Which accounting application is least suited for batch processing?
    1. general ledger
    2. vendor payments
    3. sales order processing
    4. payroll
37. Which accounting application is best suited for batch processing?
    1. general ledger
    2. vendor payments
    3. sales order processing
    4. payroll

38. Operational inefficiencies occur because
    1. accounts both common and unique to many concurrent transactions need to be updated in real time.
    2. accounts common to many concurrent transactions need to be updated in real time.
    3. accounts unique to many concurrent transactions need to be updated in real time.
    4. None of the above are true statements
39. Operational efficiencies can be improved by
    1. updating accounts both common and unique to many concurrent transactions in real time.
    2. updating accounts both common and unique to many concurrent transactions in batch mode.
    3. updating accounts unique to many concurrent transactions in real time and updating common accounts in batch mode.
    4. None of the above are true statements

SHORT ANSWER

1. List two of the three transaction cycles.

2. Documents that are created at the beginning of the transaction are called

                                                               .

3.                                                                                               are the two data processing approaches used in modern systems.

4. Give a specific example of a turn-around document.

5. Explain when it is appropriate to use special journals.

6. What are the subsystems of the revenue cycle?

7. What are the subsystems of the expenditure cycle?

8. Most organizations have replaced the general journal with a                                                                        .

9. Provide a specific example of a general ledger account and a corresponding subsidiary ledger.

10. Name five documentation techniques?

11. Why is the audit trail important?

12. List a method of data processing that uses the destructive update approach?

13. Only four symbols are used in data flow diagrams. What are they?

14. Which flowchart depicts the relationship between processes and the documents that flow between them and trigger activities?

15. What are the three characteristics that are used to distinguish between batch and real-time systems.

16. Give one advantages of real-time data collection.

17. In one sentence, what does updating a master file record involve?

18. What is destructive update?

ESSAY

1. Describe the key activities in the revenue, conversion, and expenditure cycles.

2. Categorize each of the following activities into the expenditure, conversion or revenue cycles and identify the applicable subsystem.
   1. Preparing the weekly payroll for manufacturing personnel.
   2. Releasing raw materials for use in the manufacturing cycle.
   3. Recording the receipt of payment for goods sold.
   4. Recording the order placed by a customer.
   5. Ordering raw materials.
   6. Determining the amount of raw materials to order.

3. What does an entity-relationship diagram represent? Why do accountants need to understand them?

4. Time lag is one characteristic used to distinguish between batch and real-time systems. Explain. Give an example of when each is a realistic choice.

.

5. There are two subsystems to the revenue cycle. What are they and what occurs within each?

6. Resource use is one characteristic used to distinguish between batch and real-time systems. Explain.

7. Give a brief description of each of the following documentation techniques: document flowchart, systems flowchart, and program flowchart.

8. Give an example of how cardinality relates to business policy?

9. For what purpose are ER diagrams used?

10. What is an entity?

11. Is a DFD an effective documentation technique for identifying who or what performs a particular task? Explain.

12. Is a flowchart an effective documentation technique for identifying who or what performs a particular task? Explain.

13. How may batch processing be used to improve operational efficiency?

14. If an organization processes large numbers of transactions that use common data records, what type of system would work best (all else being equal)?