Accounting Information Systems, 14e (Global Edition) Marshall Romney, Paul
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Steinbart (Solutions Manual All Chapters, 100% Original Verified, A+
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Grade)
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CHAPTER 1 c2
ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW c2 c2 c2 c2
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS c2 c2 c2 c2
1.1 Discuss the concept of a system and the issues of goal conflict and goal congruence.
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A system is a set of two or more components that are somehow interrelated and interact
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together to achieve a specific goal. A system usually consists of smaller components called
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subsystems. These subsystems have specific and defined functions, which interact with and
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support the larger system. The concept of systems is key to information technology and AIS.
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All systems, including the AIS, must work to achieve one or more organizational goals.
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Goal conflict results when a decision or action of a subsystem is inconsistent with another
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subsystem or the system (organization) as a whole. Goal congruence results when a
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subsystem achieves its goals while contributing to the organization's overall goal. Subsystems
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should maximize organizational goals.
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1.2 Give an example of how an AIS can improve decision making, and describe the
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multistep activities involved in the process.
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Decision making is a complex, multistep activity: identify the problem, collect and interpret
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information, evaluate ways to solve the problem, select a solution methodology, and
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implement the solution. An AIS can provide assistance in all phases of decision making.
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Reports can help to identify potential problems. Decision models and analytical tools can be
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provided to users. Query languages can gather relevant data to help make the decision.
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Various tools, such as graphical interfaces, can help the decision maker interpret decision
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model results, evaluate them, and choose among alternative courses of action. In addition,
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the AIS can provide feedback on the results of actions.
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An AIS can help improve decision making in several ways:
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It can identify situations requiring management action. For example, a cost report with a
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large variance might stimulate management to investigate and, if necessary, take
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corrective action.
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It can reduce uncertainty and thereby provide a basis for choosing among alternative actions.
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It can store information about the results of previous decisions, which provides valuable
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feedback that can be used to improve future decisions. For example, if a company tries
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
a particular marketing strategy and the information gathered indicates that it did not
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succeed, the company can use that information to select a different marketing strategy.
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It can provide accurate information in a timely manner. For example, Walmart has an
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
enormous database that contains detailed information about sales transactions at each of
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
its stores. It uses this information to optimize the amount of each product carried at
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
each store.
c2 c2
It can analyze sales data to discover items that are purchased together, and can use
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
such information to improve the layout of merchandise or to encourage additional sales
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
of related items. For example, Amazon uses its sales database to suggest additional
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
books for customers to purchase.
c2 c2 c2 c2 c2
1-1
.
,Ch. 1: Accounting Information Systems: An
c2 c2 c2 c2 c2
Overview
1.3 You and a few of your classmates decided to become entrepreneurs. You came up with a
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great idea for a new mobile phone application that you think will make lots of money.
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Your business plan won second place in a local competition, and you are using the
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$10,000 prize to support yourselves as you start your company.
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a. Identify the key decisions you need to make to be successful entrepreneurs,
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the information you need to make them, and the business processes you
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will need to engage in.
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b. Your company will need to exchange information with various external parties.
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Identify the external parties, and specify the information received from and sent to
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each of them.
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The author turns this question into an in-class group activity. Students are divided up in
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groups, told to close their books, and given 15 minutes to:
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a. Think through the business processes, key decisions, and information needs issues in
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their group.
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b. Identify the external users of information and specify the information received from and
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sent to each of them.
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One group is selected to present their answers to the class. The other groups are told to
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challenge the group‘s answers, provide alternative answers, and chip in with additional
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answers not provided by the selected group. Since the group that presents is not selected
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until after the time has expired, students are motivated to do a good job, as they will be
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presenting to their peers.
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The value of this activity is not in arriving at a ―right answer‖ as there are many right
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answers and student answers will vary. Instead, it is in thinking through the issues
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presented in Table 1-2 (business processes, key decisions, and information needs) and
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Figure 1-1 (interactions with
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external parties). Student answers should contain many of the things in Table 1-2 and Figure
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1-1 as well as others not shown, as a retail operation differs from an application
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development enterprise.
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The author concludes the exercise by having the students turn to Table 1-2 and Figure 1-1
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while he emphasizes the need for owners, managers, and employees of organizations to
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identify the information needed to make key decisions in the company‘s business processes
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and the key information interchanges with external parties. All of the data needed to
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produce this information must be entered into the AIS, processed, stored, protected, and
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made available to the appropriate users.
