CH 1

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Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 1 Accounting Information Systems: An Overview
1) Which of the following statements below shows the contrast between data and information?
A) Data is the output of an AIS.
B) Information is the primary output of an AIS.
) Data is more useful in decision!ma"ing than information.
D) Data and information are the same.
Answer# B
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,) Information is
A) basically the same as data.
B) raw facts about transactions.
) potentially useful facts when processed in a timely manner.
D) data that has been organi-ed and processed so that it.s meaningful.
Answer# D
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/) 0he )alue of information can best be defined as
A) how useful it is to decision ma"ers.
B) the benefits produced by possessing and using the information minus the cost of producing it.
) how rele)ant it is.
D) the e1tent to which it ma1imi-es the )alue chain.
Answer# B
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&) An accounting information system 3AIS) processes 44444444 to pro)ide users with 44444444.
A) data5 information
B) data5 transactions
) information5 data
D) data5 benefits
Answer# A
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7) Information that reduces uncertainty8 impro)es decision ma"ers. ability to ma"e predictions8 or
confirms or corrects their prior e1pectations8 is said to be
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A) complete.
B) rele)ant.
) reliable.
D) timely.
Answer# B
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;) Information that is free from error or bias and accurately represents the e)ents or acti)ities of the
organi-ation is
A) rele)ant.
B) reliable.
) )erifiable.
D) timely.
Answer# B
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<) Information that does not omit important aspects of the underlying e)ents or acti)ities that it measures
is
A) complete.
B) accessible.
) rele)ant.
D) timely.
Answer# A
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=) When two "nowledgeable people acting independently each produce the same information8 this
information is said to be
A) complete.
B) rele)ant.
) reliable.
D) )erifiable.
Answer# D
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>) Data must be con)erted into information to be considered useful and meaningful for decision!ma"ing.
0here are si1 characteristics that ma"e information both useful and meaningful. If information is free
from error or bias and accurately represents the e)ents or acti)ities of the organi-ation8 it is
representati)e of the characteristic of
A) rele)ancy.
B) timeliness.
) understandability.
D) reliability.
Answer# D
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16) An accounting information system must be able to perform which of the following tas"s?
A) collect transaction data
B) process transaction data
) pro)ide ade?uate controls
D) all of the abo)e
Answer# D
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11) Which of the following is not an e1ample of a common acti)ity in an AIS?
A) buy and pay for goods and ser)ices
B) sell goods and ser)ices and collect cash
) summari-e and report results to interested parties
D) recording of sales calls for mar"eting purposes
Answer# D
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1,) Which of the following is not one of the components of an AIS?
A) Internal controls and security measures
B) $eople
) $rocedures and instructions
D) @ardware
Answer# D
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1/) 'ne group that relies on both the ade?uate collection and transformation of data for decision!ma"ing
purposes for an organi-ation is
A) management.
B) interested outsiders.
) competitors.
D) the go)ernment.
Answer# A
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1&) 0he primary ob(ecti)e of accounting is to
A) implement strong internal controls.
B) pro)ide useful information to decision ma"ers.
) prepare financial statements.
D) ensure the profitability of an organi-ation.
Answer# B
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17) 0he American Institute of ertified $ublic Accountants 3AI$A) has recogni-ed the importance of
AIS and the ma(or impact information technology has on the area of accounting. 0o recogni-e indi)idual
$As who ha)e met educational and e1periential re?uirements in this area8 the group formally created
the designation "nown as
A) the ertified 2anagement Accountant.
B) the ertified Information 0echnology $rofessional.
) the ertified Internal Auditor.
D) the ertified Data $rocessing $rofessional.
Answer# B
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1;) 0he AIS must include controls to ensure
A) safety and a)ailability of data.
B) mar"eting initiati)es match corporate goals.
) information produced from data is accurate.
D) both A and
Answer# D
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1<) A change in the AIS that ma"es information more easily accessible and widely a)ailable within an
organi-ation is most li"ely to first influence the
A) organi-ational culture.
B) customer base.
) e1ternal financial statement users.
D) production acti)ity.
