Solutions Manual
./
, For
Accounting Inf ./
ormation Systems
./
16th Edition
./
, CHAPTER./1
ACCOUNTING./INFORMATION./SYSTEMS:./AN./OVERVIEW
SUGGESTED./ANSWERS./TO./DISCUSSION./QUESTIONS
1.1 The./value./of./information./is./the./difference./between./the./benefits./realized./from./using./that./
information./and./the./costs./of./producing./it../Would./you,./or./any./organization,./ever./produc
e./information./if./its./expected./costs./exceeded./its./benefits?./If./so,./provide./some./examples../If./
not,./why?
Most./organizations./produce./information./only./if./its./value./exceeds./its./cost../However,./there./are./two./situ
ations./where./information./may./be./produced./even./if./its./cost./exceeds./its./value.
a. It./is./often./difficult./to./estimate./accurately./the./value./of./information./and./the./cost./of./produc
ing./it../Therefore,./organizations./may./produce./information./that./they./expect./will./produce./b
enefits./in./excess./of./its./costs,./only./to./be./disappointed./after./the./fact.
b. Production./of./the./information./may./be./mandated./by./either./a./government./agency./or./a./priv
ate./organization../Examples./include./the./tax./reports./required./by./the./IRS./and./disclosure./re
quirements./for./financial./reporting.
1.2 Can./the./characteristics./of./useful./information./listed./in./Table./1-
1./be./met./simultaneously?./Or./does./achieving./one./mean./sacrificing./another?
Several./of./the./criteria./in./Table./1.1./can./be./met./simultaneously../For./example,./more./timely./infor
mation./is./also./likely./to./be./more./relevant../Verifiable./information./is./likely./to./be./more./accurate.
However,./achieving./one./objective./may./require./sacrificing./another../For./example,./ensuring./th
at./information./is./more./complete./may./reduce./its./timeliness../Similarly,./increased./verifiability
./and./accuracy./may./reduce./its./timeliness.
The./decision./maker./must./decide./which./trade-offs./are./warranted./in./each./situation.
1.3 You./and./a./few./of./your./classmates./decided./to./become./entrepreneurs../You./came./up./with./a./
great./idea./for./a./new./mobile./phone./application./that./you./think./will./make./lots./of./money../Yo
ur./business./plan./won./second./place./in./a./local./competition,./and./you./are./using./the./$10,000./pr
ize./to./support./yourselves./as./you./start./your./company.
a. Identify./the./key./decisions./you./need./to./make./to./be./successful./entrepreneurs,./the./infor
mation./you./need./to./make./them,./and./the./business./processes./you./will./need./to./engage./in.
b. Your./company./will./need./to./exchange./information./with./various./external./parties../Identi
fy./the./external./parties,./and./specify./the./information./received./from./and./sent./to./each./of./t
hem.
The./author./turns./this./question./into./an./in-
class./group./activity../Students./are./divided./up./in./groups,./told./to./close./their./books,./and./given./15./
minutes./to:
a. Think./through./the./business./processes,./key./decisions,./and./information./needs./issues./in./the
ir./group.
.
, b. Identify./the./external./users./of./information./and./specify./the./information./received./from./and./se
nt./to./each./of./them.
One./group./is./selected./to./present./their./answers./to./the./class../The./other./groups./are./told./to./challeng
e./the./group‘s./answers,./provide./alternative./answers,./and./chip./in./with./additional./answers./not./provi
ded./by./the./selected./group../Since./the./group./that./presents./is./not./selected./until./after./the./time./has./e
xpired,./students./are./motivated./to./do./a./good./job,./as./they./will./be./presenting./to./their./peers.
The./value./of./this./activity./is./not./in./arriving./at./a./―right./answer‖./as./there./are./many./right./answers./
and./student./answers./will./vary../Instead,./it./is./in./thinking./through./the./issues./presented./in./Table./1-
2./(business./processes,./key./decisions,./and./information./needs)./and./Figure./1-
1./(interactions./with./external./parties)../Student./answers./should./contain./many./of./the./things./in./Tabl
e./1-2./and./Figure./1-
1./as./well./as./others./not./shown,./as./a./retail./operation./differs./from./an./application./development./ent
erprise.
The./author./concludes./the./exercise./by./having./the./students./turn./to./Table./1-2./and./Figure./1-
1./while./he./emphasizes./the./need./for./owners,./managers,./and./employees./of./organizations./to./identi
fy./the./information./needed./to./make./key./decisions./in./the./company‘s./business./processes./and./the./k
ey./information./interchanges./with./external./parties../All./the./data./needed./to./produce./this./informatio
n./must./be./entered./into./the./AIS,./processed,./stored,./protected,./and./made./available./to./the./appropri
ate./users.
