, SOLUTION MANUAL FOR Accounting Information Systems 2nd Edition
Savage
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
⚠️Note on Answer Keys: If the answer key is not included within the chapter
questions, you will find the complete answers and solutions at the end of each
chapter.
✅ Why Buy From Us?
📚 Complete & organized chapter-by-chapter – no missing content, no guessing.
⚡ Instant digital delivery – get your file the moment you pay, no waiting.
📅 Always up to date – we track new editions so you always get the latest version.
💬 Friendly support – real humans ready to help, anytime you need us.
🔒 Safe & secure – thousands of satisfied students trust us every semester.
🛡️Our Guarantees
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🔄 Wrong File? No Problem: Contact us and we will replace it immediately with the
correct version, free of charge.
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, SavageAccounting Information Systems, 2eChapter 1
CHAPTER 1 Accounting as Information
Learning Objectives
1. Explain how accounting affects both the demand for and supply of information.
2. Compare traditional transaction-based accounting systems to process-based information systems.
3. Explain management's relationship to information and information systems.
4. Describe the relationship between accounting and data analytics.
ANSWERS TO MULTIPLE CHOICE QUESTIONS
1. C 13. C
LO 1, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB: LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Technology, AICPA AC: Systems and Process Management, Section: Technology, AICPA AC: Systems and Process Management, Section:
1.1 1.3
2. D 14. C
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: LO 3, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB:
Technology, AICPA AC: Systems and Process Management, Section: Communication, AICPA AC: Reporting, Section: 1.3
15. A
1.1
3. A LO 3, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB:
LO 1, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB: Communication, AICPA AC: Reporting, Section: 1.3
16. A
Technology, AICPA AC: Systems and Process Management, Section:
1.1
LO 3, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB:
4. D Communication, AICPA AC: Reporting, Section: 1.3
17. B
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Ethics, AICPA AC: Systems and Process Management, Section: 1.1
LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
5. C Technology, AICPA AC: Systems and Process Management, Section:
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: 1.3
18. D
Ethics, AICPA AC: Systems and Process Management, Section: 1.1
6. A LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
LO 2, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB: Ethics, Analytic, AICPA AC: Reporting, Section: 1.3
19. C
AICPA AC: Systems and Process Management, Section: 1.2
7. B LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.1
20. B
Ethics, AICPA AC: Systems and Process Management, Section: 1.2
8. C LO 4, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB:
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section:
Ethics, AICPA AC: Systems and Process Management, Section: 1.2 1.4
9. C 21. C
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: LO 4, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Ethics, AICPA AC: Reporting, Section: 1.2 Technology, AICPA AC: Systems and Process Management, Section:
10. B
1.4
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: 22. C
Ethics, AICPA AC: Reporting, Section: 1.2 LO 4, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
11. A
Technology, AICPA AC: Systems and Process Management, Section:
1.4
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Technology, AICPA AC: Systems and Process Management, Section: 23. D
1.2 LO 4, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
12. B
Technology, AICPA AC: Systems and Process Management, Section:
1.4
1 Solutions Manual Chapter 1 – Accounting as Information 1-1
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Technology, AICPA AC: Reporting, Section: 1.3
ANSWERS TO DISCUSSION AND RESEARCH QUESTIONS
DQ1. Student answers will vary. For example:
(1):
2 Solutions Manual Chapter 1 – Accounting as Information 1-2
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
(2):
3 Solutions Manual Chapter 1 – Accounting as Information 1-3
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, SavageAccounting Information Systems, 2eChapter 1
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Communication, AICPA AC: Reporting, Section: 1.1
DQ2. The reality of accounting is that there is a circular flow of cause and effect. What we see here is
both demand and supply of information, often in real time due to advances in technology.
(1) From the bottom up, the model shows the supply of information from preparers to users.
Economic activity results in accounting judgments, as accountants must make judgment calls about what
most accurately reflects the business reality of the economic exchange within the confines of a financial
reporting framework like GAAP or IFRS. Recall from your financial accounting course: These judgment
calls may involve the use of accounting estimates and the selection of accounting policies.
