Solutions Manual
Solutions Manual, Accounting
Information Systems
SEVENTH EDITION
James A. Hall
________________________________________________________________________________
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Table of Contents
Chapter 1
THE INFORMATION SYSTEM: AN ACCOUNTANT’S PERSPECTIVE...............1
Chapter 2
INTRODUCTION TO TRANSACTION PROCESSING .......................................19
Chapter 3
ETHICS, FRAUD, AND INTERNAL CONTROL..................................................47
Chapter 4
THE REVENUE CYCLE......................................................................................73
Chapter 5
THE EXPENDITURE CYCLE PART I:
PURCHASES AND CASH DISBURSEMENTS PROCEDURES......................131
Chapter 6
THE EXPENDITURE CYCLE PART I:
PAYROLL PROCESSING AND FIXED ASSETS PROCEDURES...................191
Chapter 7
THE CONVERSION CYCLE.............................................................................223
Chapter 8
FINANCIAL REPORTING AND MANAGEMENT REPORTING SYSTEMS .....269
Chapter 9
DATABASE MANAGEMENT SYSTEMS ..........................................................293
Chapter 10
THE REA APPROACH TO DATABASE MODELING .......................................329
Chapter 11
ENTERPRISE RESOURCE PLANNING SYSTEMS ........................................343
Chapter 12
ELECTRONIC COMMERCE SYSTEMS ..........................................................365
Chapter 13
MANAGING THE SYSTEMS DEVELOPMENT LIFE CYCLE ..........................385
Chapter 14
CONSTRUCT, DELIVER, AND MAINTAIN SYSTEMS PROJECTS ................397
Chapter 15
IT CONTROLS PART I: SARBANES-OXLEY AND IT GOVERNANCE ...........421
Chapter 16
IT CONTROLS PART II: SECURITY AND ACCESS........................................441
Chapter 17
IT CONTROLS PART III: SYSTEMS DEVELOPMENT,
PROGRAM CHANGES, AND APPLICATION CONTROLS .............................457
iii
CHAPTER 1
THE INFORMATION SYSTEM: AN ACCOUNTANT’S PERSPECTIVE
REVIEW QUESTIONS
1.
Operational, operations management, middle management, and top management.
Horizontal flows support operation-level tasks. The information is highly detailed
about the day-to-day operations. Vertical flows distribute summarized information
to managers at all levels, and this information flows upward. Instructions, quotas,
and budgets also flow downward.
2.
Natural systems stem from the atom, while artificial systems are put together by
humans.
3.
Multiple components, relatedness, subsystems, purpose, and interdependency.
4.
System decomposition is the process of dividing the system into smaller subsystem
parts, while interdependency is the interaction between the subsystems. They are
related by the degree and nature of the interaction between the subsystems. If a vital
subsystem fails, the entire system will most likely fail.
5.
Data are facts that are collected in a “raw” form and made meaningful through
processes such as sorting, aggregating, classifying, mathematically manipulating,
and summarizing. The meaningful data is considered to be information.
6.
AISs process financial transactions and certain nonfinancial transactions that
directly affect the processing financial transactions. The external financial reporting
documents of AIS are subject to legal and professional standards. Consequently,
management and accountants have greater legal responsibility for AIS
applications than for MIS applications. The MIS processes nonfinancial
transactions that are outside the scope of the AIS. MIS applications expand the
information set provided to such areas as production, sales, marketing, and
inventory management. MIS often draws from and builds on data from the AIS.
7.
Revenue cycle, expenditure cycle, and conversion cycle.
8.
Reports used by management, which the company is not obligated by law,
regulation, or contract to provide. These are often used for internal problemsolving issues rather than by external constituents.
9.
Relevance, accuracy, completeness, summarization, and timeliness.
10.
Relevance and efficiency.
11.
Data attribute (field), record, file, and database.
12.
Storage, retrieval, and deletion.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 1 Page 2
13.
Feedback is output that is sent back to the system as a source of data. Feedback is
useful because it can be used to initiate or adjust the system processes.
14.
a.
to support the stewardship function of management,
b.
to support the decision-making processes of managers, and
c.
to support the day-to-day operations of the firm.
15.
Stewardship is the responsibility of management to properly utilize the resources
of the firm entrusted to them. Information systems provide management with
reports to better manage the resources and also provide responsibility reports by
which management may be evaluated.
16.
Budgets and standards are set by upper-management levels. The responsibility for
meeting these goals is passed to the managers at the closest operational level. In
order for these managers to have the power to make a difference as to whether
these goals and/or standards are met, they must be entrusted with the appropriate
level of authority to make decisions. Responsibility of goals and standards, along
with corresponding authoritative powers, flow downward. The results of the
operations must flow upward to upper-level management. These upward flows
represent reports, which hold managers accountable for their decisions and
management actions.
17.
Turnkey systems are ready to implement systems that may be purchased.
Backbone systems are partially developed systems with an underlying basic
structure that is built on to suit the client’s unique needs. Vendor-supported
systems are custom systems provided, maintained, and supported by a
commercial vendor.
18.
a.
Materials Management
1. purchasing
2. receiving
3. stores
b.
Production
1. production planning
2. quality control
3. maintenance
c.
Marketing
1. advertising
2. market research
3. sales order processing
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Chapter 1 Page 3
d.
Distribution
1. warehousing
2. shipping
e.
Personnel
1. recruiting
2. training
3. benefits
4. counseling
f.
Finance
1. portfolio management
2. treasury
3. credit
4. cash disbursement
5. cash receipt
g.
Accounting
1. inventory control
2. cost accounting
3. payroll
4. accounts payable
5. accounts receivable
6. billing
7. fixed-asset accounting
8. general ledger
h.
Computer Service
1. data processing
2. systems development and maintenance
3. database administration
19.
Internal auditors are responsible for in-house appraisal of the financial reporting
system. Internal auditors are concerned with deterring and detecting fraud and for
conducting EDP audits. External auditors are independent CPAs engaged by the
firm to attest to the completeness and accuracy of the financial statements.
External auditors work together with the internal auditors.
20.
The database administrator is responsible for the security and integrity of data
stored in a central database.
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Chapter 1 Page 4
21.
Geographic location, product lines, and function.
22.
The role of the accounting function is to manage the financial information
resources of the firm. First, the accountants must capture and record business
events of a firm and their financial impact. Secondly, the accounting function
distributes transaction information to decision makers and operations personnel to
help them coordinate their many tasks. The accountants must also assign
accountability for each of these tasks.