While./this./active./learning./activity./takes./more./time./than./a./lecture./does,./it./drives./the./point./home./
much./better./than./a./lecture./would.. / It./also./keeps./the./students./more./engaged./in./the./material.
1.4 How. / do./an./organization’s./business./processes./and./lines./of./business./affect./the./design./of./
its./AIS?. / Give./several./examples./of./how./differences./among./organizations./are./reflected./in.
/their./AIS.
An./organization‘s./AIS./must./reflect./its./business./processes./and./its./line./of./business.. / For./example:
Manufacturing./companies./will./need./a./set./of./procedures./and./documents./for./the./producti
on./cycle;./non-manufacturing./companies./do./not.
Government./agencies./need./procedures./to./track./separately./all./inflows./and./outflows./from./
various./funds,./to./ensure./that./legal./requirements./about./the./use./of./specific./funds./are./followe
d.
Financial./institutions./do./not./need./extensive./inventory./control./systems.
Passenger./service./companies./(e.g.,./airlines,./bus,./and./trains)./generally./receive./payments./i
n./advance./of./providing./services../Therefore,./extensive./billing./and./accounts./receivable./p
rocedures./are./not./needed;./instead,./they./must./develop./procedures./to./account./for./prepaid
./revenue.
Construction./firms./typically./receive./payments./at./regular./intervals,./based./on./the./percentage./
of./work./completed../Thus,./their./revenue./cycles./must./be./designed./to./track./carefully./all./wor
k./performed./and./the./amount./of./work./remaining./to./be./done.
Service./companies./(e.g.,./public./accounting./and./law./firms)./do./not./sell./physical./goods./and,./
therefore,./do./not./need./inventory./control./systems../They./must./develop./and./maintain./detailed
./records./of./the./work./performed./for./each./customer./to./provide./backup./for./the./amounts./bille
d../Tracking./individual./employee./time./is./especially./important./for./these./firms./because./labor./i
s./the./major./cost./component.
1.5 Figure./1-
.
./
, For
Accounting Inf ./
ormation Systems
./
16th Edition
./
, CHAPTER./1
ACCOUNTING./INFORMATION./SYSTEMS:./AN./OVERVIEW
SUGGESTED./ANSWERS./TO./DISCUSSION./QUESTIONS
1.1 The./value./of./information./is./the./difference./between./the./benefits./realized./from./using./that./
information./and./the./costs./of./producing./it../Would./you,./or./any./organization,./ever./produc
e./information./if./its./expected./costs./exceeded./its./benefits?./If./so,./provide./some./examples../If./
not,./why?
Most./organizations./produce./information./only./if./its./value./exceeds./its./cost../However,./there./are./two./situ
ations./where./information./may./be./produced./even./if./its./cost./exceeds./its./value.
a. It./is./often./difficult./to./estimate./accurately./the./value./of./information./and./the./cost./of./produc
ing./it../Therefore,./organizations./may./produce./information./that./they./expect./will./produce./b
enefits./in./excess./of./its./costs,./only./to./be./disappointed./after./the./fact.
b. Production./of./the./information./may./be./mandated./by./either./a./government./agency./or./a./priv
ate./organization../Examples./include./the./tax./reports./required./by./the./IRS./and./disclosure./re
quirements./for./financial./reporting.
1.2 Can./the./characteristics./of./useful./information./listed./in./Table./1-
1./be./met./simultaneously?./Or./does./achieving./one./mean./sacrificing./another?
Several./of./the./criteria./in./Table./1.1./can./be./met./simultaneously../For./example,./more./timely./infor
mation./is./also./likely./to./be./more./relevant../Verifiable./information./is./likely./to./be./more./accurate.
However,./achieving./one./objective./may./require./sacrificing./another../For./example,./ensuring./th
at./information./is./more./complete./may./reduce./its./timeliness../Similarly,./increased./verifiability
./and./accuracy./may./reduce./its./timeliness.
The./decision./maker./must./decide./which./trade-offs./are./warranted./in./each./situation.
