AIS James Hall 7th Edition Chapter 8 PDF

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Lim, Apple Mae M.BSA 4-Review QuesionsChapter 8 (Even) How are journal vouchers used as a control mechanism?  Journal vouchers are used as a control mechanism by only being approved byresponsible managers, which prevents unauthorized entries. Since every entry has proper information about transacti...

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Lim, Apple Mae M. BSA 4-2 Review Questions Chapter 8 (Even)

2. How are journal vouchers used as a control mechanism?  Journal vouchers are used as a control mechanism by only being approved by responsible managers, which prevents unauthorized entries. Since every entry has proper information about transactions amounts and summaries of transactions, it's considered a control mechanism. 4. What is the purpose of the general ledger history file?  The purpose of the general ledger history file is responsible for providing the historical financial data of the past situations. Information from these files can help with comparing financial reports. 6. List the primary users of the FRS and discuss their information needs.  The primary recipients of financial statement information are external users, such as stockholders, creditors, and government agencies. Generally speaking, outside users of information are interested in the performance of the organization as a whole. Therefore, they require information that allows them to observe trends in performance over time and to make comparisons between different organizations. Given the nature of these needs, financial reporting information must be prepared and presented by all organizations in a manner that is generally accepted and understood by external users. 8. What assumption is made regarding the external users of financial statements?  The statements are prepared on the assumption that the users understand the conventions and accounting principles that are applied, and that the financial statements have information content and useful. 10. What tasks should the general ledger clerk not be allowed to do?  The general ledger clerk isn't allowed to have responsibility of maintaining special journals or general ledgers, preparation of journal vouchers, control and custody of physical assets. 12. Explain which of the four potential exposures in the FRS may be controlled better by a close examination of the journal voucher listing.  Should help uncover any journal voucher in error, either incorrect or unauthorized 14. What does XBRL stand for?  XBRL stands for extensible business reporting language and is another type of internet standard. XBRL is based on XML and is designed for providing global standards for the exchange of business information and also to provide for their preparation and publishing. Things are automated instead of manual

16. What is an XBRL instance document?  An XBRL instance document is a financial statement of a company or part of it. It denotes the actual financial reports of the organization or financial communities. Can be viewed as an application to taxonomy business reporting data. 18. Explain how the formalization of tasks promotes internal control.  Responsibility refers to an individual's obligation to achieve desired results. Authority refers to the empowerment of an individual to make decisions regarding the obligations that he/she may be assigned. Thus, if a person is held accountable for certain tasks, he/she must be given the authority and power to affect the outcomes. 20. Distinguish between narrow and wide span of control. Give an example of tasks appropriate to each type.  Wide spans of control have fewer managers/supervisors and more subordinates. Whereas, a narrow span of control has more managers/supervisors and fewer subordinates.  Usually the span of control is dependent on the activity performed. If the activity is more routine and structured in nature the less control is needed and a manager can supervise more subordinates. 22. Identify instances for which feedback becomes useless in helping to control activities.  When it’s too late. 24. What are the three elements that distinguish structured and unstructured problems? Give an example of each type of problem. Which types of problems is more suitable to a transaction processing system?  Problems are classified into two types: Structured and Unstructured. The three elements that distinguish structured and unstructured problems are as follows: 1. Data—the values used to represent factors that are relevant to the problem. 2. Procedures—the sequence of steps or decision rules used in solving the problem. 3. Objectives—the results the decision maker desires to attain by solving the problem. PROBLEM STRUCTURE When all three elements are known with certainty, the problem is structured. Payroll calculation is an example of a structured problem: 1. We can identify the data for this calculation with certainty (hours worked, hourly rate, withholdings, tax rate, and so on). 2. Payroll procedures are known with certainty: Gross pay = Hours worked x Pay rate Net pay = Gross pay x Taxes x Withholdings 3. The objective of payroll is to discharge the firm’s financial obligation to its employees. Structured problems do not present unique situations to the decision maker and, because their information requirements can be anticipated, they are well suited for traditional data processing techniques. In effect, the designer who specifies the procedures and codes the programs solves the problem.