23.
In a centralized data processing approach, the computer services function is
centrally located. The databases are housed in one place where all of the data
processing occurs by one or more main computers. All systems development and
maintenance work for the entire organization is performed by systems
professionals. End users wishing to have new systems or features must submit a
formal request to this group and are usually prioritized and placed in a queue.
In a distributed data-processing approach, the CPUs are spread out and control
over data and processing is at the information processing unit (IPU) level. Thus,
end users have more influence over the systems development projects, which are
typically handled by systems professionals at the IPU level.
24.
The data control group is a liaison between the end user and data-processing
personnel. It receives the user input and distributes the output to the users. Data
control members scan the input for accuracy and completeness before passing the
input to the data-entry personnel.
25.
Data processing is organized around several information processing units, which
are distributed throughout the organization and placed under the control of end
users. The central computer services are eliminated or minimized.
26.
The advantages of DDP are:
a.
cost reductions
b.
improved cost control responsibility
c.
improved user satisfaction
d.
ability to back up computer facilities
The disadvantages of DDP are:
a.
potential mismanagement of organization-wide resources
b.
hardware and software incompatibility
c.
redundant tasks
d.
consolidating incompatible activities
e.
acquiring qualified professionals
f.
lack of standards
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Chapter 1 Page 5
27.
Identical applications or applications that are very similar may be created by
multiple user areas, which are unaware of what other areas are doing. Further,
data redundancy may occur if the same data are being collected and stored by
different user areas. The duplicated data may result in data consistency problems
if not properly managed.
28.
A flat-file system 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.
29.
a.
increased data storage since the same data is stored in multiple files
b.
increased data updating since changes must be made to multiple files
c.
possibility of noncurrent data caused by failure to update.
30.
The key elements of the REA model are summarized below.
Resources. Economic resources are the assets of the organization. They are
defined as objects that are both scarce and under the control of the enterprise.
This definition departs from the traditional model since it does not include accounts
receivable. An account receivable is an artifact record used simply to store and
transmit data. Since it is not an essential element of the system, it need not be
included the database. Instead accounts receivable are derived as the difference
between sales to customers and the cash received in payment of sales.
Events. Economic events are phenomena that affect changes in resources. They
can result from activities such as production, exchange, consumption, and
distribution. Economic events are the critical information elements of the
accounting system and should be captured in a highly detailed form to provide a
rich database.
Agents. Economic agents are individuals and departments that participate in an
economic event. They are parties both inside and outside the organization with
discretionary power to use or dispose of economic resources. Examples of agents
include sales clerks, production workers, shipping clerks, customers, and vendors.
31.
Enterprise Resource Planning (ERP) is an information system model that enables
an organization to automate and integrate its key business processes. ERP breaks
down traditional functional barriers by facilitating data sharing, information flows,
and the introduction of common business practices among all organizational
users.
32.
Users, system designers, and system auditors.
33.
The attest function is performed by an independent certified public accountant who
expresses an opinion about the fairness of a client-firm’s financial statements.
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Chapter 1 Page 6
34.
Assurance pertains to professional services, including the attest function, that are
designed to improve the quality of information, both financial and non-financial,
used by decision makers. The domain of assurance services is intentionally
unbounded so that it does not inhibit the growth of future services that are
currently unforeseen. For example, assurance services may be contracted to
provide information about the quality or marketability of a product. Assurance
services are intended to help people make better decisions by improving
information. This information may come as a by-product of the attest function, or it
may ensue from an independently motivated review.
35.
IT auditing is part of a broader financial audit in which the auditor attests to the
integrity of elements of the organization’s information system that have become
complicated by computer technology.
36.
The conceptual system must first be determined. It specifies the nature of the
information required, how and when it is to be collected, and who is the user. For
each conceptual system, many different physical configurations may be possible.
The physical system is the medium and method used to collect the data, process
it, and disseminate the resulting information.
DISCUSSION QUESTIONS
1.
The reporting requirements of external users such as lending institutions, the IRS,
the SEC, and stockholders are subject to stringent reporting standards. Thus,
firms have historically placed a very high emphasis on the accuracy of the AISs
and the reports they produce for external agencies since failure to provide
accurate and timely information carries heavy penalties. Internal users, such as
managers, also need vital information to make good decisions. Firms are
beginning to realize that the needs of these internal users are also very important
to efficiently and effectively operate and plan for the future.
2.
The level of detail necessary for the stockholders is highly aggregated and
typically follows the format prescribed by the SEC and GAAP. Much more detailed
information is necessary for middle management to plan and control operations.
Highly detailed information is needed at the operations management level in order
to run the day-to-day business processes and operations.
3.
Financial transactions affect the accounts in the balance sheet in some manner.
Three examples are 1) use of equipment-depreciation, 2) payment of a bond
payable, and 3) receipt of cash from a customer for a sale previously made on
account. Nonfinancial transactions include business events that do not impact the
financial statements. Three examples are 1) a book checked out by a student in a
school library, 2) the recording of a customer complaint via a toll-free hotline, and
3) status reports of research and development projects.
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Chapter 1 Page 7
4.
Managers of all areas typically need data from both the AIS and the MIS. If the
data needed by managers for decision-making processes are located in two or
more datasets, the preparation of reports is both inefficient and expensive.
Further, a lack of coordination between the two datasets can result in data that is
not consistent and is unreliable.
5.
The transaction processing systems only differ in the types of data elements
collected. Both service and manufacturing industries need to collect data regarding
business processes. While a manufacturing firm may collect data regarding the
amount of scrap generated at a particular workstation, a service firm, such as a
public accounting firm, needs to collect data regarding the number of hours spent
by staff to verify cash balances. Transaction processing systems are equally
important to both types of industries.
6.
The General Ledger System (GLS) summarizes all of the transaction cycle activity
and general journal entries. The GLS provides most of the input in the Financial
Reporting System (FRS). The FRS communicates information from the GLS to the
external users. The FRS often collects additional pieces of information other than
that which is found in the GLS. An example of this is when a pending lawsuit is
likely to be settled in the next year. The GLS would not have this information.
7.
If the collected data are not accurate and/or not correctly entered, then the
resulting information will not be accurate. Also, if the data processing system is not
correctly processing the information, then the resulting information will also be
incorrect. If the database is not accurately maintained over time, again the
resulting information will be incorrect.
8.