1.3 You./and./a./few./of./your./classmates./decided./to./become./entrepreneurs../You./came./up./with./a./
great./idea./for./a./new./mobile./phone./application./that./you./think./will./make./lots./of./money../Yo
ur./business./plan./won./second./place./in./a./local./competition,./and./you./are./using./the./$10,000./pr
ize./to./support./yourselves./as./you./start./your./company.
a. Identify./the./key./decisions./you./need./to./make./to./be./successful./entrepreneurs,./the./infor
mation./you./need./to./make./them,./and./the./business./processes./you./will./need./to./engage./in.
b. Your./company./will./need./to./exchange./information./with./various./external./parties../Identi
fy./the./external./parties,./and./specify./the./information./received./from./and./sent./to./each./of./t
hem.
The./author./turns./this./question./into./an./in-
class./group./activity../Students./are./divided./up./in./groups,./told./to./close./their./books,./and./given./15./
minutes./to:
a. Think./through./the./business./processes,./key./decisions,./and./information./needs./issues./in./the
ir./group.
.
, b. Identify./the./external./users./of./information./and./specify./the./information./received./from./and./se
nt./to./each./of./them.
One./group./is./selected./to./present./their./answers./to./the./class../The./other./groups./are./told./to./challeng
e./the./group‘s./answers,./provide./alternative./answers,./and./chip./in./with./additional./answers./not./provi
ded./by./the./selected./group../Since./the./group./that./presents./is./not./selected./until./after./the./time./has./e
xpired,./students./are./motivated./to./do./a./good./job,./as./they./will./be./presenting./to./their./peers.
The./value./of./this./activity./is./not./in./arriving./at./a./―right./answer‖./as./there./are./many./right./answers./
and./student./answers./will./vary../Instead,./it./is./in./thinking./through./the./issues./presented./in./Table./1-
2./(business./processes,./key./decisions,./and./information./needs)./and./Figure./1-
1./(interactions./with./external./parties)../Student./answers./should./contain./many./of./the./things./in./Tabl
e./1-2./and./Figure./1-
1./as./well./as./others./not./shown,./as./a./retail./operation./differs./from./an./application./development./ent
erprise.
The./author./concludes./the./exercise./by./having./the./students./turn./to./Table./1-2./and./Figure./1-
1./while./he./emphasizes./the./need./for./owners,./managers,./and./employees./of./organizations./to./identi
fy./the./information./needed./to./make./key./decisions./in./the./company‘s./business./processes./and./the./k
ey./information./interchanges./with./external./parties../All./the./data./needed./to./produce./this./informatio
n./must./be./entered./into./the./AIS,./processed,./stored,./protected,./and./made./available./to./the./appropri
ate./users.
While./this./active./learning./activity./takes./more./time./than./a./lecture./does,./it./drives./the./point./home./
much./better./than./a./lecture./would.. / It./also./keeps./the./students./more./engaged./in./the./material.
1.4 How. / do./an./organization’s./business./processes./and./lines./of./business./affect./the./design./of./
its./AIS?. / Give./several./examples./of./how./differences./among./organizations./are./reflected./in.
/their./AIS.
An./organization‘s./AIS./must./reflect./its./business./processes./and./its./line./of./business.. / For./example:
Manufacturing./companies./will./need./a./set./of./procedures./and./documents./for./the./producti
on./cycle;./non-manufacturing./companies./do./not.
Government./agencies./need./procedures./to./track./separately./all./inflows./and./outflows./from./
various./funds,./to./ensure./that./legal./requirements./about./the./use./of./specific./funds./are./followe
d.
Financial./institutions./do./not./need./extensive./inventory./control./systems.
Passenger./service./companies./(e.g.,./airlines,./bus,./and./trains)./generally./receive./payments./i
n./advance./of./providing./services../Therefore,./extensive./billing./and./accounts./receivable./p
rocedures./are./not./needed;./instead,./they./must./develop./procedures./to./account./for./prepaid
./revenue.
Construction./firms./typically./receive./payments./at./regular./intervals,./based./on./the./percentage./
of./work./completed../Thus,./their./revenue./cycles./must./be./designed./to./track./carefully./all./wor
k./performed./and./the./amount./of./work./remaining./to./be./done.
Service./companies./(e.g.,./public./accounting./and./law./firms)./do./not./sell./physical./goods./and,./
therefore,./do./not./need./inventory./control./systems../They./must./develop./and./maintain./detailed
./records./of./the./work./performed./for./each./customer./to./provide./backup./for./the./amounts./bille
d../Tracking./individual./employee./time./is./especially./important./for./these./firms./because./labor./i
s./the./major./cost./component.
1.5 Figure./1-
.
