ACCOUNTING INFORMATION SYSTEMS 2026
PRACTICE TEST PAPER ERP SYSTEMS AND
TRANSACTION CYCLES REVIEW SHEET FULL
SOLUTIONS
◉ Which of the following situations represents an internal control
weakness? Answer: The distribution of paychecks by the employees'
immediate supervisor is an internal control weakness. Paychecks
should go directly to employees either by mail or through direct
deposit. Giving the responsibility for distribution to the supervisor
creates the possibility of loss, theft, or withholding of pay from an
employee that the supervisor simply does not like. An additional risk
arises if the employee is absent on payday and the supervisor has no
secure storage for the check until the employee is back.
◉ Which of the following is NOT a reasonable control for fixed
assets? Answer: Requiring that fully depreciated assets be disposed
of immediately is not a reasonable control for fixed assets. Fully
depreciated assets may have years of useful life remaining. For
example, manufacturing machinery may be depreciated over three
years but many factories use machines that are 10, 15, or 20 years
old if they are well maintained.
◉ What type of data is found in the general ledger master file?
Answer: Balances for each account in the chart of accounts are found
,in the general ledger master file. The text describes the general
ledger file as the information hub for the accounting system. Each
record in the general ledger master file corresponds with one of the
accounts in the chart of accounts. Each record is either a GL Master
account (i.e., Sales) or a control account (i.e. Accounts Receivables
control)
◉ Which report is an output of the financial reporting system (FRS)?
Answer: A comparative balance sheet is an output of the financial
reporting system. The law requires that corporations generate a
series of financial reports - Income Statement, Balance Sheet,
Statement of Cash Flows, Tax Returns, and others. This requirement
is met by the financial reporting system.
◉ A characteristic of the management reporting system (MRS) is
Answer: The management reporting system (MRS) focuses on
internal decision-making information. The MRS is the source for
reports that managers will use to analyze business performance
such as variance analysis, production efficiency, sales, and
purchases.
◉ Big data analytics are characterized by Answer: Big data analytics
are characterized by volume, velocity, and variety of data. These are
referred to as the three Vs: extreme volumes of data (megabytes,
terabytes, petabytes, etc.), the rapid velocity at which the data must
be processed (particularly in applications involving machine
learning and artificial intelligence), and the wide variety of
,structured and unstructured data types that need to be integrated
(audio, video, external web data, social media, the financial
reporting system, the management reporting system).
◉ What function does prescriptive analytics serve? Answer:
Prescriptive analytics tells the user what actions should be taken in
response to specific questions. For example, some companies use
predictive analytics to optimize trade promotions. Prescriptive
analytics helps them determine which campaigns to run and for
which products.
◉ Which item reflects vital information such as quantities and unit
prices? Answer: The sales order contains vital information such as
unit prices and quantities.
◉ How do inventory control functions adjust inventory at the time of
a return? Answer: An approved credit memo triggers the system to
adjust the inventory when items are returned.
◉ Which risk is associated with charge accounts within the revenue
cycle? Answer: The clerk can be careless and allow purchases from
individuals who do not pay their bills.
◉ Which function reflects the expenditure cycle? Answer: Inventory
is a part of the expenditure cycle because the quantities and
condition are updated.
, ◉ What is the purpose of the blind copy? Answer: The blind copy is
used to force the clerk to count contents to verify items match.
◉ Which items reflect fixed assets? Answer: Buildings can sold and
converted to cash.
◉ What contributes to the success of the electronic data interchange
system? Answer: Implementation of agreements contributes to the
success by circumventing discrepancies.
◉ What is an example of a payroll system information technology
(IT) control? Answer: Direct deposit is an example of an IT control.
◉ Which department is responsible for receiving the supplier's
invoice, the purchase order, and the receiving report in order to post
the acquisition of fixed assets? Answer: Accounts Payable receives
the supplier's invoice, purchase order, and receiving report to post
the acquisition of fixed assets in the accounts payable subledger.
◉ Which information from timecards provides an audit trail to
support financial reporting? Answer: Payroll expenses should be
supported with hours worked by employees on a specified date.
