THE UNIVERSITY OF THE SOUTH PACIFIC

SCHOOL OF ACCOUNTING AND FINANCE

AF 121 – ACCOUNTING INFORMATION SYSTEMS

(Semester 2 / 2014)

(DFL)

FINAL EXAM

(Time allowed: 3 hours + 10 mins extra reading time)

(Weighting: 50% of final grade)

INSTRUCTIONS FOR CANDIDATES:

 PLEASE ANSWER SECTION A IN THE MULTIPLE CHOICE GRID

PROVIDED.
 PLEASE ANSWER SECTIONS B AND C IN THE ANSWER BOOKLET
PROVIDED.
 LABEL YOUR ANSWERS CLEARLY

SECTION DESCRIPTION MARK SUGGESTED

ALLOCATION TIME

A MULTIPLE CHOICE QUESTIONS 40 72 MINUTES

B SHORT ANSWER QUESTIONS 30 54 MINUTES

C CASE STUDY 30 54 MINUTES

TOTAL 100 3 HOURS

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SECTION A: MULTIPLE CHOICE

1. Which of the following accounts should be entered as a positive number in MYOB?

A. Merchandise Inventory
B. GST Paid
C. Provision for doubtful debts
D. Improvements Amortisation

2. Which of the following statements is INCORRECT about MYOB?

A. By default, MYOB will automatically warn for duplicate Cheque Numbers
B. By default, MYOB will allow users to make changes to previous transactions
C. Account Right has over 100 standard Accounts Lists (Chart of Accounts) to choose
from
D. After the company file has been created and saved you cannot change the Accounting
information

3. If I owned an accounting firm which provides accounting services, which of the following
layout style would be the most appropriate for my company’s invoices?

A. Service
B. Item
C. Professional
D. Miscellaneous

4. Which of the following statements is/are INCORRECT with regards to entering opening
balances in MYOB?
I. MYOB will not let you proceed unless your amount left to be allocated equals zero
II. If your opening balances are not fully allocated, MYOB will take the difference to
an account called Historical Balancing.
III. MYOB classifies Historical Balancing as equity.

A. I only
B. I and II only
C. II and III only
D. I and III only

5. Which of the following accounts would you set the tax code to CAP?

A. Motor Vehicle
B. Prepaid Insurance
C. Owner’s Equity
D. Stock Write Off

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6. By default, Accounts in MYOB will be set to which tax code?

A. N-T
B. GST
C. CAP
D. TAX

7. When entering transactions in the thirteenth period, dates must be prefixed with which of
the following?
A. #
B. $
C. *
D. %

8. Which of the following statements is FALSE?

A. The trial balance is a list of the active general ledger accounts with debit and credit
balances.
B. A balanced trial balance guarantees that there are no errors in the nominal
ledger entries.
C. An unbalanced trial balance indicates that an error is present.
D. Trial Balance while not as useful as financial reports for assisting managers make
decisions are useful for recording account balances according to the chart of accounts.

9. Which of the following flowchart options would I select, if I were searching for a
transaction involving the transfer of funds from the cheque account to the investment
account?

A. Cheque Register
B. Banking Register
C. Investment Register
D. Transfer Register

10. The sales module on MYOB is integrated with other modules. When a sale is posted,
what modules are affected?

A. Sales module only

B. Sales, Inventory and Accounts module
C. Sales, Inventory, Accounts and Purchases module
D. Inventory and Accounts modules

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11. In order to close a customer’s account on MYOB you need to:

A. check the “inactive card” check box on the customer’s card

B. delete the customer’s card from MYOB
C. Both A and B
D. None of the above

12. A backorder is created when:

A. the business does not have enough goods on hand to cover for a sale
B. the business wants to create a backorder
C. the inventory is in excess to the customer orders
D. none of the above

13. Which of the following is TRUE?

A. it is imperative to perform an initial bank reconciliation on conversion date

B. you only need to perform an initial bank reconciliation if there are outstanding
deposits and unpresented cheques
C. it is not necessary to perform initial bank reconciliation at all
D. all of the above

14. The purpose of tracing sales invoices to shipping documents would be to provide
evidence that

A. shipments to customers were properly invoiced.

B. no duplicate shipments or billings occurred
C. goods billed to customers were shipped.
D. all prenumbered sales invoices were accounted for.