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While this active learning activity takes more time than a lecture does, it drives the point
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home much better than a lecture would. It also keeps the students more engaged in the
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material.
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1-2
.
, Accounting Information c2
Systems
1.4 How do an organization‘s business processes and lines of business affect the design of its
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AIS? Give several examples of how differences among organizations are reflected in
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their AIS.
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An organization‘s AIS must reflect its business processes and its line of business. For example:
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Manufacturing companies will need a set of procedures and documents for the
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production cycle; non-manufacturing companies do not.
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Government agencies need procedures to track separately all inflows and outflows from
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various funds, to ensure that legal requirements about the use of specific funds are
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followed. Financial institutions do not need extensive inventory control systems.
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Passenger service companies (e.g., airlines, bus, and trains) generally receive payments in
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advance of providing services. Therefore, extensive billing and accounts receivable
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procedures are not needed; instead, they must develop procedures to account for prepaid
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revenue.
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Construction firms typically receive payments at regular intervals, based on the
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percentage of work completed. Thus, their revenue cycles must be designed to track
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carefully all work performed and the amount of work remaining to be done.
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Service companies (e.g., public accounting and law firms) do not sell physical goods
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and, therefore, do not need inventory control systems. They must develop and
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maintain detailed records of the work performed for each customer to provide backup
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for the amounts billed. Tracking individual employee time is especially important for
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these firms because labor is the major cost component.
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1.5 Figure 1-4 shows that organizational culture and the design of an AIS influence one
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another. What does this imply about the degree to which an innovative system
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developed by one company can be transferred to another company?
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Since people are one of the basic components of any system, it will always be difficult to
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transfer successfully a specific information systems design intact to another organization.
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Considering in advance how aspects of the new organizational culture are likely to affect
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acceptance of the system can increase the chances for successful transfer. Doing so may
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enable the organization to take steps to mitigate likely causes of resistance. The design of
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an AIS, however, itself can influence and change an organization‘s culture and philosophy.
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Therefore, with adequate top management support, implementation of a new AIS can be
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used as a vehicle to change an organization. The reciprocal effects of technology and
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organizational culture on one another, however, mean that it is unrealistic to expect that the
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introduction of a new AIS will produce the same results observed in another organization.
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1-3
.
, Ch. 1: Accounting Information Systems: An
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Overview
1.6 Why have accounting software packages been designed with separate transaction modules?
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Since every organization does not necessarily use all of the transaction cycles in its
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operations, it is to the advantage of the organization to be able to ―pick and choose‖ from
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among various software modules that track and record different transaction cycles. For
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example, a law firm would have no need to implement a production cycle module. Also, the
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nature of a transaction cycle varies across the broad spectrum of business organizations.
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Again, a law firm would have a revenue cycle, but it would not involve the purchase,
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receipt, and payment for products or merchandise; likewise a retail store chain may not sell
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any consulting services to its customers.
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1.7 Apply the value chain concept to S&S. Explain how it would perform the various
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primary and support activities.
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The value chain classifies business activities into two categories: primary and
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support. The five primary activities at S&S:
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a. Inbound logistics includes all processes involved in ordering, receiving, and temporarily
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storing merchandise that is going to be sold to S&S customers.
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b. S&S does not manufacture any goods, thus its operations activities consists of
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displaying merchandise for sale and protecting it from theft.
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c. Outbound logistics includes delivering the products to the customer.
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d. Sales & marketing includes ringing up and processing all sales transactions and
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advertising products to increase sales.
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e. Service includes repairs, periodic maintenance, and all other post-sales services
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offered to customers.
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The four support activities at S&S:
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a. Firm infrastructure includes the accounting, finance, legal, and general
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administration functions required to start and maintain a business.
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b. Human resource management includes recruiting, hiring, training,
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evaluating, compensating, and dismissing employees.
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c. Technology includes all investments in computer technology and various c2 c2 c2 c2 c2 c2 c2 c2
input/output devices, such as point-of-sale scanners. It also includes all support
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activities for the technology.
