TURNER, WEICKGENANNT & COPELAND.

ACCOUNTING INFORMATION SYSTEMS CONTROLS AND PROCESSES

TUTORIAL 2

CHAPTER2 FOUNDATIONAL CONCEPTS OF THE AIS

QUESTION 1: Match the concepts with their definitions:

1. Turnaround document a. Contains summary-level data for every asset,

liability, equity, revenue and expense
account
2. General ledger b. Path of a transaction through a data
processing system from point of origin to
final output or backwards from final output
to point of origin
3. Subsidiary ledger c. List of general ledger account codes; allows
transaction data to be classified and entered
into proper accounts; facilitates preparation
of financial statements and reports
4. Control account d. Company data sent to an external party and
then returned to the system as input
5. Chart of accounts e. Used to record infrequent or nonroutine
transactions
6. General journal f. Used to record large numbers of routine
repetitive transactions
7. Special journal g. Contains detailed data for any general ledger
account with many individual subaccounts
8. Audit trail h. File which stores cumulative information
about an organization (like a ledger in a
manual AIS)
9. Master file i. File which contains records of individual
business transactions that occur during a
specific period (like a journal in a manual AIS)
10. Database j. Updating each transaction as it occurs
11. Batch processing k. Set of interrelated centrally coordinated files
12. Online, real time l. Updating done periodically for a batch of
processing similar transactions
13. Transaction file m. The general ledger account corresponding to
a subsidiary ledger where the balance of all
the subsidiary ledger entries should equal
the amount in the general ledger account

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QUESTION 2: Answer the following questions.

1. What is the relationship between business processes and the accounting information
system?

2. Why is it sometimes necessary to change business processes when IT systems are applied to
business processes?

3. Are manual systems and processes completely outdated?

4. Describe the purpose of each of the following parts of a manual system:

a. Source document
b. Turnaround document
c. General ledger
d. General journal
e. Special journal
f. Subsidiary ledger

5. Suppose that a large company is considering replacing a legacy system near obsolescence.
Describe any aspects of the decision that the company should consider.

6. How is integration across business processes different between legacy systems and modern
integrated systems?

7. How does client-server computing divide the processing load between the client and the
server?

8. What are the distinguishing characteristics of cloud computing?

9. What are the advantages of using some form of IT systems for input rather than manual
input?

10. In general, what types of transactions are well suited to batch processing?

11. How would real-time processing provide a benefit to managers over-seeing business
processes?

QUESTION 3: Identify whether the following reports would be categorized as trading partner
documents, internal documents/reports or external reports:

a. Daily cash receipts listing

b. Accounts receivable aging
c. Wire transfer of funds to a vendor

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d. Customer price list

e. General ledger
f. Statement of cash flows
g. Sales invoice
h. Production schedule
i. Customer address list
j. Payroll journal

QUESTION 4:

For each of the following, identify which data processing method (batch or online, real-time
processing) would be most appropriate:
a. Make an airline reservation
b. Prepare bi-weekly payroll checks
c. Prepare a daily bank deposit
d. Preparation of customer bills by a local utility
e. Register for a university course

QUESTION 5: PROCESS MAP.

LOOKPRETTY is a company which sells on-line a large variety of decorative articles and fashion
accessories. The customer registers and enters their order. Payment is done by credit card. The
manager of the company employs a clerk and an accountant. The on-line order center
generates a daily sales summary which will be used by the accountant to record accounting
entries. The manager is in charge of controlling the accuracy of the accounting data before they
are stored.A pictorial representation of the sales process is shown on the following page.

Required: Indicate for each of the items listed below the corresponding number on the process
map.

Item Corresponding item number

Captures order and credit card information and forwards

sale

Do records match?

Generates daily sales summary

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Receives ordered goods

Data storage

Yes

No

On-line customer order

Records accounting entries

Packs and mails the sold goods

Pays on-line by credit card

Applies corrective controls

Process Map

Order Center Customer Clerk Accountant Manager

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2
10

9 12
5 7 8
3

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QUESTION 6: Data Flow Diagram

A Data Flow Diagram graphically describes the flow of data within an organization using 4
symbols: data sources and destinations, data flows, transformation processes and data stores.