15. Under a system of sound internal controls, if a company sold defective goods, the return
of those goods from the customer should be accepted by the

A. receiving clerk.
B. sales clerk.
C. purchasing clerk
D. inventory control clerk

16. Which of the following is not a document that is part of the cash collection process?

A. Remittance advice
B. Cash receipts journal
C. Bank deposit slip
D. Packing slip

17. Which of the following would represent proper segregation of duties?

A. The employee who has custody of cash also does accounts receivable record keeping.

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 B. The employee who has custody of cash completes the bank reconciliation.
C. The employee who opens mail containing checks prepares a list of checks
received.
D. The employee who opens mail containing checks records transactions in the general
ledger.

18. What does the Grey Arrow ( ) next to a transaction in MYOB indicate?

A. It indicates that the transaction cannot be edited or deleted.

B. It indicates that the transaction can be edited but not deleted
C. It indicates that the transaction cannot be edited but can be deleted.
D. It indicates that the transaction can be edited and deleted.

19. Within the purchasing processes, which of the following is the first document prepared
and thereby the one that triggers the remaining purchasing processes?

A. The invoice
B. The receiving report
C. The purchase order
D. The purchase requisition

20. Personnel who work in the receiving area should complete all of the following processes
except

A. counting the goods received.

B. inspecting goods received for damage.
C. preparing a receiving report.
D. preparing an invoice.

21. Which of the given departments will immediately adjust the vendor account for each
purchase transaction so that the company will know the correct amount owed to the
vendor?

A. Purchasing
B. Receiving
C. Accounts payable
D. Shipping

22. The document prepared when purchased items are returned is a(n)

A. debit memo.
B. invoice.
C. receiving report.
D.sales journal.

23. Which of the following tabs would I select to generate an Ageing Payables Report?

A. Sales
B. Purchases
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 C. Banking
D. Payroll

24.Viliame has realized that he entered a sales transaction incorrectly in MYOB. Instead of
50 items, Viliame entered 55 items. To correct this error, Viliame opens the sales register
and selects the “All Sales” tab. However, the transaction he incorrectly entered does not
appear on the sales register. Which of the following is the MOST LIKELY reason for this?

A. MYOB will automatically correct errors for users

B. MYOB does not allow users to correct previously entered transactions.
C. The date range in the sales register is not the correct range in which the
incorrect transaction falls within.
D. Viliame has to click the tab “Open Invoices”

25. Which of the following is NOT a cost of holding too much inventory?
A. Risk of theft
B. Stock obsolescence
C. Lost revenue from customers opting for another supplier
D. Hiring a storage facility

26. Which of the following statements is the MOST correct?

A. FOB Shipping point means that the seller bears the risk of shipping the goods to the
buyer.
B. FOB Destination means that the buyer bears the risk of shipping from the shipping
point to the buyers place of business
C. Goods held on consignment by an organization should be included in that
organization’s inventory.
D. Inventory is generally an insignificant asset for service firms.

27. Which of the following statements is CORRECT with relation to FIFO and LIFO?
A. In periods of inflation, LIFO will show a higher profit
B. In periods of deflation, LIFO will show a lower profit
C. In periods of inflation, FIFO will show a higher profit
D. In periods of inflation, FIFO will show a lower profit
28. I wish to transfer money from my bank account to my investment account. When I click
on the transfer money to field, my investment account does not appear as an option.
Which of the following is the MOST likely reason why this is so:
A. When creating the Investment Account, I selected Asset in the Account Type
option instead of Bank.
B. I selected the incorrect business type for my company.
C. I have not changed the system date for my computer.
D. I do not have any funds in my bank account to transfer.

29. With relation to inventory management, which of the following is something MYOB does
NOT do?
A. Automatically reorder stock from suppliers when stock levels are low

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 B. Track inventory transfers and automate the transfers using the Auto-Build features
C. Shows you how to revalue your stock
D. Keep track of items

30. Which of the following transactions would most likely NOT be used as a recurring
journal entry in MYOB?
A. Interest Expense
B. Depreciation
C. Legal Fees
D. Amortisation

31. Which of the following is correct with regards to credit limits?

A. The credit limit for cash sales is usually set at $0.

B. MYOB does not allow invoices to be raised for sales that exceed a customer’s credit
limit.
C. Credit limits cannot be changed.
D. None of the above.