Examples of estimates are establishing a fair value for an intangible asset, such as goodwill, or
determining the allowance for doubtful accounts. Here is an extract from Facebook's 2020 10K report:
Estimating fair value requires judgment and use of estimates such as discount rates, forecast cash flows,
holding period, and market data of comparable companies, among others."
An example of the selection of an accounting policy is the recognition of revenue on a gross or net basis.
Here is an example from Facebook's 2020 10K report:
Gross vs. Net in Revenue Recognition
For revenue generated from arrangements that involve third-party publishers, there is significant
judgment in evaluating whether we are the principal and report revenue on a gross basis or the agent
and report revenue on a net basis. In this assessment, we consider whether we obtain control of the
specified goods or services before they are transferred to the customer, as well as other indicators such
as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price. The
assessment of whether we are considered the principal or the agent in a transaction could impact our
revenue and cost of revenue recognized on the consolidated statements of income."
These judgments affect the usefulness of information and users' decisions. Sound judgments lead to
economic prosperity and a more prosperous society. Accounting professionals serve the public interest.
(2) We can also look at the arrows in reverse by emphasizing the demand for information, which
starts at the top of the model with users seeking information about economic activity to facilitate decision-
making. Examples include the demand to know profits, inventory levels, cash flows, etc. The practice of
accounting has consequences, as the decisions that users make based on accounting information result
in economic activity, and we have a circular flow starting from the bottom of the model again.
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Communication, AICPA AC: Systems and Process Management, Section: 1.1
DQ3. (1) The overriding purpose of a business is to make a profit and generate enough cash flow
to continue operations. Without the profit motive, it would not be a business (at least not for very long).
Social responsibility should be at the forefront of businesses' minds as they decide on their strategic
plans and objectives. However, businesses, whether they are socially responsible or not, must make a
profit to survive.
(2) Student answers will vary, but examples include:
Resources:
Raw materials and manufacturing capabilities
4 Solutions Manual Chapter 1 – Accounting as Information 1-4
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
A partnership with an existing backpack fabrication company
RFID tags and RFID middleware
Systems developers, designers, etc. to build mobile apps and supporting systems.
Outputs:
Completed backpacks with RFID sensors embedded in liner
Pencil cases, book covers, etc., with integrated RFID tags.
Stand-alone RFID tags to attach to individual items
A mobile app for configuring your daily schedule and the items you need.
(3) Seed money will be needed to begin manufacturing, though a partnership with an existing
backpack fabrication company would be easier. Revenues will include sales of backpacks and items that
are scannable. The app will be included with the backpack sale, though a free app with ads is available
for download as well in the mobile app store. It provides calendaring and packing list features without the
scanning capabilities. Revenues are generated through ad sales.
LO 1, Blooms: Application, Difficulty: Medium, TOT: 20 min., AACSB: Communication, AICPA AC: Systems and Process Management, Section: 1.1
DQ4. A business process is group of related business events (also called business activities) intended
to accomplish the strategic objectives of the business. We can decompose a business process into
business events.
A business event in a business process is an activity performed by the business, e.g., "take customer
order" (Hint: the description of each business event includes at least a verb and a noun). Examples of
business events: take customer order, hire employee, pay employee, pay vendor; declare dividends, pay
dividends, get a loan, pay a loan installment, order equipment, receive equipment, acquire a competitor.
For the acquisition of supplies, a simple business process with three business events could be as follows:
Event 1: Order supplies from vendor
Event 2: Receive supplies from vendor
Event 3: Pay vendor for supplies
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.1
DQ5. The AIS involves a subset of all business data, which makes it one part of a firm's overall information
system. While we have many business events or activities in an organization, the AIS uses only the data
from business events that result in an economic exchange of resources. Accounting filters and limits the
firm's data and limits it to the data reflected in an accounting transaction. What makes AIS unique are
aspects such the need for compliance with regulations such as SOX, the need to generate information
for financial decision making support, and the need to use it to implement internal controls, among other
things.
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 5 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section: 1.1
DQ6. Student answers will vary.
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Communication, AICPA AC: Systems and Process Management, Section: 1.2
DQ7. The information system, with inputs, processing, storage, and outputs, provides information on how
well (or not) the business processes are functioning towards the achievement of the firm's strategic
5 Solutions Manual Chapter 1 – Accounting as Information 1-5
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
objectives. In a process-based system, the accounting system is part of the overall information system.
