AIS Exam 1| 2023 WITH COMPLETE SOLUTION

AIS Exam 1| 2023 WITH COMPLETE SOLUTION objective of financial reporting - to provide information needed for decisions elements of financial statements - the information provided by accounting -assets, liabilities, equity -investments by owners -distributions to owners -revenues, expenses -gains, losses -comprehensive income qualitative characteristics - attributes that make information useful -understandability -relevance -reliability -comparability -consistency assumption, principles, and constraints - concepts that provide a foundation assumptions - economic entity going concern periodicity monetary unit principles - historical cost realization matching full disclosure constraints - cost effectiveness materiality conservatism What AIS systems do - 1. capture data on the elements of financial statements 2. transforming those data into relevant and reliable information 3. recognizing and adapting to the cost-benefit constraint broad business perspective competencies - -strategic/critical thinking -resource management -risk analysis -research personal competencies - -problem solving and decision making -communication sales/collection process - taking a customers order to collecting payment -includes purchasing inventory on account, paying vendor invoices acquisition/payment process - any resource an organization needs, context of inventory -purchasing inventory on account and paying vendor vendor invoices conversion process - manufacturing a product financing process - acquiring external financing in the form of debt and equity human resources process - hiring new employees, evaluating employee performance, paying employees, managing their separation from the company AIS structure - inputs processes outputs storage internal controls Criteria for a reasonable source - authority accuracy objectivity currency coverage accounting cycle - 1. obtain info about external transactions from source documents 2. analyze transactions 3. record the transactions in a journal 4. post from the journal to the general ledger accounts 5. prepare an unadjusted trial balance 6. record adjusting entries and post to the general ledger accounts 7. prepare an adjusted trial balance 8. prepare financial statements 9. close the temporary accounts to retained earnings 10. prepare a post-closing trial balance general purpose financial statements - income statement statement of changes in shareholders' equity balance sheet statement of cash flows coding systems - -sequential: 101, 102, 103 -block: current assets 100's, plant assets 200's -hierarchical: -mnemonic: DVR, FSTV activities, documents, and technology - Interrelated parts of an accounting information system AICPA core competency framework - A structure that explains skills needed by accounting professionals business processes - One way to organize the study of AIS comprehensive income - An element of financial statements in the FASB conceptual framework criteria for evaluating information - Authority, accuracy, objectivity, currency, and coverage critical thinking - A broad business perspective competency information literacy - The ability to find, evaluate, use, and communicate information internal control - A generic AIS element that helps an organization control its assets storage - The generic AIS element associated with master/transaction/junction files 1. Which of the following is an example of an internal control in the accounting information system? a. bank reconciliation b. Sales order c. Balance sheet d. steps in the accounting cycle - bank reconciliation 2. Which of the following provides the best example of "materiality" as the term is used in the FASB conceptual framework a. preparing an operating budget b. expensing the cost of a wastebasket c. reporting investments at their fair market value d. providing information for decisions - expensing the cost of a wastebasket 3. All of the following are facts about the accounting information systems except: a. they should all involve some form of internal control b. they always incorporate information technology c. they usually provide general-purpose financial statements as outputs d. they can involve three types of storage files - the always incorporate information technology 4. Which of the following best pairs a generic element of the AIS with a specific example of that element? a. input, balance sheet b. internal control, general ledger software c. internal control, balance sheet d. input, general ledger software - internal control, general ledger software 5. Which of the following statements shows the strongest level of information competence? a. never using Wikipedia to do research b. consulting the AICPA web site for information on fraud examination c. investigating an author's professional background d. using only scholarly information as the basis for a paper - using only scholarly information as the basis for a paper accrued revenur - service is provided before cash is received credit - increases to liabilities debit - decreases to revenue deferred revenu