Unstructured Problems Problems are unstructured when any of the three characteristics identified previously are not known with certainty. In other words, an unstructured problem is one for which we have no precise solution techniques. Either the data requirements are uncertain, the procedures are not specified, or the solution objectives have not been fully developed. Such a problem is normally complex and engages the decision maker in a unique situation. In these situations, the systems analyst cannot fully anticipate user information needs, rendering traditional data processing techniques ineffective.  Structured Problems is more suitable to a transaction processing system. 26. What are two objectives that enable reports to be considered useful?  Characteristics of a report.  To be effective, a report must possess the following attributes: relevance, summarization, exception orientation, accuracy, completeness, timeliness, and conciseness. 28. What is responsibility accounting?  Concept that every economic event affecting the organization is the responsibility of and can be traced to an individual manager. The responsibility accounting system personalizes performance by saying to the manager, ‘‘This is your original budget, and this is how your performance for the period compares to your budget.’’ Most organizations structure their responsibility reporting system around areas of responsibility in the firm. A fundamental principle of this concept is that responsibility area managers are accountable only for items (costs, revenues, and investments) that they control.

30. What are the three most common forms of responsibility centers?  Cost centers are organizational units with responsibility for cost management.  Profit centers have responsibility for both cost management and revenue generation.  Investment centers have responsibility for cost management, revenue generation, and also the investment and use of assets. 32. What is data mining?  Data mining is the process or strategy of finding, determining, and discovering patterns for the purpose of uncovering relationships among data sets. Extracts information from large databases. 34. What is information overload?  Information overload is when the information received by the manager contains too much information and makes it hard to make and optimal decision or understand the issue. 36. Explain how ad hoc reports have allowed managers to make timelier and better quality decisions. Give an example.  Ad Hoc reports have allowed managers to make timely and better decisions because it contains all the information and data in one central unit so that managers can quickly produce ad hoc reports without the use of data processing professionals.

38. What types of variances are found on cost center reports? Explain what each variance is measuring and why this information is important.  A cost center is an organizational unit with responsibility for cost management within budgetary limits. The variances found in cost center reports are:  Labor Variances - The logic for direct labor variances is very similar to that of direct material. The total variance for direct labor is found by comparing actual direct labor cost to standard direct labor cost. If actual cost exceeds standard cost, the resulting variances are unfavorable and vice versa. The overall labor variance could result from any combination of having paid laborers at rates equal to, above, or below standard rates, and using more or less direct labor hours than anticipated.  Material Variances - Material variances compares actual raw material cost with budgeted material cost. It also compares the actual quantity of raw material used with budget quantity of raw material requires. - It helps a user to control a wastage of raw material and maintain appropriate input-output ratio.  Overhead Variances - Overhead variances are a bit more challenging to calculate and evaluate. As a result, the techniques for factory overhead evaluation vary considerably from company to company. To begin, recall that overhead has both variable and fixed components (unlike direct labor and direct material that are exclusively variable in nature). The variable components may consist of items like indirect material, indirect labor, and factory supplies. Fixed factory overhead might include rent, depreciation, insurance, maintenance, and so forth. Because variable and fixed costs behave in a completely different manner, it stands to reason that proper evaluation of variances between expected and actual overhead costs must take into account the intrinsic cost behavior. As a result, variance analysis for overhead is split between variances related to variable overhead and variances related to fixed overhead. For example, a production department may be responsible for meeting its production obligation while keeping production costs (labor, materials, and overhead) within the budgeted amount. The performance report for the cost center manager reflects its controllable cost behavior by focusing on budgeted costs, actual costs, and variances from budget. Performance measurements should not consider costs that are outside the manager’s control, such as investments in plant equipment or depreciation on the building....