Answer# A
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1=) 0he process of creating )alue for customers is the result of nine acti)ities that form a
A) )alue chain.
B) profitable operation.
) successful business.
D) support system.
Answer# A
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1>) 0he )alue chain concept is composed of two types of acti)ities "nown as
A) primary and support.
B) primary and secondary.
) support and )alue.
D) technology and support.
Answer# A
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,6) Which of the following is a primary acti)ity in the )alue chain?
A) infrastructure
B) technology
) purchasing
D) mar"eting and sales
Answer# D
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,1) In )alue chain analysis8 what is the acti)ity of arranging the deli)ery of products to customers
called?
A) outbound logistics
B) inbound logistics
) shipping
D) deli)ery
Answer# A
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,,) An AIS pro)ides )alue by
A) impro)ing products or ser)ices through information that increases ?uality and reduces costs.
B) pro)iding timely and reliable information to decision ma"ers.
) creating new products.
D) both A and B
Answer# D
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,/) In hapter 18 Aigure 1!& shows the factors that influence the design of AIS. 0he diagram shows a bi!
directional arrow between the organi-ational culture and the AIS. 0he reason for this two!way
interchange between organi-ational culture and AIS is
A) that the AIS should not influence the )alues of the organi-ational culture.
B) because the organi-ation.s culture influences the AIS8 and li"ewise the AIS influences the
organi-ation.s culture by controlling the flow of information within the organi-ation.
) due to the transfer of managers between the two corporate elements.
D) the AIS impacts the organi-ation.s "ey strategies.
Answer# B
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,&) An e1ample of inbound logistics would consist of
A) the acti)ities that transform inputs into final products or ser)ices.
B) the acti)ities that help customers to buy the organi-ation.s products or ser)ices.
) the acti)ities that pro)ide post!sale support to customers.
D) the acti)ities that consist of recei)ing8 storing8 and distributing the materials used as inputs by the
organi-ation to create goods and:or ser)ices it sells.
Answer# D
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,7) A good e1ample of how an AIS is used to share "nowledge within an organi-ation is
A) the use of a corporate database to help staff identify the rele)ant e1perts who can help with a
particular client.
B) the use of laptop computers to access a networ" for messaging worldwide.
) the monitoring of production e?uipment to watch for defects.
D) the use of point!of!sale data to determine hot!selling items.
Answer# A
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,;) 'ne acti)ity within the )alue chain is research and de)elopment. 0his acti)ity can be identified as a
A) firm infrastructure acti)ity.
B) human resources acti)ity.
) technology acti)ity.
D) purchasing acti)ity.
Answer#
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,<) When the AIS pro)ides information in a timely and accurate manner8 it stands as an e1ample of
A) impro)ed decision ma"ing.
B) impro)ing the ?uality and reducing the costs of products or ser)ices.
) impro)ing efficiency.
D) all of the abo)e
Answer# D
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,=) Accounting information plays ma(or roles in managerial decision ma"ing by
A) identifying situations re?uiring management action.
B) reducing uncertainty.
) pro)iding a basis for choosing among alternati)e actions.
D) all of the abo)e
Answer# D
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,>) A well!designed AIS can impro)e the decision!ma"ing function within the organi-ation. Which
statement below would describe a limitation8 rather than a benefit8 of an efficient AIS?
A) An AIS reduces uncertainty8 and therefore accounting information can pro)ide a basis for choosing
among alternati)e courses of action.
B) An AIS identifies situations re?uiring management action.
) An AIS pro)ides to its users an abundance of information without any filtering or condensing of such
information.
D) An AIS pro)ides information about the results of pre)ious decisions which pro)ides decision ma"ers
with feedbac" that can be used in future decision ma"ing.
Answer#
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/6) Bill Aredson is in charge of the mail room at Cammon Dni)ersity. +)ery Ariday morning she recei)es
a report )ia email that summari-es the number of outgoing and incoming pieces of mail by source and
destination department. +)ery Ariday afternoon8 Bill deletes the report without reading it because it has
no bearing on mail room operations. Which of the following characteristics of useful information is
absent in the situation described abo)e?
