SOLUTION Manual for
Accounting Information Systems
9th Edition by Hall
CHAPTER 2
INTRODUCTION TO TRANSACTION PROCESSING
REVIEW QUESTIONS
1. The expenditure cycle, conversion cycle, and revenue cycle.
2. Purchases/accounts payable system, cash disbursements system, fixed assets
system, and payroll system.
3. The physical component includes the acquisition of goods, while the financial
component includes the recognition of a liability owed to the supplier and the
transfer of the payment to the supplier.
4. Production system and cost accounting system.
5. Sales order processing system and cash receipts system.
6. Source documents, product documents, and turnaround documents.
7. Special journals and the general journal.
, Chapter 2 Page 37
8. A general journal is used to record nonrecurring and infrequent transactions.
Oftentimes, general journals are replaced with a journal voucher system. The
journal voucher is used to record a single nonrecurring and infrequent
transaction, and it is used as a special source document for the transaction.
The total of journal vouchers processed is equivalent to the general journal.
9. General ledger and subsidiary ledger.
10. A trail that allows the auditor to begin with a summary total found on the financial
statements and track it back to the individual transactions that make
up this total. Conversely, an auditor should be able to track transactions to their
final impact on the financial statements.
11. The confirmation process entails selecting customers and contacting them to
determine whether the transactions recorded in the financial statements actually
took place and are valid.
12. Master files, transaction files, reference files, and archive files.
13. Master files correspond to general ledger accounts and subsidiary ledgers.
Examples include accounts receivable and customer subsidiary accounts,
accounts payable and vendor subsidiary accounts, inventory, etc. Transaction
files correspond to general and special journals. Examples include the general
journal, sales journals, cash receipts journals, payroll journals, etc. Reference
files include lists of vendors, delinquent customers, tax tables, sales tax rates,
discount rates, lists of customers granted specific discounts, etc. Archive files
are typically composed of records that have been processed but are retained
for their history. Examples include payroll transactions, sales transactions, etc.
, Chapter 2 Page 38
14. The digital audit trail, like the paper trail, allows us to trace transactions from the
financial statement balance back to the actual transaction so we may: (1)
compare balances, (2) perform reconciliations, (3) select and trace samples of
entries, and (4) identify, pull, and verify specific transactions.
15. Cardinality reflects normal business rules as well as organizational policy. For
instance, the 1:1 cardinality in the first example in Figure 2-16 suggests that
each salesperson in the organization is assigned one automobile. If instead the
organization’s policy were to assign a single automobile to one or more
salespeople that share it, this policy would be reflected by a 1:M relationship.
16. Entity relationship diagrams represent the relationship between entities
(resources, events, and agents) in a system. Dataflow diagrams represent the
logical elements (i.e. what is being done) of a system by illustrating processes,
data sources, data flows, and entities. System flowcharts represent the physical
elements being used (i.e., how the tasks are being conducted) by illustrating the
relationship between input sources, program, and output products. System
flowcharts can also represent both the logical and physical elements of manual
systems and also illustrate the preparation and handling of documents.
17. Cardinality refers to the numerical mapping between entity instances, and it is
a matter of organization policy. The relationship can be one-to-one, onetomany,
or many-to-many.
, Chapter 2 Page 39
18. An entity relationship (ER) diagram is a documentation technique used to
represent the relationship between entities. One common use for ER diagrams
is to model an organization’s database, which we examine in detail in Chapter
9.
19. Entities are physical resources (automobiles, cash, or inventory), events
(ordering inventory, receiving cash, shipping goods), and agents (salesperson,
customer, or vendor) about which the organization wishes to capture data.
20. Batch processing occurs when similar transactions are accumulated over time
and processed together. Real-time processing captures each event or
transaction and processes it before engaging in another transaction. If
transactions are independent of one another, such as the processing of daily
cash receipts, then batch processing is appropriate. If transactions are
dependent on one another, such as credit sales, ticket sales, etc., then realtime
processing is more appropriate.
21. A flat-file model is one in which individual data files are not related to other files.
End users in this environment own their data files rather than share them with
other users. Data processing is thus performed by standalone applications
rather than integrated systems.
22. No. A DFD shows which tasks are being performed, but not who performs them.
It depicts the logical system.
23. Yes, A flowchart depicts the physical system and illustrates what type of and
where a task is performed and who is performing it.