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d. Purchasing includes all processes involved in identifying and selecting vendors to
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supply goods and negotiating the best prices, terms, and support from those
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suppliers.c2
1-4
.
c2 c2 c2 c2 c2 c2 c 2 c2
Steinbart (Solutions Manual All Chapters, 100% Original Verified, A+
c2 c2 c2 c2 c2 c2 c2 c2 c2
Grade)
c2
CHAPTER 1 c2
ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW c2 c2 c2 c2
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS c2 c2 c2 c2
1.1 Discuss the concept of a system and the issues of goal conflict and goal congruence.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
A system is a set of two or more components that are somehow interrelated and interact
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
together to achieve a specific goal. A system usually consists of smaller components called
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
subsystems. These subsystems have specific and defined functions, which interact with and
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
support the larger system. The concept of systems is key to information technology and AIS.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
All systems, including the AIS, must work to achieve one or more organizational goals.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
Goal conflict results when a decision or action of a subsystem is inconsistent with another
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
subsystem or the system (organization) as a whole. Goal congruence results when a
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subsystem achieves its goals while contributing to the organization's overall goal. Subsystems
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
should maximize organizational goals.
c2 c2 c2 c2
1.2 Give an example of how an AIS can improve decision making, and describe the
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
multistep activities involved in the process.
c2 c2 c2 c2 c2 c2
Decision making is a complex, multistep activity: identify the problem, collect and interpret
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
information, evaluate ways to solve the problem, select a solution methodology, and
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
implement the solution. An AIS can provide assistance in all phases of decision making.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
Reports can help to identify potential problems. Decision models and analytical tools can be
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
provided to users. Query languages can gather relevant data to help make the decision.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
Various tools, such as graphical interfaces, can help the decision maker interpret decision
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
model results, evaluate them, and choose among alternative courses of action. In addition,
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
the AIS can provide feedback on the results of actions.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
An AIS can help improve decision making in several ways:
c2 c2 c2 c2 c2 c2 c2 c2 c2
It can identify situations requiring management action. For example, a cost report with a
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
large variance might stimulate management to investigate and, if necessary, take
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
corrective action.
c2 c2
It can reduce uncertainty and thereby provide a basis for choosing among alternative actions.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
It can store information about the results of previous decisions, which provides valuable
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
feedback that can be used to improve future decisions. For example, if a company tries
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
a particular marketing strategy and the information gathered indicates that it did not
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
succeed, the company can use that information to select a different marketing strategy.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
It can provide accurate information in a timely manner. For example, Walmart has an
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
enormous database that contains detailed information about sales transactions at each of
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
its stores. It uses this information to optimize the amount of each product carried at
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
each store.
c2 c2
It can analyze sales data to discover items that are purchased together, and can use
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
such information to improve the layout of merchandise or to encourage additional sales
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
of related items. For example, Amazon uses its sales database to suggest additional
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
books for customers to purchase.
c2 c2 c2 c2 c2
1-1
.
,Ch. 1: Accounting Information Systems: An
c2 c2 c2 c2 c2
Overview
1.3 You and a few of your classmates decided to become entrepreneurs. You came up with a
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
great idea for a new mobile phone application that you think will make lots of money.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
Your business plan won second place in a local competition, and you are using the
c2 c 2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
$10,000 prize to support yourselves as you start your company.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
a. Identify the key decisions you need to make to be successful entrepreneurs,
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
the information you need to make them, and the business processes you
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
will need to engage in.
c2 c2 c2 c2 c2
b. Your company will need to exchange information with various external parties.
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
Identify the external parties, and specify the information received from and sent to
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
each of them.
c2 c2 c2
The author turns this question into an in-class group activity. Students are divided up in
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
groups, told to close their books, and given 15 minutes to:
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
a. Think through the business processes, key decisions, and information needs issues in
c2 c2 c2 c2 c2 c2 c2 c2 c2 c2 c2
their group.
c2 c2
b. Identify the external users of information and specify the information received from and
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sent to each of them.
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One group is selected to present their answers to the class. The other groups are told to
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challenge the group‘s answers, provide alternative answers, and chip in with additional
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answers not provided by the selected group. Since the group that presents is not selected
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until after the time has expired, students are motivated to do a good job, as they will be
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presenting to their peers.
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The value of this activity is not in arriving at a ―right answer‖ as there are many right
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answers and student answers will vary. Instead, it is in thinking through the issues
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presented in Table 1-2 (business processes, key decisions, and information needs) and
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Figure 1-1 (interactions with
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external parties). Student answers should contain many of the things in Table 1-2 and Figure
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1-1 as well as others not shown, as a retail operation differs from an application
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development enterprise.