Efficiency is crucial to an AIS. The cost of collecting and producing information
should not outweigh its benefits. Further, the applications should be run in a
manner that places the least strain on the overall system. For example, the
printing of checks to vendors should not be done during the day if it slows down
the online sales order processing system in a multitasking environment.
In order for a system to be effective, the appropriate data should be processed,
and the resulting information disseminated to the appropriate users. For example,
an accounts receivable delinquent report should be sent to the collection
department in a timely fashion, so that measures can be taken to collect the funds.
The ability to react to a change is very important, especially in an FRS where
reporting requirements and standards change frequently.
9.
This statement means that the accounting system is a representation of the
operations of a firm. As machines operate, workers perform their duties, raw
materials are transferred into finished goods and cash flows are exchanged
between suppliers and customers, the accounting system must be continuously
updated to accurately reflect these actions. This conceptual flow is crucial because
it allows management to view in summary and in detail the financial effects of
these operations on the firm.
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Chapter 1 Page 8
10.
Accounting independence is important because the separation between the
record-keeping functions and the physical resources is crucial. This concept is
extremely important for cash receipts operations. The person in charge of deposits
of currency and check receipts should not be allowed to reconcile the sales
records to the cash deposits and/or the bank account. If these duties are not
separated, then the cash receipts clerk can steal money and cover it up during the
reconciliation process.
11.
The internal auditors are responsible for detecting and pursuing fraud within the
firm. If management-level employees are involved, the internal auditors may fear
losing their jobs if they blow the whistle on such activities. Thus, the internal
auditors should report to the board of directors so that they do not fear any
repercussions of their actions from top management.
12.
In a centralized data-processing environment, the computer services personnel
are all housed in one department where all of the systems development and
maintenance takes place. End users must formally request any additions or
enhancements to the current system. In a distributed data processing (DDP)
system, the systems professionals may still be housed together or they may be
located throughout the various segments of the organization. End users gain more
control over their data and applications. DDP is becoming more and more popular
as networking computers is becoming easier and more commonplace.
13.
The conceptual system represents the logic and decision rules to be applied, while
the physical system represents the means of accomplishing the tasks. Many
different possibilities (physical systems) may be available to accomplish the
conceptual system. The accountant is important in the design of the conceptual
system; however, system designers may dominate in the tasks of physical design
because of the technical nature of the solution. The accountant should still be
involved in the process, although he/she may only participate in an advisory role.
14.
Accountants, although providers of financial information to both internal and
external users, are still the primary “users” of the AIS. The accountants oversee
the data collection, processing, and output of the AIS. Thus, as new AISs are
developed by system professionals, accountants’ needs as seen from the
viewpoint of a user are very important. Thus, the accountants guide the systems
developers by conveying their needs and constraints.
15.
Yes and No. Virtually all publicly traded firms have computerized AISs as well as
most small- and medium-sized firms. Audits of non-computerized systems are
becoming rare. Thus, one may say that virtually all auditors must deal with
electronic processing of data. However, certain auditing personnel, known as IT
auditors, have special skills, which allow them to focus on the computer
“processing.” Thus, distinguishing these auditors from auditors who do not have
such skills may still be appropriate.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 1 Page 9
16.
Organizations are segmented in order to promote internal efficiencies. These
internal efficiencies occur as a result of localized control over resources and also
by specialization of labor. Localized control over resources allows the managers of
those resources to have increased responsibility and authority. Hopefully, these
management teams understand the segment’s operating environment better than
anyone else in the organization. If this is true, they should be able to make the
best allocation of resources. Geographic location is also important, especially in a
global economy where firms operate in many different cultures. The local
management team should be in the best position to make cost-effective resource
allocations.
17.
The accounting function provides record-keeping services for all of the operations
and day-to-day activities of other departments, which affect the financial position of
the organization. Record-keeping tasks must be kept separate from any area that
has custody over assets. Thus, the accounting function must remain independent
so that the protection of the firm’s assets is carried out in an environment with
minimum possibilities for theft.
18.
Turnkey. These are completely finished and tested systems that are ready for
implementation. Typically, they are general-purpose systems or systems
customized to a specific industry. Typically the end user will have standard
business practices that permit the use of “canned” or “off-the-shelf” systems that
can be employed with little or no modification.
In-house. Larger organizations with unique and frequently changing needs
engage in in-house development. The formal process by which this is
accomplished is called the system development life cycle.
Backbone. Backbone systems consist of a basic system structure on which to
build. The primary processing logic is preprogrammed, and the vendor then
designs the user interfaces to suit the client’s unique needs. A backbone system is
a compromise between a custom system and a turnkey system.
19.
The REA model requires that accounting phenomena be characterized in a
manner consistent with the development of multiple user views not simply those of
the accounting function. As such, REA procedures and databases are structured
around events rather than accounting artifacts such as journals, ledgers, charts-ofaccounts, and double-entry accounting. Under the REA model, business
organizations prepare financial statements directly from the event database.
20.
Advantages of ERP
• Enterprise Resource Planning (ERP) systems enable organizations to
automate and integrate key business processes.
• ERPs break down traditional functional barriers by facilitating data sharing.
• ERP software embodies and supports the best business practices of a given
industry, thus encouraging positive changes in the way firms do business.
• Organizations experience internal efficiencies by employing standard business
practices among all organizational units.
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Chapter 1 Page 10
Disadvantages of ERP
• The implementation of an ERP system can be a massive undertaking that can
span several years.
• Because of their complexity and size, few organizations are willing or able to
commit the necessary financial resources and incur the risk of developing an
ERP system in-house. Hence, virtually all ERPs are commercial products
designed to solve standardized business problems. Many organizations have
unique needs that require customized systems.
• Organizations that implement an ERP often need to modify their business
processes to suit the ERP. Often, additional software applications need to be
connected to the ERP to handle unique business functions, particularly
industry-specific tasks. These applications, often called bolt-ons, are not
always designed to communicate with ERP packages.
• ERP packages are enormously expensive. Organization management should
exercise great care in deciding which, if any, ERP is best for them.
MULTIPLE CHOICE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
C
B
A
D
D
C
C
D
D
D
E
A
B
C
PROBLEMS
1.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
S
I
S
T
S
S
S
I
T
S
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Chapter 1 Page 11
See the following diagram. Each subsystem is interdependent upon each other.
The human body must have all subsystems working properly in order to survive.
Problem 1-2
2.
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Chapter 1 Page 12
3.
