Accounting Systems Ch 10

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Every economic event is associated with at least one internal agent or one external agent. (T/F)

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Bentley Restoration Company restores and sells top-end classic and antique automobiles. Most of its customers are private collectors, but some are investors who buy multiple cars and hold them for resale. Bentley extends no credit terms. All sales are for cash. Which of the following best describe the association between Auto Inventory (resource) and Sell Auto (event)?

a. 1,M : 0,1
b. 0,M : 1,1
c. 1,1 : 1,M
d. 1,M : 1,1

a. 1,M : 0,1

Which of the following is not a difference between ER and REA diagrams?

a. entities in REA diagrams are organized by class
b. there are more entities in an REA diagram than an ER
diagram
c. ER diagrams always use noun naming conventions,
while events in REA diagrams use verb names
d. REA diagrams focus on sequence of events from top
to bottom
e. all of these are differences between ER and REA
diagrams

c. ER diagrams always use noun naming conventions, while events in REA diagrams use verb names

REA diagram entities are arranged in constellations by size. (T/F)

False

External agents are not employees of the company whose system is being modeled. (T/F)

False

The concept of duality means that an REA diagram must consist of

a. two resources: one increase and the other decreased
by the same event
b. two events: one economic and the other support
c. two agents: one internal and the other external
d. none of these
e. all of these

d. none of these

Accounts payable would not likely be modeled in an REA diagram. (T/F)

True

When assigning foreign keys in a 1:1 association

a. the primary key on the 0,1 side should be embedded
as the foreign key on the 1,1 side
b. the primary key on the 1,1 side should be embedded as
the foreign key on the 0,1 side
c. the primary key of each table should be embedded as
a foreign key in the related table
d. none of these

b. the primary key on the 1,1 side should be embedded as the foreign key on the 0,1 side

Which of the following associations would most likely describe the relationship between an internal agent and an economic event.

a. 0:M
b. 1:M
c. M:M
d. 1:1

b. 1:M

Journals and ledgers are not modeled in REA diagrams (T/F)

True

According to the REA philosophy, information systems should support only the needs of accounting professionals. (T/F)

False

Many believe that the accounting profession should shift away from financial statement reporting and toward providing information that assists decision-making. (T/F)

True

Modern managers need both financial and nonfinancial information that traditional GAAP-based systems are incapable of providing. (T/F)

True

The REA model is an alternative accounting framework for modeling an organization's critical resources, events, and accounts. (T/F)

False

In REA, resources are assets that include accounts receivable. (T/F)

False

Accounting Systems Ch 10

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