Required: Mention the name of each symbol and indicate the corresponding explanation by
inserting the right item number from the list of items presented below.

Symbol Name Explanation (item N°)

List of explanations of DFD symbols

Item Explanation
N°

1 The flow of data among processes, stores, sources and destinations

2 The entities (people or organizations that send data to and receive data from the
system

3 The processes that transform data from inputs to outputs

4 The storage of data or data repository (the DFD doesn’t show the physical storage
medium)

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Example: Data Flow Diagram of payroll processing

Narrative description: Time cards from the different production departments are used by the
payroll processing system to produce the following documents:

- Tax report to be sent to the government authorities

- Employee paychecks
- Payroll report to be used by management

Required: Based on the above narrative description, complete the following diagram:

QUESTION 7: SYSTEM FLOWCHART

A system flowchart depicts the relationships among system input, processing and output. It
begins by identifying system inputs and their origins. Input is followed by the processing
performed on data. The resulting information is the output which can be stored, displayed on a
screen or printed on paper. In many cases, the output from one process is the input to another
process. Flowcharting symbols are of four main categories: input/output symbols, processing
symbols, storage symbols and flow and miscellaneous symbols.

Example: System flowchart segment: Billing

Narrative description: Billing data are keyed and used to update the sales transaction file and
the customer master file.

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Required: use the following symbols to depict the narrative description presented above:

QUESTION 8: DOCUMENT FLOWCHART

A document flowchart illustrates the flow of documents and information within an

organization. It shows where each document originates, its purpose, its disposition and how it
flows through the system. Document flowcharts are very useful in analyzing internal controls. In
fact, they can reveal system weaknesses such as inadequate communication flows, unnecessary
complexity in document flows, improper procedures resulting in wasteful delays.

Example: Segment of document flowchart related to the receiving report.

Narrative description: upon receipt of the ordered goods, the receiving clerk manually prepares
a receiving report to record the quantity and description of the goods received. The report is
prepared in 3 copies. Copy 1 is sent to the accounts payable, copy 2 is forwarded to the
purchasing department and copy 3 is filed.

Required: use the following symbols to depict the narrative description presented above:

QUESTION 9:

Match the system flowchart or data flow diagram segments presented below to their
appropriate descriptions. Label the different parts of each flowchart based on the selected
description.

DESCRIPTIONS

N° Description Flowchart reference

letter
1 Statements are prepared and sent to customers from data
contained in the accounts receivable data store.
2 A customer sends a sales invoice to the accounts payable
process.
3 A check is manually prepared from data on a vendor invoice.

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4 The cash receipt process updates the cash receipts data store.
5 A sale invoice is manually prepared and sent to a customer.
6 A report is prepared from data stored on magnetic tape.
7 Data from a cancelled invoice are used to update the cash
disbursements ledger.
8 A sales order is prepared manually. Copy 1 is sent to the
warehouse, and copy 2 is filed.
9 An accounts receivable aging report is prepared from the
accounts receivable master file and the cash receipts master file,
both stored on disk.

FLOWCHARTS

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QUESTION 10: Mary Morrissey is a college student. Each Monday through Thursday, she
commutes to her classes at Tannell Technical College (TTC). Each semester, Mary pays for on-
campus parking privileges. Before Wednesday of the week prior to each new semester, Mary
writes a check to TTC Parking Services for $150. She writes her student identification number
on the check’s memo line and then mails the check to the TTC Parking Services Office. Upon
receipt of student checks, TTC’s Parking Services Office clerk issues a current semester parking
decal and a receipt for payment received. These items are mailed to each student at the
address noted on the check. A daily listing of checks received is prepared and filed by date. A
photocopy of the check is made and placed in a file organized by the student’s last name.
Accordingly, each student has a parking file maintained in the TTC Parking Services office. The
checks are endorsed and deposited in the bank on a daily basis. Once each month, the TTC
Parking Services office manager reconciles the bank statement.

Required: Prepare the following pictorial representations of TTC’s parking services

processes:

a. Process map
b. Document flowchart
c. Data flow diagram

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