The missing element is feedback. Feedback is crucial to determine when it is
necessary to adjust data collection procedures or data-processing elements to
satisfy the needs of internal and external end users.
4.
AIS data would include historical sales data by customer and product line, gross
margin and profit by product line, and sales return data by customer and product
line. MIS data would include customer complaints, average delivery time from
order placement to receipt of goods, and reasons for return of merchandise.
Benefits of integrating the information would include more efficient reporting and
enhanced understanding of causal effects of the non-financial (MIS) performance
metrics on the firm’s financial results (AIS).
5.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
6.
The problem associated with the flat file model are:
MRS
TPS
FRS
MRS
TPS
FRS
MRS
TPS
FRS
TPS
MRS
Data Storage
An efficient information system captures and stores data only once and makes this
single source available to all users who need it. In the flat-file environment, this is
not possible. To meet the private data needs of users, organizations must incur
the costs of both multiple collection and multiple storage procedures. Some
commonly used data may be duplicated dozens, hundreds, or even thousands of
times.
Data Updating
Organizations have a great deal of data stored in files that require periodic
updating to reflect changes. When users keep separate flat files, all changes must
be made separately for each user. This adds significantly to the task and the cost
of data management.
Currency of Information
In contrast to the problem of performing multiple updates is the problem of failing
to update all the user files affected by a change in status. If update information is
not properly disseminated, the change will not be reflected in some users’ data,
resulting in decisions based on outdated information.
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Chapter 1 Page 13
Task-Data Dependency
The flat-file user’s ability to function is constrained by the data that he or she
possesses and controls. New tasks require the procurement of new information
which takes time, inhibits performance, adds to data redundancy, and drives data
management costs even higher.
7.
President
Marketing
International
Land & Legal
Accounting
Tulsa
Exploration
Tulsa
Production
Tulsa
Distribution
Tulsa
Personnel
Corporate
Finance
Treasury
Promotion
Advertising
Inventory
Control
Geological
Extracting
Warehousing
Recruiting
Credit
Market
Research
Cost
Accounting
Geophysical
Refining
Shipping
Training
Tulsa
Sales
Payroll
New Orleans
New Orleans
New Orleans
Benefits
Cash
Receipts
Cash
Disbursements
Accounts
Payable
Geological
Extracting
Warehousing
Promotion
Advertising
Accounts
Receivable
Geophysical
Refining
Shipping
Market
Research
Billing
Training
Cash
Receipts
Sales
Fixed
Assets
Benefits
Cash
Disbursements
National
General
Ledger
New Orleans
Tulsa
Recruiting
New Orleans
New Orleans
Recruiting
Inventory
Control
Training
Cost
Accounting
Benefits
Payroll
Accounts
Payable
Accounts
Receivable
Billing
Fixed
Assets
General
Ledger
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Chapter 1 Page 14
8.
Business
Organization
Product
Design
Lawn & Garden
Furniture
Plastic
Packaging
Paper
Products
Production
Distribution
Marketing
Finance
Human
Resources
Accounting
Materials
Management
Portfolio
Mgt
Recruiting
Promotion
Treasury
Training
Inventory
Purchasing
Plastic
Packaging
Advertising
Credit
Benefits
Cost
Accounting
Receiving
Paper
Products
Research
Cash
Disbursement
Counseling
Payroll
Stores
Sales
Cash
Receipt
Manufacturing
Lawn &
Garden
Furniture
Support
Warehousing
Shipping
Lawn & Garden
Furniture
Lawn & Garden
Furniture
Accounts
Payable
Lawn & Garden
Furniture
Plastic
Packaging
Accounts
Receivable
Purchasing
Promotion
Billing
Receiving
Advertising
Fixed
Assets
Stores
Research
General
Ledger
Paper
Products
Plastic
Packaging
Sales
Paper
Products
Plastic
Packaging
Purchasing
Inventory
Receiving
Promotion
Cost
Accounting
Stores
Advertising
Payroll
Research
Accounts
Payable
Sales
Accounts
Receivable
Billing
Fixed
Assets
General
Ledger
Paper
Products
Inventory
Cost
Accounting
Payroll
Accounts
Payable
Accounts
Receivable
Billing
Fixed
Assets
General
Ledger
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Chapter 1 Page 15
9. a. The production department’s vice president or manager should not supervise
the inventory management tasks. The production department uses the raw
materials and therefore should not have any custodial tasks over the storage of
the inventory items. A separate materials management department should
handle the purchasing of inventory items and the warehousing of raw
materials. The production department may not take the time (and should not be
wasting its time trying) to investigate the best possible prices for a given quality
and quantity of goods. Further, the production department may be able to pilfer
goods from the production line if a separate department is not controlling the
release of raw materials for specific job lots. The production department should
not be in charge of cost accounting. The cost accounting department should be
separate since this department tracks the costs of the production process. If
the cost accountants report to the production manager, they may be influenced
to overlook some cost items or alter the amounts to make the cost center look
better. Also, the production manager should not be in charge of payroll, he or
she may have paychecks written for fictitious employees. The sales
department should not be in charge of credit approvals. Salespeople’s
compensation is typically tied to their sales figures, and thus salespeople have
an incentive to write as many sales as possible without regard to the financial
stability of the customer. Poor credit decisions may be made if the credit
department reports to the sales manager. Further, the billing department
should not report to the sales manager either because the salespeople may be
tempted to issue unwarranted and unauthorized discounts to their most
valuable customers. The finance department collects and distributes cash;
therefore, it should not have custody over the accounts receivable and
accounts payable. A separate accounting function should provide a check and
balance on the cash collections and disbursements.
b. A reorganization is presented in the following diagram. Two new positions
have been created: VP-Materials Management and VP-Accounting (or
Controller). The VP-Finance is a “promotion” given to the financial manager.
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Chapter 1 Page 16
10.
Because businesspeople were not able to adequately express their needs and
much of what they did express was not fully understood by the systems analysts,
many new systems projects produced ineffective systems. Most business students
now study the development process of information systems so they will be better
able to communicate their information needs to system personnel and have an
appreciation that clear expression of the problem by the user and better
understanding of the business situation/problem environment by the system
developer will enhance a projects deployment. Either avoiding jargon or fully
explaining the terms will also help to close the communication gap.
11.
Record Type
Primary Key
Accounts Receivable
Accounts Payable
Inventory
Customer Sales Order
Purchase Orders to vendors
Cash Receipts from customers
Cash Disbursements to vendors
Employee Payroll Earnings records
Customer Number
Vendor Number
Part Number
Sales Order Number
Purchase Order Number
Receipt Number
Check Number
Employee Number
12.