It is not a stand-alone system. A process-based system stores data about all business events of interest
to the firm, including nonfinancial and nonaccounting data. The reports generated by a process-based
system are more flexible in format and provide diverse information, depending on their purpose. They
include standard accounting reports.
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section: 1.2
DQ8. Student answers will vary but examples include:
1. Repay employee's student loans, with amounts depending on levels of performance (human
resources).
2. Buy sustainably sourced products (raw materials and supplies).
3. Recycle or reuse supplies (supplies).
4. Volunteer for community services (employees).
5. Conduct responsible research using alternative methods to animals (R&D).
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.2
DQ9. Student answers will vary, but examples include:
1. Reduce energy consumption in manufacturing.
2. Reduce water usage in manufacturing.
3. Protect manufacturing workers (like welders) from harmful omissions.
4. Manufacture sustainable products.
5. Track carbon footprint.
6. Reduce raw material waste.
7. Eliminate the use of harmful products.
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.2
DQ10. At this stage, as students have not yet covered ERP systems, the conceptual focus will
most likely be on how the business processes determine the information system because the information
system captures the data about the business processes in addition to helping execute the business
processes. Without business processes to generate business activities or events, there would be no
need for an information system!
Students who may have taken an MIS course that includes ERP systems may look at it from the
perspective of an ERP system dictating business processes to, this would be fine (e.g., standardizing
acquisition and payment processes), this would be fine (e.g., standardizing acquisition and payment
processes), but that it could stifle innovation for conversion processes. Firms could lose their competitive
advantage if their value-added activities are the same as those of their competitors, as they would not be
differentiating themselves.
6 Solutions Manual Chapter 1 – Accounting as Information 1-6
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 5 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section: 1.2
DQ11. (1) Planning includes (a) developing a strategic plan to create a sustainable
competitive advantage, (b) planning business processes focused on achieving strategic goals, (c)
identifying key profit drivers and developing benchmark metrics for them, (d) identifying opportunities and
assessing their risk, and (e) forecasting future performance.
(2) Implementation includes (a) operationalizing the strategic plan by dividing high-level business
processes into smaller processes and activities, (b) assigning employees to perform the activities, (c)
motivating employees to maximize their performance, and (d) embedding internal controls in processes
and systems to prevent and detect errors and fraud.
(3) Control by monitoring includes (a) evaluating the results of an activity or an entire business
process to see whether they meet expectations, (b) evaluating the operating results to see if the business
processes are achieving the organization's objectives, (c) monitoring key performance indicators and
comparing them to benchmarks, (d) auditing processes, systems, controls, and transactions, and (e)
comparing actual performance and metrics to forecasts and budgets.
(4) Changing and improving processes includes (a) changing plans and expectations or
changing an activity or a process so that actual results meet expectations, (b) prosecuting occupational
fraudsters to the full extent of the law and sending a message of zero tolerance for fraud to management
and other employees, and (c) improving internal controls to decrease opportunities for errors and fraud.
Management plans and implements processes to achieve its strategic objectives. The business events
and activities embedded in the business processes create data of interest to the firm. The database
management system (DBMS) captures the data for storage in the database. The data is processed and
retrieved in the form of reports, dashboards, and queries. Management uses the information retrieved
from the information system (including financial accounting information and cost accounting information)
to monitor the business processes to ensure that they do what they are supposed to do. If things go
wrong, management takes corrective action to change the business processes, business activities or
internal controls. The result is more planning, implementation, monitoring, and changing and improving
processes, and the cycle continues.
LO 3, Blooms: Application, Difficulty: Medium, TOT: 20 min., AACSB: Communication, AICPA AC: Systems and Process Management, Section: 1.3
DQ12. Student answers will vary.
Quality information for a business is the degree of fit of the information for a particular purpose in a
specified task setting. The information should meet overall expectations for its intended use, subject to
cost versus benefit considerations.
My choice of a fundamental characteristic is faithful representation or accuracy, meaning that the
information must correspondent with the facts or occurrences it represents, and be complete, unbiased
and free of material error or misstatement.