32. Which of the following is an advantage of Electronic Data Interchange (EID)?

A. Elimination of data keying and errors

B. Elimination of costs and time
C. Reduction in inventory levels
D. All of the above

33. Point of Sale systems features include which of the following?

A. Touch screen menus

B. Bar code scanning
C. Real-time access
D. All of the above

34. Which of the following is NOT a part of the stock-taking process?

A. Costing
B. Collecting
C. Marketing
D. Examining

35. Which of the following is the most susceptible to fraud?

A. Cash
B. Sales
C. Fixed Assets
D. Inventory

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QUESTIONS 36- 40 RELATE TO YOUR MAJOR ASSIGNMENT:

36. Which of the following was NOT one of the inventories of the fictitious firm in the
assignment?
A. Painting
B. Spears
C. Emu Eggs
D. Carving

37. Which of the following is NOT one of the transactions your group had to record in the
assignment?
A. Purchase Returns.
B. Cash Purchases.
C. Credit Purchase
D. Provision for doubtful debts

38. Which of the following was NOT a report that your group had to submit in the
assignment?
A. General Ledger [Detail]
B. GST [Summary] Accrual
C. Accounts Payable Ageing [Summary]
D. Profit & Loss Statement

39. How was the refund of the overpaid rent recorded?

A. Banking > Receive Money
B. Sales > Receive Payment
C. Purchases > Pay Pills
D. Accounts > Record Journal Entry

40. How was the inventory opening balances recorded?

A. Inventory > Items Register
B. Inventory > Adjust Inventory
C. Inventory > Count Inventory
D. Inventory > Opening Balances

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SECTION B: SHORT ANSWER QUESTIONS (30 marks)

Question 1 (12 marks)

The following reports were based on the major assignment: Talon Art Gallery. In each report
there is an error made by the group.

Report 1: Aged Receivables (Summary)

Report 2: Aged Payables (Summary)

Report 3: Trial Balance (Excerpt)

Required:

i.) Explain the error the group made in each of the three reports.

Report 1:

Cash Sales should not be appearing in the Ageing Receivables report. This is because
Cash Sales relates to those sales in which cash is received as soon as the sale is made and
therefore it would not be receivable.

Report 2

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 Dongaru Emu Farm should not be showing as a negative number. This would indicate
that we have overpaid our supplier.

Report 3

Historical Balancing of $44,750 indicates that the opening balances setup was not done
correctly.

(6 marks)

ii.) Discuss how the group can correct each of these errors.

Error 1

The group must find the cash sales transaction and on the”Paid Today” field include the
$220.

Error 2

The group must find the overpayment that led to the negative balance of the creditor and
correct the payment details.

Error 3

The group needs to go back to the opening balances setup and check the opening balances
entered to ensure that all amounts have been entered correctly and that all figures have
also been entered.

(6marks)

Q2. What is the difference between a Header Account and Detail Account in MYOB?

Header Account (Non-Postable)

Used to enter headings. E.g. Current Assets, Income. Does not accept figures from
transactions. The figure recorded in the Header Account is a summary of the Detail Accounts
under it. Header Accounts are displayed in bold.

Detail Account (Postable)

These accounts are listed under the Header Account and can accept figure from transactions.

(4 marks)

Q3. Sales and inventory purchases are routine processes that occur nearly every day in a
business. How are these routine processes different from payroll or fixed asset processes?

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The major difference is the frequency of occurrence. As stated in the question, sales and
purchases are often undertaken daily. Payroll occurs on a fixed schedule such as every week,
biweekly, or at month-end. Payroll transaction volume might be large, but only at these time
intervals. Some payroll events occur only when employees are hired or fired. Fixed asset
processes occur on an “as needed” basis. The volume of fixed asset transactions is relatively
small compared to sales or purchase transaction volume. Depreciation of fixed assets occurs
on a fixed interval, such as at year end.

(5 marks)

Q4. Discuss how a company would account for inventory differently in MYOB under a
perpetual and period inventory system.