Accounting Information Systems
9th Edition by Hall
CHAPTER 2
INTRODUCTION TO TRANSACTION PROCESSING
REVIEW QUESTIONS
1. The expenditure cycle, conversion cycle, and revenue cycle.
2. Purchases/accounts payable system, cash disbursements system, fixed assets
system, and payroll system.
3. The physical component includes the acquisition of goods, while the financial
component includes the recognition of a liability owed to the supplier and the
transfer of the payment to the supplier.
4. Production system and cost accounting system.
5. Sales order processing system and cash receipts system.
6. Source documents, product documents, and turnaround documents.
7. Special journals and the general journal.
, Chapter 2 Page 37
8. A general journal is used to record nonrecurring and infrequent transactions.
Oftentimes, general journals are replaced with a journal voucher system. The
journal voucher is used to record a single nonrecurring and infrequent
transaction, and it is used as a special source document for the transaction.
The total of journal vouchers processed is equivalent to the general journal.
9. General ledger and subsidiary ledger.
10. A trail that allows the auditor to begin with a summary total found on the financial
statements and track it back to the individual transactions that make
up this total. Conversely, an auditor should be able to track transactions to their
final impact on the financial statements.
11. The confirmation process entails selecting customers and contacting them to
determine whether the transactions recorded in the financial statements actually
took place and are valid.
12. Master files, transaction files, reference files, and archive files.
13. Master files correspond to general ledger accounts and subsidiary ledgers.
Examples include accounts receivable and customer subsidiary accounts,
accounts payable and vendor subsidiary accounts, inventory, etc. Transaction
files correspond to general and special journals. Examples include the general
journal, sales journals, cash receipts journals, payroll journals, etc. Reference
files include lists of vendors, delinquent customers, tax tables, sales tax rates,
discount rates, lists of customers granted specific discounts, etc. Archive files
are typically composed of records that have been processed but are retained
for their history. Examples include payroll transactions, sales transactions, etc.
, Chapter 2 Page 38
14. The digital audit trail, like the paper trail, allows us to trace transactions from the
financial statement balance back to the actual transaction so we may: (1)
compare balances, (2) perform reconciliations, (3) select and trace samples of
entries, and (4) identify, pull, and verify specific transactions.
15. Cardinality reflects normal business rules as well as organizational policy. For
instance, the 1:1 cardinality in the first example in Figure 2-16 suggests that
each salesperson in the organization is assigned one automobile. If instead the
organization’s policy were to assign a single automobile to one or more
salespeople that share it, this policy would be reflected by a 1:M relationship.
16. Entity relationship diagrams represent the relationship between entities
(resources, events, and agents) in a system. Dataflow diagrams represent the
logical elements (i.e. what is being done) of a system by illustrating processes,
data sources, data flows, and entities. System flowcharts represent the physical
elements being used (i.e., how the tasks are being conducted) by illustrating the
relationship between input sources, program, and output products. System
flowcharts can also represent both the logical and physical elements of manual
systems and also illustrate the preparation and handling of documents.
17. Cardinality refers to the numerical mapping between entity instances, and it is
a matter of organization policy. The relationship can be one-to-one, onetomany,
or many-to-many.
, Chapter 2 Page 39
18. An entity relationship (ER) diagram is a documentation technique used to
represent the relationship between entities. One common use for ER diagrams
is to model an organization’s database, which we examine in detail in Chapter
9.
19. Entities are physical resources (automobiles, cash, or inventory), events
(ordering inventory, receiving cash, shipping goods), and agents (salesperson,
customer, or vendor) about which the organization wishes to capture data.
20. Batch processing occurs when similar transactions are accumulated over time
and processed together. Real-time processing captures each event or
transaction and processes it before engaging in another transaction. If
transactions are independent of one another, such as the processing of daily
cash receipts, then batch processing is appropriate. If transactions are
dependent on one another, such as credit sales, ticket sales, etc., then realtime
processing is more appropriate.
21. A flat-file model is one in which individual data files are not related to other files.
End users in this environment own their data files rather than share them with
other users. Data processing is thus performed by standalone applications
rather than integrated systems.
22. No. A DFD shows which tasks are being performed, but not who performs them.
It depicts the logical system.
23. Yes, A flowchart depicts the physical system and illustrates what type of and
where a task is performed and who is performing it.