My choice of an enhancing characteristic is timeliness, which relates to the speed at which the information
can be available and still be quality information.
Fundamental characteristics are primary, and enhancing characteristics are secondary. The fundamental
characteristics make information more useful when compared to enhancing characteristics.
7 Solutions Manual Chapter 1 – Accounting as Information 1-7
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, SavageAccounting Information Systems, 2eChapter 1
If information is a faithful representation of an organization's financial results and condition (the financial
statements), this is a primary characteristic because, regardless of the enhancing characteristics, like
issuing the financial statements on time, materially inaccurate financial statements are of no use to
decision makers.
LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 20 min., AACSB: Reflective Thinking, AICPA AC: Systems and Process Management, Section: 1.3
DQ 13. Possible answers: Companies can balance profitability with ESG initiatives by making
sustainability a central part of their business model rather than viewing it as an additional expense. For
instance, energy efficiency, waste reduction, and sustainable supply chains can help reduce operating
expenses over time while supporting environmental goals. By lowering costs in the long run, companies
can maintain profitability while being socially responsible.
Additionally, prioritizing ESG can attract investors and customers who value corporate responsibility,
creating new growth opportunities. Investments in ESG can also differentiate a company in the market,
offering a competitive advantage through innovation, brand loyalty, and a positive public image.
LO 3, Blooms: Comprehension, Difficulty: Moderate, TOT: 12 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.3
DQ14. Student answers will vary but will likely include Excel, SQL databases, querying, and
visualization (Tableau, Power BI, etc.).
LO 4, Blooms: Comprehension, Difficulty: Easy, TOT: 15 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section: 1.4
8 Solutions Manual Chapter 1 – Accounting as Information 1-8
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
Savage
Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
⚠️Note on Answer Keys: If the answer key is not included within the chapter
questions, you will find the complete answers and solutions at the end of each
chapter.
✅ Why Buy From Us?
📚 Complete & organized chapter-by-chapter – no missing content, no guessing.
⚡ Instant digital delivery – get your file the moment you pay, no waiting.
📅 Always up to date – we track new editions so you always get the latest version.
💬 Friendly support – real humans ready to help, anytime you need us.
🔒 Safe & secure – thousands of satisfied students trust us every semester.
🛡️Our Guarantees
💰 Money-Back Guarantee: Not satisfied? We offer a full refund – no questions asked.
🔄 Wrong File? No Problem: Contact us and we will replace it immediately with the
correct version, free of charge.
⏰ 24/7 Support: We are always here – reach out anytime and expect a fast response.