A) %ele)ant
B) %eliable
) omplete
D) 0imely
+) Dnderstandable
A) Eerifiable
C) Accessible
Answer# A
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/1) In)entory information is pro)ided in real time by a firm.s accounting information system. 0he
accuracy of this information is ?uestionable8 howe)er8 since the production manager often reports stoc"
outs of components that the system indicates are in stoc". Which of the following characteristics of
useful information is absent in the situation described abo)e?
A) %ele)ant
B) %eliable
) omplete
D) 0imely
+) Dnderstandable
A) Eerifiable
C) Accessible
Answer# B
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/,) Boe 2ar-etti has been the controller of Aair)iew 0ires for ,7 years. 'wnership of the firm recently
changed hands and the new owners are conducting an audit of the financial records. 0he audit has been
unable to reproduce financial reports that were prepared by 2ar-etti. While there is no e)idence of
wrongdoing8 the auditors are concerned that the discrepancies might contribute to poor decisions. Which
of the following characteristics of useful information is absent in the situation described abo)e?
A) %ele)ant
B) %eliable
) omplete
D) 0imely
+) Dnderstandable
A) Eerifiable
C) Accessible
Answer# A
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//) In ,66/8 uster 2anufacturing implemented a Web!based information system that allows all
employees to access mission!critical information. 0he intention was to increase production efficiency.
Dnfortunately8 it had the opposite effect8 as deli)eries fell behind schedule and costs increased. Beff
A"spen8 the director of information technology ser)ices8 as"ed Boyce Ben"ins to come in and tal" with
him about the system. Boyce is a long!time employee of uster8 and her opinion is )alued by her peers
and by her super)isor. FSo Boyce8 how.s it going down there in the shop?FFGot so good8 Beff. Dsed to be
we got a wee"ly pic" list so we "new how to plan production. Gow8 we got that computer system. 2ost
of us can.t figure out how to use it to do our (obs. Is there some way to print out a pic" list?FBeff thought
for a while before responding. FWell8 Boyce8 to tell you the truth8 I.m not so sure how to do it myself8 but
there must be a way. We.ll bring in the consultants that helped us build the system. 2aybe they can
help.F Which of the following characteristics of useful information is absent in the situation described
abo)e?
A) %ele)ant
B) %eliable
) omplete
D) 0imely
+) Dnderstandable
A) Eerifiable
C) Accessible
Answer# +
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/&) %a--mata-8 Wisconsin8 is a popular tourist destination. During the winter months8 the population
dwindles to a meager few8 but when summer comes8 the si-e of the town surges. huc" @ewitt is the
town sanitation engineer. When the si-e of the town surges8 so do his responsibilities. Among them is
management of the sewage processing )olume.In an inter)iew with the local paper8 huc" complained
that a report on tourist population that he uses to ad(ust processing )olume refers to data that was
collected fi)e days ago and it ta"es him a wee" to ma"e ad(ustments.Which of the following
characteristics of useful information is absent in the situation described abo)e?
A) %ele)ant
B) %eliable
) omplete
D) 0imely
+) Dnderstandable
A) Eerifiable
C) Accessible
Answer# D
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/7) A frantic Stro Arin-el called the home office from Des 2oines.F9ou ha)e got to help me. I am about
to close a great sale8 but I ha)e to be able to guarantee deli)ery by the fourteenth. I can.t get through to
the company Web site to )erify deli)eryHFF0han" you for calling. 9our call is )ery important to us.
@owe)er8 all of our lines are currently in use. $lease try again later.FWhich of the following
characteristics of useful information is absent in the situation described abo)e?
A) %ele)ant
B) %eliable
) omplete
D) 0imely
+) Dnderstandable
A) Eerifiable
C) Accessible
Answer# C
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/;) 2essage left on an answering machine# F@i BobH Bust got into town. @ow about dinner this e)ening
if you.re a)ailable. all meHFWhich of the following characteristics of useful information is absent in the
situation described abo)e?