This response is NOT in normalized form.
Accounts Payable Record:
Primary key-vendor number
invoice number
amount
date due
date paid
discounts
Inventory:
Primary key-part number
Description
amount on hand
unit price
economic order quantity
reorder level
Customer Sales Orders Record:
Primary key-sales order number
customer number
item number
unit price
quantity
discount
date billed
date due
ship date
total (not really necessary since it is a calculated amount)
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Chapter 1 Page 17
Purchase Orders to Vendors:
Primary key-purchase order number
vendor number
vendor’s part number
part number (our’s)
quantity
date ordered
date required
expected dollar amount
Cash Receipts from Customers:
Primary Key-cash receipt number (sequentially assigned)
customer number
invoice number
customer’s check number
amount received
date
Employee Payroll Earnings records
Primary Key-employee identification number
Hours worked-regular time
Hours worked-overtime
Current Gross Pay
Current federal income tax withheld
Current state income tax withheld
Current FICA tax withheld
Year to date hours-regular
Year to date hours-overtime
Year to date gross pay
Year to date federal income tax withheld
Year to date state income tax withheld
Year to date FICA tax withheld
13.
Advantages of DDP. The most commonly cited advantages of DDP are related to
cost savings, increased user satisfaction, and improved operational efficiency.
Specific issues are:
Cost reductions. In the past, achieving economies of scale was the principal
justification for the centralized approach. The economics of data processing
favored large, expensive, powerful computers. The wide variety of needs that such
centralized systems had to satisfy called for computers that were highly
generalized and employed complex operating systems. Powerful yet inexpensive
small scale, which can cost effectively perform specialized functions, have
changed the economics of data processing dramatically. DDP can reduce costs in
two other areas: (1) data can be entered and edited at the IPU, thus eliminating
the centralized tasks of data conversion and data control; and (2) application
complexity can be reduced, which in turn reduces development and maintenance
costs.
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Chapter 1 Page 18
Improved cost control responsibility. Managers assume the responsibility for
the financial success of their operations. This requires that they be properly
empowered with the authority to make decisions about resources that influence
their overall success.
Improved user satisfaction. Perhaps the most often cited benefit of DDP is
improved user satisfaction in three areas: (1) users desire to control the resources
that influence their profitability; (2) users want systems professionals (analysts,
programmers, and computer operators) who are responsive to their specific
situation; and (3) users want to become more actively involved in developing and
implementing their own systems.
Backup. The final argument in favor of DDP is the ability to back up computing
facilities to protect against potential disasters such as fires, floods, sabotage, and
earthquakes. One solution is to build excess capacity into each IPU. If a disaster
destroys a single site, its transactions can be processed by the other IPUs. This
requires close coordination between decision makers to ensure that they do not
implement incompatible hardware and software at their sites.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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, 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.
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,
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Chapter 2 Page 20
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.
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 2-12 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, one-to-many, or
many-to-many.
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 real-time processing is more
appropriate.
21.
During the file update process, sequential master files are completely reproduced
in the form of a physically new file, thus creating a backup copy automatically.
Databases use destructive update procedures and require separate backup
procedures.
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Chapter 2 Page 21
22.
No. A DFD shows which tasks are being performed, but not who performs them. It
depicts the logical system.
23.
A flowchart depicts the physical system and illustrates what type of and where a
task is performed and who is performing it.
24.
A single transaction may affect several different accounts. Some of these
accounts, however, may not need to be updated in real time. In fact, the task of
doing so takes time which, when multiplied by hundreds or thousands of
transactions, can cause significant processing delays. Batch processing of noncritical accounts, however, improves operational efficiency by eliminating
unnecessary activities at critical points in the process.
25.
When testing an application program, the auditor needs details about its internal
logic provided by the program flowchart to design the audit tests.
26.
The system flowchart shows the relationship between two computer programs, the
files that they use, and the outputs that they produce. However, this level of
documentation does not provide the operational details that are sometimes
needed. An auditor wishing to assess the correctness of a program’s logic cannot
do so from the system flowchart. A program flowchart provides this detail. Every
program represented in a system flowchart should have a supporting program
flowchart that describes its logic.
27.
Legacy systems tend to have the following distinguishing features: they are
mainframe-based applications, they tend to be batch-oriented, and early legacy
systems use flat files for data storage. However, hierarchical and network
databases are often associated with later-era legacy systems. These highly
structured and inflexible storage systems promote a single-user environment that
discourages information integration within business organizations.
28.
Batch processing and real-time processing.
29.
Prior to each batch update or periodically (every few minutes), the master file
being updated is copied to create a backup version of the original file. Should the
current master be destroyed after the update process, reconstruction is possible in
two stages. First, a special recovery program uses the backup file to create a preupdate version of the master file. Second, the file update process is repeated
using the previous batch of transactions to restore the master to its current
condition.
30.
Record layout diagrams are used to reveal the internal structure of the records that
constitute a file or database table. The layout diagram usually shows the name,
data type, and length of each attribute (or field) in the record.
31.
Updating a master file record involves changing the value of one or more of its
variable fields to reflect the effects of a transaction.
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Chapter 2 Page 22
32.
A flat-file structure is a single-view model that characterizes legacy systems in
which data files are structured, formatted, and arranged to suit the specific needs
of the owner or primary user of the system. Such structuring, however, may omit
or corrupt data attributes that are essential to other users, thus preventing
successful integration of systems across the organization.
33.
Destructive update involves replacing an old data value with a new value and thus
destroying the original.
34.
Transaction volume is the key factor. Large-scale systems that process high
volumes of transactions often use real-time data collection and batch updating.
Master file records that are unique to a transaction such as customer accounts
and individual inventory records can be updated in real time without causing
operational delays. Common accounts should be updated in batch mode. Realtime processing is better suited to systems that process lower transaction volumes
and those that do not share common records.
35.
In a real-time processing environment, the master files are updated as soon as the
transaction is submitted and accepted into the system. Thus, reports are more
accurate in the sense that the information is as current as possible. Faster
operational response time to customer requests such as the shipping of an order
is another, and very important, benefit. Finally, the reduction of paper and storage
space of physical source documents is another benefit.
36.
By collecting data in real time, certain transaction errors can be prevented or
detected and corrected at their source.
37.