PRACTICE TEST PAPER ERP SYSTEMS AND
TRANSACTION CYCLES REVIEW SHEET FULL
SOLUTIONS
◉ Which of the following situations represents an internal control
weakness? Answer: The distribution of paychecks by the employees'
immediate supervisor is an internal control weakness. Paychecks
should go directly to employees either by mail or through direct
deposit. Giving the responsibility for distribution to the supervisor
creates the possibility of loss, theft, or withholding of pay from an
employee that the supervisor simply does not like. An additional risk
arises if the employee is absent on payday and the supervisor has no
secure storage for the check until the employee is back.
◉ Which of the following is NOT a reasonable control for fixed
assets? Answer: Requiring that fully depreciated assets be disposed
of immediately is not a reasonable control for fixed assets. Fully
depreciated assets may have years of useful life remaining. For
example, manufacturing machinery may be depreciated over three
years but many factories use machines that are 10, 15, or 20 years
old if they are well maintained.
◉ What type of data is found in the general ledger master file?
Answer: Balances for each account in the chart of accounts are found
,in the general ledger master file. The text describes the general
ledger file as the information hub for the accounting system. Each
record in the general ledger master file corresponds with one of the
accounts in the chart of accounts. Each record is either a GL Master
account (i.e., Sales) or a control account (i.e. Accounts Receivables
control)
◉ Which report is an output of the financial reporting system (FRS)?
Answer: A comparative balance sheet is an output of the financial
reporting system. The law requires that corporations generate a
series of financial reports - Income Statement, Balance Sheet,
Statement of Cash Flows, Tax Returns, and others. This requirement
is met by the financial reporting system.
◉ A characteristic of the management reporting system (MRS) is
Answer: The management reporting system (MRS) focuses on
internal decision-making information. The MRS is the source for
reports that managers will use to analyze business performance
such as variance analysis, production efficiency, sales, and
purchases.
◉ Big data analytics are characterized by Answer: Big data analytics
are characterized by volume, velocity, and variety of data. These are
referred to as the three Vs: extreme volumes of data (megabytes,
terabytes, petabytes, etc.), the rapid velocity at which the data must
be processed (particularly in applications involving machine
learning and artificial intelligence), and the wide variety of
,structured and unstructured data types that need to be integrated
(audio, video, external web data, social media, the financial
reporting system, the management reporting system).
◉ What function does prescriptive analytics serve? Answer:
Prescriptive analytics tells the user what actions should be taken in
response to specific questions. For example, some companies use
predictive analytics to optimize trade promotions. Prescriptive
analytics helps them determine which campaigns to run and for
which products.
◉ Which item reflects vital information such as quantities and unit
prices? Answer: The sales order contains vital information such as
unit prices and quantities.
◉ How do inventory control functions adjust inventory at the time of
a return? Answer: An approved credit memo triggers the system to
adjust the inventory when items are returned.
◉ Which risk is associated with charge accounts within the revenue
cycle? Answer: The clerk can be careless and allow purchases from
individuals who do not pay their bills.
◉ Which function reflects the expenditure cycle? Answer: Inventory
is a part of the expenditure cycle because the quantities and
condition are updated.
, ◉ What is the purpose of the blind copy? Answer: The blind copy is
used to force the clerk to count contents to verify items match.
◉ Which items reflect fixed assets? Answer: Buildings can sold and
converted to cash.
◉ What contributes to the success of the electronic data interchange
system? Answer: Implementation of agreements contributes to the
success by circumventing discrepancies.
◉ What is an example of a payroll system information technology
(IT) control? Answer: Direct deposit is an example of an IT control.
◉ Which department is responsible for receiving the supplier's
invoice, the purchase order, and the receiving report in order to post
the acquisition of fixed assets? Answer: Accounts Payable receives
the supplier's invoice, purchase order, and receiving report to post
the acquisition of fixed assets in the accounts payable subledger.
◉ Which information from timecards provides an audit trail to
support financial reporting? Answer: Payroll expenses should be
supported with hours worked by employees on a specified date.