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The author concludes the exercise by having the students turn to Table 1-2 and Figure 1-1
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while he emphasizes the need for owners, managers, and employees of organizations to
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identify the information needed to make key decisions in the company‘s business processes
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and the key information interchanges with external parties. All of the data needed to
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produce this information must be entered into the AIS, processed, stored, protected, and
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made available to the appropriate users.
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While this active learning activity takes more time than a lecture does, it drives the point
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home much better than a lecture would. It also keeps the students more engaged in the
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material.
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1-2
.
, Accounting Information c2
Systems
1.4 How do an organization‘s business processes and lines of business affect the design of its
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AIS? Give several examples of how differences among organizations are reflected in
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their AIS.
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An organization‘s AIS must reflect its business processes and its line of business. For example:
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Manufacturing companies will need a set of procedures and documents for the
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production cycle; non-manufacturing companies do not.
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Government agencies need procedures to track separately all inflows and outflows from
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various funds, to ensure that legal requirements about the use of specific funds are
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followed. Financial institutions do not need extensive inventory control systems.
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Passenger service companies (e.g., airlines, bus, and trains) generally receive payments in
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advance of providing services. Therefore, extensive billing and accounts receivable
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procedures are not needed; instead, they must develop procedures to account for prepaid
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revenue.
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Construction firms typically receive payments at regular intervals, based on the
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percentage of work completed. Thus, their revenue cycles must be designed to track
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carefully all work performed and the amount of work remaining to be done.
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Service companies (e.g., public accounting and law firms) do not sell physical goods
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and, therefore, do not need inventory control systems. They must develop and
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maintain detailed records of the work performed for each customer to provide backup
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for the amounts billed. Tracking individual employee time is especially important for
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these firms because labor is the major cost component.
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1.5 Figure 1-4 shows that organizational culture and the design of an AIS influence one
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another. What does this imply about the degree to which an innovative system
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developed by one company can be transferred to another company?
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Since people are one of the basic components of any system, it will always be difficult to
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transfer successfully a specific information systems design intact to another organization.
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Considering in advance how aspects of the new organizational culture are likely to affect
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acceptance of the system can increase the chances for successful transfer. Doing so may
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enable the organization to take steps to mitigate likely causes of resistance. The design of
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an AIS, however, itself can influence and change an organization‘s culture and philosophy.
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Therefore, with adequate top management support, implementation of a new AIS can be
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used as a vehicle to change an organization. The reciprocal effects of technology and
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organizational culture on one another, however, mean that it is unrealistic to expect that the
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introduction of a new AIS will produce the same results observed in another organization.
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1-3
.
, Ch. 1: Accounting Information Systems: An
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Overview
1.6 Why have accounting software packages been designed with separate transaction modules?
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Since every organization does not necessarily use all of the transaction cycles in its
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operations, it is to the advantage of the organization to be able to ―pick and choose‖ from
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among various software modules that track and record different transaction cycles. For
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example, a law firm would have no need to implement a production cycle module. Also, the
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nature of a transaction cycle varies across the broad spectrum of business organizations.
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Again, a law firm would have a revenue cycle, but it would not involve the purchase,
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receipt, and payment for products or merchandise; likewise a retail store chain may not sell
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any consulting services to its customers.
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1.7 Apply the value chain concept to S&S. Explain how it would perform the various
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primary and support activities.
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The value chain classifies business activities into two categories: primary and
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support. The five primary activities at S&S:
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a. Inbound logistics includes all processes involved in ordering, receiving, and temporarily
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storing merchandise that is going to be sold to S&S customers.
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b. S&S does not manufacture any goods, thus its operations activities consists of
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displaying merchandise for sale and protecting it from theft.
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c. Outbound logistics includes delivering the products to the customer.
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d. Sales & marketing includes ringing up and processing all sales transactions and
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advertising products to increase sales.
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e. Service includes repairs, periodic maintenance, and all other post-sales services
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offered to customers.
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The four support activities at S&S:
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a. Firm infrastructure includes the accounting, finance, legal, and general
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administration functions required to start and maintain a business.
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b. Human resource management includes recruiting, hiring, training,
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evaluating, compensating, and dismissing employees.
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c. Technology includes all investments in computer technology and various c2 c2 c2 c2 c2 c2 c2 c2
input/output devices, such as point-of-sale scanners. It also includes all support
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activities for the technology.
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d. Purchasing includes all processes involved in identifying and selecting vendors to
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supply goods and negotiating the best prices, terms, and support from those
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suppliers.c2
1-4
.