Block codes for the general ledger accounts, sequential codes for documents, and
group codes for coding transactions.
38.
Sequential codes are appropriate for items in either an ascending or descending
sequence, such as the numbering of checks or source documents. An advantage
is that during batch processing, any gaps detected in the sequence is a signal that
a transaction may be missing. A disadvantage is that the codes carry little, if any,
information other than the sequence order. Another disadvantage is that
sequential codes are difficult to manage when items need to be added; the
sequence needs either to be reordered or the items must be added to the end of
the list. Block codes provide some remedies to sequential codes by restricting
each class to a prespecified range. The first digit typically represents a class,
whereas the following digits are sequential items which may be spaced in intervals
in case of future additions. An example of block coding is a chart of accounts. A
disadvantage of block coding is that the information content does not provide
much meaning, i.e. an account number only means something if the chart of
accounts is known. Group codes may be used to represent complex items or
events involving two or more pieces of related data. The code is comprised of
fields which possess specific meaning. The advantages of group codes over
sequential and block codes are 1. they facilitate the representation of large
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Chapter 2 Page 23
amounts of diverse data, 2. they allow complex data structures to be represented
in a hierarchical form that is logical and thus more easily remembered by humans,
and 3. they permit detailed analysis and reporting both within an item class and
across different classes of items. A disadvantage is that the codes may be
overused to link classes which do not need to be linked, and thus create a more
complex coding system than is necessary. Alphabetic codes may be used
sequentially or in block or group codes. An advantage is that a system which uses
alphabetic codes can represent far more situations than a system with numeric
codes given a specific field size. Some disadvantages are that sequentially
assigned codes mostly have little meaning. Also, humans typically find alphabetic
codes more difficult to sort than numeric data. Lastly, mnemonic codes are
alphabetic characters in the form of acronyms, abbreviations or other combinations
that convey meaning. The meaning aspect is its advantage. A disadvantage of
mnemonic codes is that they are limited in their ability to represents items within a
class (i.e. names of all of American Express’s customers).
DISCUSSION QUESTIONS
1.
Cash flows into the firm from sales made to customers. The sales order
processing subsystem of the revenue cycle captures the intent of customers to
exchange cash for services or goods manufactured. Typically sales are made on
credit. The cash receipts subsystem of the revenue cycle captures the actual
receipt of cash. Depending on the credit terms and promptness of payment by the
customer, the lag between the sales order processing subsystem and the cash
receipts subsystem may be days, weeks, or months.
The cash inflow allows the organization to purchase raw materials, pay workers,
and buy capital assets necessary to manufacture the product (or to provide
services). The raw materials requirements are determined by the production
planning subsystem of the conversion cycle. These requirements trigger orders
being placed through the purchases/accounts payable subsystem of the
expenditure cycle. For credit sales, the cash is ultimately released once the goods
are received (or services are performed) and an invoice has been received. The lag
between receiving goods and disbursement of cash may be days or weeks. Cash is
also disbursed to employees, typically after services are rendered by the
employees. The lag is usually no more than one-half a month for salaried
employees and as short as one-half a week for hourly wage earners. The payroll
subsystem of the expenditure system captures these disbursements to employees.
2.
Initially, the cost accounting system was used for the valuation of inventory and
cost of goods sold reported to external users; however, the valuable use of cost
accounting data for budgeting, cost control, performance reporting, and
management decision making have proved to be crucial internal support.
3.
The conversion cycle activities for service and retailing entities include planning
the items to purchase or the services to produce, planning the workforce to
accomplish the necessary tasks (extremely crucial in service entities), and
directing the workforce in performing the service or selling the good.
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Chapter 2 Page 24
4.
Yes. For example, the remittance advice of a bill that is returned with the payment
serves as a source document for the cash receipts transaction processing system.
Thus, the product document becomes a source document.
5.
This type of transaction is recorded in the general journal since it is nonrecurring,
infrequent, and not similar to other types of transactions.
6.
Sometimes the terms are used interchangeably, such as the sales journal is
sometimes called the sales register. The term journal is appropriate when the
information needs to be ultimately posted to the general ledger. Registers may be
used to keep logs of information that may support, but do not specifically get
posted to the general ledger, such as a raw materials receipts register or a
shipping log.
7.
The balance in the general ledger is considered a control account. This amount is
an aggregated number representing the total amount owed to creditors listed in
the accounts payable journal. The accounts payable subsidiary ledger details the
exact amount owed to each creditor. The sum of the amounts owed to each
creditor listed in the accounts payable journal should equal the corresponding
control total in the general ledger. Thus, the accounts payable subsidiary ledger is
a detailed breakdown of the summary control total of accounts payable in the
general ledger.
8.
Confirmation is most typically used for confirming the accounts receivable account
as reported on the balance sheet. The audit trail is used to trace from the general
ledger accounts receivable control account to the subsidiary account, and then to
specific customer accounts. A sample of the customer accounts is then selected
for confirmation.
9.
In theory, the magnetic audit trail functions the same as a manual audit trail. In
practice, the steps are slightly different. The archive file that consists solely of valid
transactions is the file to which the accounts receivable subsidiary account
balances and transactions are traced. The customers still need to be contacted for
confirmation.
10.
Small batches have the advantage of fewer transactions to sort through for error
detection, but they are not processed as efficiently. Further, computing facilities
and constraints might dictate whether multiple small batches may be processed
throughout the day or whether a single large batch is processed at night when the
computing facilities have excess capacity. (Multiple small batches may still be
processed in the evening.)
11.
Not all modern organizations use entirely modern information systems. Some firms
employ legacy systems for certain aspects of their data processing. When legacy
systems are used to process financially significant transactions, auditors need to
know how to evaluate and test them.
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Chapter 2 Page 25
12.
Large-scale systems that process high volumes of transactions often use real-time
data collection and batch updating. Master file records that are unique to a
transaction, such as customer accounts and individual inventory records, can be
updated in real time without causing operational delays. Common accounts should
be updated in batch mode. Real-time processing is better suited to systems that
process lower transaction volumes and those that do not share common records.
13.
Real-time processing is better suited to systems that process lower transaction
volumes and those that do not share common records.
14.
A hashing structure typically works by taking a key value and using it to divide a
prime number. The result is a unique number almost all of the time if enough
decimal places are used. The resulting numbers are used to find the unique
location of the record. Calculating a record’s address is faster than searching for it
through an index. It is not used exclusively because it does not use the storage
disk efficiently. Some disk locations will never be selected because they do not
correspond to legitimate key values. Also, different record keys may sometimes
translate to the same address and data collision could occur. A way around this is
using pointers, but the additional pointers slow down the system.