Under a perpetual inventory system the “I Buy”, “I Sell” and “I Inventory” boxes would be
checked.

In a periodic inventory system only the “I Buy” and “I Sell” would be checked.

(4 marks)

Q5. Explain the purpose of the undeposited funds account in MYOB.

Undeposited funds is used to assist with the reconciliation of your cheque account by
recording the day’s banking as a single deposit. The Undeposited Funds Account acts as a
temporary clearing account recording each individual receipt. At the end of the day, you
deposit the total receipts collected for the day into the cheque account, using the bank deposit
function. Undeposited Funds operates in a similar way to (and instead of) a Cash Drawer.

(5 marks)

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SECTION C: CASE STUDY (30 MARKS)

Intelligent Learning Inc. is a primary school located in Kabwabwa. Kabwabwa is a small

country located in the Pacific, to the north of Fiji, to the east of Tonga and to the
Southwest of the Solomon Islands. Internet in the country is very expensive and the
internet service is quite poor. Internet speeds are sluggishly slow and there are also issues
related to connectivity.

The school is a private school that solely relies on student tuition fees. The school was
established by James Cook, a British expatriate. The school has one stream for each of the
classes. The school has six classes beginning from class one. The school was established
in 2008 with an initial total enrollment for that year of 20 students. Since then the student
enrollment has increased to 210 for 2013. The numbers are expected to increase.

The school has 15 employees including the owner who is also the principal. There are
also 9 teachers, one administration clerk, one cleaner, a security guard, school nurse and
an accounts officer. Employees are paid on a fortnightly basis.

Ms. Emma Watson is the school’s accountant. Ms. Watson is responsible for all
accounting functions of the organizations and maintains the accounting records using
Microsoft Excel. Ms. Watson maintains an excel sheet of all total payments and total cash
receipts. She also prepares monthly bank reconciliations for Mr. Cook to review. A sheet
of all inventory items such as chairs, tables, books and stationery are also maintained by
Ms. Watson.

In terms of cash receipts, most receipts relate to student tuition fees. These fees must be
paid before the beginning of the semester. The average tuition fee for a student is $500
per student, per term. There are also receipts which relate to fundraising activities such as
bazaars and school dances.

In terms of cash payments, most regular payments relate to paying staff, paying the rent
of the building, utilities (water, electricity), fuel for the school car and stationery items.
The school makes on average 5 payments during a normal school term. The frequency of
payments increases during special occasions such as fundraising activities.

The school is exempt from Goods & Services Tax (GST) and also exempt from income
tax as under the country’s tax laws, the provision of education is an activity exempt from
GST and tax. The school therefore does not submit GST returns and tax returns to the
government. The school also is not required to prepare financial reports that are compliant
with Generally Accepted Accounting Principles (GAAP).

Ms. Watson is currently pursuing her Bachelor of Commerce in Professional Accounting

at the University of the South Pacific through Distance and Flexible Learning. She is
currently enrolled in AF121 which she finds very interesting! She particularly is
interested in MYOB and believes that such a software would significantly improve her
work. She suggests to Mr. Cook that the school should use MYOB to maintain the

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school’s accounting records. Mr. Cook is a bit hesitant and asks Ms. Watson to research
the cost of buying MYOB.

Ms. Watson finds that there are a number of available MYOB packages. There is the
MYOB Lite version, suitable for small businesses. This package is valued at $1,000 for
the entire software. The limitations of this software are that it can only handle a maximum
of 50,000 transactions for one financial period and does not have a fixed assets module.
Another package is MYOB Premier which is for medium to large size businesses. This
package costs $20,000 and has unlimited transactions and also has a fixed assets module.
Another package is MYOB live, which is MYOB’s cloud based software offering. This
means that the software is actually stored in MYOB Australia’s server and not on the
school’s server. To access the software, requires a stable and reliable internet connection.
The cost of MYOB Live is $50 per month and this includes all the features of MYOB
premier. Furthermore, the software will be updated and maintained by MYOB IT support
staff.

QUESTIONS:

1. Assume you are Ms. Watson. Provide a case to Mr. Cook as to why the school should
adopt MYOB.

Student should provide and elaborate on any of the three the following reasons:

Faster input

Manual entries can be more time consuming. This is especially so when you have to be
creating headings or labels as you go alone. As a matter of fact, manual systems can
require multiple entries per transaction and are likely to be more complex. The more
complex the system the more time it will take.