, SavageAccounting Information Systems, 2eChapter 1
CHAPTER 1 Accounting as Information
Learning Objectives
1. Explain how accounting affects both the demand for and supply of information.
2. Compare traditional transaction-based accounting systems to process-based information systems.
3. Explain management's relationship to information and information systems.
4. Describe the relationship between accounting and data analytics.
ANSWERS TO MULTIPLE CHOICE QUESTIONS
1. C 13. C
LO 1, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB: LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Technology, AICPA AC: Systems and Process Management, Section: Technology, AICPA AC: Systems and Process Management, Section:
1.1 1.3
2. D 14. C
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: LO 3, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB:
Technology, AICPA AC: Systems and Process Management, Section: Communication, AICPA AC: Reporting, Section: 1.3
15. A
1.1
3. A LO 3, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB:
LO 1, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB: Communication, AICPA AC: Reporting, Section: 1.3
16. A
Technology, AICPA AC: Systems and Process Management, Section:
1.1
LO 3, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB:
4. D Communication, AICPA AC: Reporting, Section: 1.3
17. B
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Ethics, AICPA AC: Systems and Process Management, Section: 1.1
LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
5. C Technology, AICPA AC: Systems and Process Management, Section:
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: 1.3
18. D
Ethics, AICPA AC: Systems and Process Management, Section: 1.1
6. A LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
LO 2, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB: Ethics, Analytic, AICPA AC: Reporting, Section: 1.3
19. C
AICPA AC: Systems and Process Management, Section: 1.2
7. B LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.1
20. B
Ethics, AICPA AC: Systems and Process Management, Section: 1.2
8. C LO 4, Blooms: Knowledge, Difficulty: Easy, TOT: 1 min., AACSB:
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section:
Ethics, AICPA AC: Systems and Process Management, Section: 1.2 1.4
9. C 21. C
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: LO 4, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Ethics, AICPA AC: Reporting, Section: 1.2 Technology, AICPA AC: Systems and Process Management, Section:
10. B
1.4
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB: 22. C
Ethics, AICPA AC: Reporting, Section: 1.2 LO 4, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
11. A
Technology, AICPA AC: Systems and Process Management, Section:
1.4
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Technology, AICPA AC: Systems and Process Management, Section: 23. D
1.2 LO 4, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
12. B
Technology, AICPA AC: Systems and Process Management, Section:
1.4
1 Solutions Manual Chapter 1 – Accounting as Information 1-1
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 1 min., AACSB:
Technology, AICPA AC: Reporting, Section: 1.3
ANSWERS TO DISCUSSION AND RESEARCH QUESTIONS
DQ1. Student answers will vary. For example:
(1):
2 Solutions Manual Chapter 1 – Accounting as Information 1-2
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
(2):
3 Solutions Manual Chapter 1 – Accounting as Information 1-3
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Communication, AICPA AC: Reporting, Section: 1.1
DQ2. The reality of accounting is that there is a circular flow of cause and effect. What we see here is
both demand and supply of information, often in real time due to advances in technology.
(1) From the bottom up, the model shows the supply of information from preparers to users.
Economic activity results in accounting judgments, as accountants must make judgment calls about what
most accurately reflects the business reality of the economic exchange within the confines of a financial
reporting framework like GAAP or IFRS. Recall from your financial accounting course: These judgment
calls may involve the use of accounting estimates and the selection of accounting policies.
Examples of estimates are establishing a fair value for an intangible asset, such as goodwill, or
determining the allowance for doubtful accounts. Here is an extract from Facebook's 2020 10K report:
Estimating fair value requires judgment and use of estimates such as discount rates, forecast cash flows,
holding period, and market data of comparable companies, among others."
An example of the selection of an accounting policy is the recognition of revenue on a gross or net basis.
Here is an example from Facebook's 2020 10K report:
Gross vs. Net in Revenue Recognition
For revenue generated from arrangements that involve third-party publishers, there is significant
judgment in evaluating whether we are the principal and report revenue on a gross basis or the agent
and report revenue on a net basis. In this assessment, we consider whether we obtain control of the
specified goods or services before they are transferred to the customer, as well as other indicators such
as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price. The
assessment of whether we are considered the principal or the agent in a transaction could impact our
revenue and cost of revenue recognized on the consolidated statements of income."
These judgments affect the usefulness of information and users' decisions. Sound judgments lead to
economic prosperity and a more prosperous society. Accounting professionals serve the public interest.
(2) We can also look at the arrows in reverse by emphasizing the demand for information, which
starts at the top of the model with users seeking information about economic activity to facilitate decision-
making. Examples include the demand to know profits, inventory levels, cash flows, etc. The practice of
accounting has consequences, as the decisions that users make based on accounting information result
in economic activity, and we have a circular flow starting from the bottom of the model again.
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Communication, AICPA AC: Systems and Process Management, Section: 1.1
DQ3. (1) The overriding purpose of a business is to make a profit and generate enough cash flow
to continue operations. Without the profit motive, it would not be a business (at least not for very long).
Social responsibility should be at the forefront of businesses' minds as they decide on their strategic
plans and objectives. However, businesses, whether they are socially responsible or not, must make a
profit to survive.
(2) Student answers will vary, but examples include:
Resources:
Raw materials and manufacturing capabilities
4 Solutions Manual Chapter 1 – Accounting as Information 1-4
Copyright © 2026 John Wiley & Sons, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited
, SavageAccounting Information Systems, 2eChapter 1
A partnership with an existing backpack fabrication company
RFID tags and RFID middleware
Systems developers, designers, etc. to build mobile apps and supporting systems.