A) %ele)ant
B) %eliable
) omplete
D) 0imely
+) Dnderstandable
A) Eerifiable
C) Accessible
Answer#
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/<) %obinson rusoe has formed a business that sells car)ed gourmet coconuts. @e has hired fi)e
employees. 0he most senior is Ariday8 who manages the car)ing process. 2onday is the newest
employee. She collects the coconuts. 0uesday8 as you might e1pect8 ta"es calls from curstomers8 oops8 I
mean customers8 who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea8
whereupon they drift to the wholesaler. 0hursday sends smo"e signals to the wholesaler e1tolling the
)irtues of the latest production run of nuts that are drifting across the bay.Which of the following
functions in the )alue chain is 2onday performing?
A) Inbound logistics
B) 'perations
) 'utbound logistics
D) 2ar"eting and sales
+) Ser)ice
Answer# A
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/=) %obinson rusoe has formed a business that sells car)ed gourmet coconuts. @e has hired fi)e
functions in the )alue chain is Ariday performing?
B) 'perations
+) Ser)ice
Answer# B
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/>) %obinson rusoe has formed a business that sells car)ed gourmet coconuts. @e has hired fi)e
functions in the )alue chain is Wednesday performing?
B) 'perations
+) Ser)ice
Answer#
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&6) %obinson rusoe has formed a business that sells car)ed gourmet coconuts. @e has hired fi)e
functions in the )alue chain is 0hursday performing?
B) 'perations
+) Ser)ice
Answer# D
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&1) %obinson rusoe has formed a business that sells car)ed gourmet coconuts. @e has hired fi)e
functions in the )alue chain is 0uesday performing?
B) 'perations
+) Ser)ice
Answer# +
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&,)
%efer to the chart abo)e. At what point8 measured in terms of the net cost of information8 does
information o)erload begin?
A) 6
B) 7
) 16
D) 1,
Answer#
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&/) 0ri!Anything8 *imited8 is a British company operating in Gew 9or" state. It offers styli-ed8 bouti?ue
public relations ser)ices to upscale retailers in ?uaint Gew +ngland towns. A ma(or source of re)enue is
a wee"ly newsletter that reports on current and pro(ected tourist tra)el and spending patterns.
$reparation of the newsletter re?uires study and analysis of weather conditions8 economic acti)ity8 and
tra)el costs. It is a)ailable at an annual subscription rate of I,>>.>>. 0here are currently 1>6 subscribers.
$reparation and distribution of the newsletter costs I1,8666 annually. 0he )alue of information to
subscribers is#
A) I,/;.=/
B) I&&8>>=.16
) *ess than I;/.1;
D) At least I/66.66
Answer# D
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&&) 2any modern accounting software pac"ages offer separate transaction cycle modules. What is the
reason for this?
A) +)ery organi-ation does not need to implement all of the a)ailable transaction cycle modules.
B) 2ost businesses do not need the re)enue cycle module as part of their AIS.
) 0he nature of a gi)en transaction cycle is the same irrespecti)e of the type of organi-ation.
D) A properly designed AIS does not use the concept of separate business transaction cycles to process
transactions.
Answer# A
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&7) 0he business owners obtain financing from outside in)estors8 which results in an inflow of cash into
the company. 0his transaction is considered to be part of which cycle?
A) the re)enue cycle
B) the payroll cycle
) the production cycle
D) the financing cycle
Answer# D
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&;) Which of the following is not a transaction cycle?
A) re)enue
B) e1penditure
) human resources
D) general ledger and reporting
Answer# D
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&<) Which of the following statements is false?
A) %etail stores do not ha)e a production cycle.
B) Ainancial institutions ha)e installment!loan cycles.
) A ser)ice company does not ha)e an in)entory system.
D) +)ery organi-ation should implement e)ery transaction cycle module.
Answer# D
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&=) 0ransaction cycles can be summari-ed on a high le)el as Fgi)e!getF transactions. An e1ample of
Fgi)e!getF in the e1penditure cycle would be
A) gi)e cash8 get cash.
B) gi)e cash8 get goods.
) gi)e cash8 get labor.
D) gi)e goods8 get cash.
Answer# B
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&>) 0ransaction cycles can be summari-ed on a high le)el as Fgi)e!getF transactions. An e1ample of
Fgi)e!getF in the re)enue cycle would be
A) gi)e cash8 get goods.