Greater cost cutting

A computerized accounting package like MYOB offers up-to-date, accurate and easy to
access financial information. This means that audit and accounting expenses will be much
less than they are likely to be with a complex manual system that only you can readily
understand.

Quick access to management information

The state of your business finances is important because it will help you plan for the
future as well as make wise decisions in the present. This means that being able to study
things like your business’ cash flow, sales records and order invoices is important as well.
Using a program like MYOB makes generating reports and invoices easy, so you do not
waste time extracting and sifting through data in order to run reports.

Improved accuracy

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Improved accuracy: Having less areas to fill in means you are less likely to make errors
that can cost you time and money. This is so because these types of software often require
just one figure for each transaction. This makes it easier to keep track of the task as well
as to double check entries.

(6 marks)
2. What are some reasons against adopting MYOB for Intelligent Learning Inc.?
i.) MYOB is more expensive than the School’s current system of excel and the
benefits of MYOB may not exceed the costs.
ii.) MYOB requires training and the current accountant is still pursuing her degree
and may not be fully trained on using MYOB.
iii.) Given the small size of the country, if the current accountant leaves it may be
difficult to find someone who is trained in MYOB.
iv.) The organization may not need MYOB as its reporting needs are simple. It also
does not need to submit GST returns or comply with GAAP.

(4 marks)

3. Assuming Mr. Cook agrees to invest in MYOB. Evaluate each of the MYOB options
and make a recommendation as to which MYOB package the school should buy.

MYOB Lite

Pros

i.) Suitable for small businesses

ii.) Cheaper than MYOB Premier

Cons

i.) No IT Support
ii.) One off payment which is a sunk cost

MYOB Premier

Pros

i.) Unlimited transactions

ii.) Fixed Assets Module

Cons

i.) Most expensive option

ii.) Additional features not necessary given the small size and lack of complexity of
the school.

MYOB Live

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 Pros

i.) Cheaper over a 1 year period. $600 a year

ii.) IT support comes with package

Cons

i.) Internet costs are expensive

ii.) Internet connectivity is also a problem in the country.

Recommendation

MYOB Lite would be the best option given its price, the nature of the organization and also
the internet difficulties in the country.

(12 marks)

4. Assuming the school does adopt MYOB, the school creates a customer card for each
family instead of each child. This is because the school finds this easier to do as one
family may have a number of children enrolled in the school. Instead of invoicing one
child, one family is invoiced. Discuss whether you agree with this system.

This would be OK for the school as it is a primary school, the students cannot pay for
their school fees. It is the parents who will invariably pay for the school fees of their
children. Therefore it is OK as long as it is noted on the memo when invoices are raised
or when payments are made as to the number of children that the invoice or the payment
relates to.

(4 marks)

5. Mr. Cook requests Ms. Watson to produce a profit and loss report for the year. He
further requests if the revenue and related costs from the fundraisers such as the
bazaars and school dances to be shown separately from the revenue and costs from
tuition fees. This is so Mr. Cook can assess each revenue generating activity
separately. Ms. Watson generates the Profit & Loss statement, however tuition fees
are shown as one line item but all other proceeds from fundraising activities are
shown in the line item: “Other Revenue”. Furthermore, costs are also lumped
together. It is difficult to determine the specific costs for each activity. In order to
prepare the report requested by Mr. Cook, Ms. Watson has to go through each receipt
and each payment to identify which item related to which activity.

Required:
A. Explain the feature in MYOB that would have allowed Ms. Watson to provide
the report requested by Mr. Cook without having to sort each receipt and
payment by activity?

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Students should refer to the job feature in MYOB which allows companies to allocate
revenue and costs by profit centers and analyse these profit centers accordingly.

(2 marks)

B. Explain what she should do from now on if she wants to use this feature to
prepare such reports?

Ms. Watson needs firstly to create the jobs for tuition and the various fundraising
activities. Then when entering transactions, Ms. Watson needs to allocate the
transactions to the various job cards created.

(2 marks)

~ THE END ~

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