15.
The virtual storage access method (VSAM) structure is used for very large files
that require routine batch processing and a moderate degree of individual record
processing. For instance, the customer file of a public utility company will be
processed in batch mode for billing purposes and directly accessed in response to
individual customer queries. Because of its sequential organization, the VSAM
structure can be searched sequentially for efficient batch processing.
16.
A physical address pointer contains the actual disk storage location (cylinder,
surface, and record number) needed by the disk controller. This approach allows
the system to access the record directly without obtaining further information.
A relative address pointer contains the relative position of a record in the file.
This address (i,e., the 200th record on the file) must be further manipulated to
convert it to the actual physical address. The conversion software determines this
by using the physical address of the beginning of the file, the length of each record
in the file, and the relative address of the record being sought.
A logical key pointer contains the primary key of the related record. This key
value is then converted into the record’s physical address by a hashing algorithm.
17.
The auditor should examine the system flowchart since it clearly depicts the
separation of functions and illustrates who is responsible for performing specific
processing steps. The dataflow diagram illustrates the logical system and is too
general since many different physical designs may be applicable.
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Chapter 2 Page 26
18.
Uncoded data takes a great deal of recording space, is time-consuming to
record and is prone to many types of errors. Consider a firm that manufactures
bicycles and carries in its inventory reflector lights. The lights come in six sizes,
2 colors, and 4 different grades of material. Thus, 48 different varieties of reflector
light are held (6x2x4). Every time lights are purchased, the description would need
to be included rather than a code. For example if 100 units of one type of reflector
light were purchased, and 200 units of another were purchased from Collins
Manufacturer in Roanoke, Virginia, the journal entry would be:
Inventory-2”, yellow, metal reflector light
Inventory-3”, orange, plastic reflector light
A/P-Collins Mnf-Roanoke, VA
75
120
195
Some problems this approach may produce are 1. the sales staff will have a more
tedious job in writing up orders, and more errors may occur (i.e. what if they forget
to write the color or material type?), 2. the warehouse personnel will have a more
difficult time locating and picking the goods for shipment, and again more errors
may occur, and 3. the accounting personnel will also have a more tedious job
posting to the subsidiary ledgers and errors may occur.
19.
a. state codes—alphabetic code, i.e. PA, this method is appropriate because it
corresponds with the postal services abbreviation and is meaningful to
humans.
b. check number—numeric, sequential. This method allows the checks to be
examined to determine if any are missing.
c. chart of accounts—block coding since this method allows a whole class of
items to be restricted to a specific range. i.e. assets 100-199, liabilities 200299, equity accounts, 300-399.
d. inventory item number—alpha-numeric. The numeric portion allows the items
to be easily sorted and found. The alphabetic portion allows more
combinations to be made with fewer digits or characters. i.e. 2000A, 2000B,
2000C could represent virtually the same inventory item but in three different
sizes.
e. bin number (inv warehouse location)—group codes since certain digits may be
used to represent which warehouse, certain digits may be used to represent
floor, certain digits may be used to represent rows, certain digits may be used
to represent bins. i.e. 211225 could represent warehouse 2, floor 1, row 12,
and bin #25.
f.
sales order number—numeric, sequential. This method allows the sales orders
to be examined to determine if any are missing.
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Chapter 2 Page 27
g. vendor code—alpha-numeric. The alphabetic portion allows more meaningful
codes to be used and found. The numeric portion allows different firms with
similar names to be distinguished. i.e. ALPH01, ALPH02 where ALPH01 is the
vendor code for Alphahydraulics and ALPH02 is the vendor code for Alpha
Trucking Services. Once the name of the company is known, finding the
vendor code is much easier than if only numbers are used.
h. invoice number—numeric, sequential. This method allows the invoices to be
examined sequentially. Gaps in the sequence may signify missing invoices.
i.
customer number—same as for vendor code.
MULTIPLE CHOICE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
C
A
E
B
A
C
D
D
C
C
A
C
A
C
A
C
B
B
C
B
D
PROBLEMS
1.
a.
b.
c.
d.
e.
f.
Expenditure cycle-payroll subsystem.
Conversion cycle-production system subsystem.
Revenue cycle-cash receipts subsystem.
Revenue cycle-sales order processing subsystem.
Expenditure cycle-purchases subsystem.
Conversion cycle-production subsystem.
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Chapter 2 Page 28
2.
a.
b.
c.
d.
e.
f.
g.
h.
master file
transaction file
reference file
archive file
master file
transaction file
reference file
archive file
3.
4.
The receiving department is a department that prepares many purchase
requisitions, which are sent to the purchasing department. The purchasing
department prepares many purchase orders, which are sent to suppliers. The
many different suppliers each may ship many different inventory items to the
receiving department of the customer, although each purchase order will be for
only one inventory item. The receiving clerk receives the many different inventory
items and prepares a receiving report for each shipment that will relate to one
purchase order.
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Chapter 2 Page 29
5.
6.
Business Rules:
An inventory item may be ordered many times from many suppliers. A purchase
order may list many items and a supplier may supply many items.
A purchase order may be sent to only one vendor. A vendor may receive more
than one purchase order.
An invoice comes from only one vendor, but a vendor may send more than one
invoice.
7.
a. Symbol 1 is a terminal showing the source or destination of a document or
report; symbol 2 is source document or report.
b. Symbols 3 and 4 depict the entry of data in real time into a system from a
computer terminal.
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Chapter 2 Page 30
c. Symbols 4 and 5 depict the storage/retrieval of data to/from a computer disk.
d. Symbols 6, 8, and 9 depict the processing of a source document and its
placement into a file.
8.
Time sheets are collected in a batch, and the information is manually keyed into
the system. This data is now stored on a magnetic disk. An editing program is run,
which verifies whether the employee number is valid by checking it against an
employee master file. The validity of the cost center assigned is also verified
against a master file. Logical and clerical errors should also be tested, such as an
employee working an unreasonable number of hours in a day/week. Records that
are found to be in error are sent to an error file. These errors need to be
investigated and corrected. The good records are stored in a data file. The next
program takes the edited transaction records, one at a time, and updates any
corresponding fields in the master files. Finally, a report program generates
paychecks and management reports.
9.