B) gi)e goods8 get cash.
) gi)e cash8 get labor.
D) gi)e cash8 get cash.
Answer# B
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76) Croups of related business acti)ities such as the ac?uisition of merchandise and payment of )endors
are called
A) transaction cycles.
B) economic cycles.
) business e)ents.
D) transactions.
Answer# A
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71) Which of the following is a true statement?
A) Business strategy directly influences AIS8 but not information technology.
B) Information technology directly influences organi-ational culture8 but not business strategy.
) 'rgani-ational culture directly influences business strategy8 but not AIS.
D) AIS directly influences information technology8 but not business strategy.
Answer# A
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7,) 0he transaction cycle that includes the e)ents of hiring employees and paying them is "nown as the
A) re)enue cycle.
B) e1penditure cycle.
) human resources cycle.
D) financing cycle.
Answer#
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7/) 0he transaction cycle approach leads to efficient processing of a large number of transactions
because
A) transaction cycles are easier to computeri-e.
B) a large number of transactions within a gi)en cycle can be categori-ed into a relati)ely small number
of distinct types.
) the transaction cycle approach represents the natural order of business.
D) transaction cycles are easy to understand.
Answer# B
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7&) Which of the following is not an e1ample of how an AIS adds )alue to an organi-ation?
A) All employees at a hospital can access and update patient records from any computer terminal in the
hospital.
B) A customer ser)ice representati)e can find a customer.s account data8 purchase history8 payment
history8 and salesperson.s name while on the phone with the customer8 to resol)e issues ?uic"ly.
) Suppliers are able to access sales data directly from the point!of!sale system of a retailer and deli)er
in)entory automatically when needed.
D) lient ta1 files are encrypted and made a)ailable on the $A firm.s networ" to any employee with an
access code.
Answer# A
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77) %olleigh orp. identifies growth by new product de)elopment and product impro)ement as the
number one corporate goal. An employee at Wrigley.s8 one of %olleigh.s wholly!owned subsidiaries8
de)eloped an inno)ation to an e1isting product that would directly address a shortcoming in the similar
product offered by %olleigh.s closest competitor. Wrigley.s current %eturn on In)estment 3%'I) is 17J8
but the product inno)ation is e1pected to generate %'I of only 1,J. Awarding bonuses to subsidiary
managers based on %'I could result in#
A) goal conflict
B) information o)erload
) goal congruence
D) decreased )alue of information
Answer# A
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7;) Which of the following tradeoffs between characteristics of useful information is least
ob(ectionable?
A) Incomplete information recei)ed on a timely basis
B) Irrele)ant information recei)ed in an understandable format
) Dnreliable information easily accessible
D) Eerifiable information recei)ed in unreadable format
Answer# A
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7<) $aid time!off policies8 (ob descriptions8 and procedures manuals are e1amples of information needed
to support "ey decisions in what business process?
A) @ire and train employees
B) Ac?uire in)entory
) Sell merchandise
D) ollect payment from customers
Answer# A
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7=) Which of the following is not a "ey decision to be made when starting a business?
A) @ow to estimate the allowance for uncollectible accounts
B) Whether to ad)ertise on 0E8 radio8 or newspaper
) @ow to raise capital
D) Whether to accept American +1press
Answer# A
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7>) $aying federal payroll ta1es is part of which transaction cycle?
A) @uman resources:payroll
B) +1penditure
) Ainancing
D) %e)enue
Answer# A
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;6) Who of the following would not be in)ol)ed in the re)enue cycle?
A) Accounts payable cler"
B) ustomer
) ashier
D) redit manager
Answer# A
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;1) Which of the following is not one of the three basic types of data about a specific sales transaction
that should be captured by an Accounting Information System?
A) Game of the employee who completed the sale
B) Daily sales ?uota
) $roduct sold
D) Date
Answer# B
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;,) Who of the following is not a sta"eholder with whom an accounting information system typically
communicates directly?
A) Wall Street industry analyst
B) Eenture capitalist
) ompany that supplies raw materials
D) ompany that purchases finished goods for resale to consumers
Answer# A
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