Any of the following types of errors may cause a payroll record to be placed in the
error file:
a. invalid employee number
b. invalid cost center
c. incorrect batch/control total that does not equal the totals computed by the
program
A program flowchart is presented below.
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Chapter 2 Page 31
10.
A rectangle is used to represent an entity. An entity might be the source of a
document or activity, or the destination of a document.
A rectangle with rounded corners represents and a process.
A rectangle without the right most line represents a data store, or the place from
which data for obtained or stored.
Arrows represent the flow and direction of information within the diagram.
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Chapter 2 Page 32
11.
12.
See the drawings on the following two pages.
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Chapter 2 Page 33
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Chapter 2 Page 34
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13.
Receiving report file
(PK)
Receiving
Report
Number
(SK)
Purchase
Order
Number
(SK)
Inventory
Number
(SK)
Vendor
Number
Quantity
Received
Condition
Purchase order File
Purchase
Order
Number
Inventory
Number
Vendor
Number
Quantity
Ordered
Vendor Master File
Vendor
Number
Name
Address
Balance
Terms
Inventory Master File
Inventory
Number
14.
Description
Quantity
On Hand
Reorder
Point
EOQ
Unit Cost
See drawings on the following pages.
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Chapter 2 Page 36
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15.
See the data flow diagram, ER diagram, and flowchart on the following pages.
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Chapter 2 Page 38
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Chapter 2 Page 39
16.
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Chapter 2 Page 40
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Chapter 2 Page 41
17.
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Chapter 2 Page 42
18.
101.0
102.0
103.0
104.0
105.0
121.0
131.0
131.5
132.0
132.5
133.0
133.5
134.0
134.5
135.0
201.0
202.0
203.0
221.0
222.0
301.0
302.0
311.0
390.0
401.0
Cash
Accounts Receivable
Office Supplies Inventory
Prepaid Insurance
Inventory
Investments in Marketable Securities
Delivery Truck
Accumulated Depreciation—Delivery Truck
Equipment
Accumulated Depreciation—Equipment
Furniture and Fixtures
Accumulated Depreciation—Furniture and Fixtures
Building
Accumulated Depreciation—Building
Land
Accounts Payable
Wages Payable
Taxes Payable
Notes Payable (Long-term)
Bonds Payable
Common Stock
Paid in Capital in Excess of Par
Treasury Stock
Retained Earnings
Sales
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Chapter 2 Page 43
401.5
420.0
501.0
501.0
521.0
522.0
531.0
541.0
551.0
561.0
571.0
19.
Sales Returns and Allowances
Dividend Income
Cost of Goods Sold
Wages Expense
Utility Expense
Office Supplies Expense
Insurance Expense
Depreciation Expense
Advertising Expense
Fuel Expense
Interest Expense
The following scheme uses group codes with alphabetic and numeric data since
they can be used to categorize information in a hierarchical form.
Warehouse
1
Aisle
C
Left or right
Side of Aisle
L
Shelf
5
Bin
08
Thus, code 1CL08 represents the above. 2AR415 represents inventory in
warehouse #2, aisle A, right side of aisle, shelf 4, bin #15.
20. a.
b.
c.
d.
e.
f.
g.
indexed sequential or indexed random; least optimal: sequential
indexed random or hashing; least optimal: sequential
sequential; least optimal: indexed random
sequential or pointer; least optimal; indexed random
indexed random or hashing; least optimal: sequential
indexed random or hashing; least optimal: sequential
indexed random; least optimal: hashing
21. a. A sequential file could be used, but with only eight updates per month, roughly
1/8 of the files will be updated each run. That means for each run the other 7/8
of the file must be read and rewritten. Random access will aid the customer
inquiry response time. A hierarchical database would be appropriate since this
is a one-to-one relationship—each address has one resident in charge of
utilities.
b. Random access for customer balances and payment information is crucial. A
network or relational database is necessary since this is a many-to-many
relationship: many purchases per customer, many merchants per customer,
many customers per merchants.
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Chapter 2 Page 44
c. Random access will be necessary for flight inquiries and updates throughout
the day. A navigational database would be appropriate. Only one direction
needs to be investigated. Most customers start with a departure city and then
flights to the destination city can be investigated. Many different destinations
will exist for a given departure city. Rarely will a customer wish to book a flight
based on a destination where they do not know from which city they will
depart.
d. A random access storage device is necessary to access the students’ records
quickly when they check out books. A network or relational database will be
necessary since the data should be bidirectional. An investigation may need to
be conducted to determine what books a student has checked out or an
investigation may need to be conducted regarding who has a certain book
checked out that has been recalled.
22. a. Only the backup files can be presumed to be uncorrupted.
b. The clerk will have to reenter the data for the previous day’s sales.
c. The company will first have to restore the backed up data to the computer.
Once the clerk has reentered the sales data, this new transaction file will have
to go through the edit process. Finally, an updated master file(s) may be
generated and then a new backup file created.
23.
9997/3=3332.33333333333
9997/2307=4.33333333333
9997/39=256.33333333333
These numbers are identical with respect to location. The record with key=3 will be
stored in cylinder 33, surface 33, record number 3333.
The record with key=2307 will be randomly stored elsewhere and a pointer will be
attached from the record with key=3 to the location of the record with key=2307.
The record with key=39 will be stored at yet another random location and another
pointer will be attached to the record with key=3 giving the location of the record
with key=39.
24.
The following list illustrates, step by step, the update procedures for a sequential
file update process.
t=1 m=1 t=m
update m=1
t=6 m=2 t>m
skip m=2
t=6 m=3 t>m
skip m=3
t=6 m=4 t>m
skip m=4
t=6 m=5 t>m
skip m=5
t=6 m=6 t=m
update m=6
t=8 m=7 t>m
skip m=7
t=8 m=8 t=m
update m=8
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Chapter 2 Page 45
t=9 m=9 t>m
update m=9
t=10 m=10 t=m
update m=10
t=13 m=11 t>m
skip m=11
t=13 m=12 t>m
skip m=12
t=13 m=13 t=m
update m=13
t=11 m=14 t<m
ERROR! write to error file
t=15 m=15 t=m
update m=15
t=17 m=16 t>m
skip m=16
t=17 m=17 t=m
update m=17
eof m=18
stop
The error in the order of the file causes record 11 in the master file to be incorrect
since it is not updated. This record should be written to an error file.
If a direct access method is used, no errors would occur because of the out-ofsequence condition of transaction file records.
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