Outputs:
Completed backpacks with RFID sensors embedded in liner
Pencil cases, book covers, etc., with integrated RFID tags.
Stand-alone RFID tags to attach to individual items
A mobile app for configuring your daily schedule and the items you need.
(3) Seed money will be needed to begin manufacturing, though a partnership with an existing
backpack fabrication company would be easier. Revenues will include sales of backpacks and items that
are scannable. The app will be included with the backpack sale, though a free app with ads is available
for download as well in the mobile app store. It provides calendaring and packing list features without the
scanning capabilities. Revenues are generated through ad sales.
LO 1, Blooms: Application, Difficulty: Medium, TOT: 20 min., AACSB: Communication, AICPA AC: Systems and Process Management, Section: 1.1
DQ4. A business process is group of related business events (also called business activities) intended
to accomplish the strategic objectives of the business. We can decompose a business process into
business events.
A business event in a business process is an activity performed by the business, e.g., "take customer
order" (Hint: the description of each business event includes at least a verb and a noun). Examples of
business events: take customer order, hire employee, pay employee, pay vendor; declare dividends, pay
dividends, get a loan, pay a loan installment, order equipment, receive equipment, acquire a competitor.
For the acquisition of supplies, a simple business process with three business events could be as follows:
Event 1: Order supplies from vendor
Event 2: Receive supplies from vendor
Event 3: Pay vendor for supplies
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.1
DQ5. The AIS involves a subset of all business data, which makes it one part of a firm's overall information
system. While we have many business events or activities in an organization, the AIS uses only the data
from business events that result in an economic exchange of resources. Accounting filters and limits the
firm's data and limits it to the data reflected in an accounting transaction. What makes AIS unique are
aspects such the need for compliance with regulations such as SOX, the need to generate information
for financial decision making support, and the need to use it to implement internal controls, among other
things.
LO 1, Blooms: Comprehension, Difficulty: Easy, TOT: 5 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section: 1.1
DQ6. Student answers will vary.
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Communication, AICPA AC: Systems and Process Management, Section: 1.2
DQ7. The information system, with inputs, processing, storage, and outputs, provides information on how
well (or not) the business processes are functioning towards the achievement of the firm's strategic
5 Solutions Manual Chapter 1 – Accounting as Information 1-5
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objectives. In a process-based system, the accounting system is part of the overall information system.
It is not a stand-alone system. A process-based system stores data about all business events of interest
to the firm, including nonfinancial and nonaccounting data. The reports generated by a process-based
system are more flexible in format and provide diverse information, depending on their purpose. They
include standard accounting reports.
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section: 1.2
DQ8. Student answers will vary but examples include:
1. Repay employee's student loans, with amounts depending on levels of performance (human
resources).
2. Buy sustainably sourced products (raw materials and supplies).
3. Recycle or reuse supplies (supplies).
4. Volunteer for community services (employees).
5. Conduct responsible research using alternative methods to animals (R&D).
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.2
DQ9. Student answers will vary, but examples include:
1. Reduce energy consumption in manufacturing.
2. Reduce water usage in manufacturing.
3. Protect manufacturing workers (like welders) from harmful omissions.
4. Manufacture sustainable products.
5. Track carbon footprint.
6. Reduce raw material waste.
7. Eliminate the use of harmful products.
LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 10 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.2
DQ10. At this stage, as students have not yet covered ERP systems, the conceptual focus will
most likely be on how the business processes determine the information system because the information
system captures the data about the business processes in addition to helping execute the business
processes. Without business processes to generate business activities or events, there would be no
need for an information system!
Students who may have taken an MIS course that includes ERP systems may look at it from the
perspective of an ERP system dictating business processes to, this would be fine (e.g., standardizing
acquisition and payment processes), this would be fine (e.g., standardizing acquisition and payment
processes), but that it could stifle innovation for conversion processes. Firms could lose their competitive
advantage if their value-added activities are the same as those of their competitors, as they would not be
differentiating themselves.
6 Solutions Manual Chapter 1 – Accounting as Information 1-6
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LO 2, Blooms: Comprehension, Difficulty: Easy, TOT: 5 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section: 1.2
DQ11. (1) Planning includes (a) developing a strategic plan to create a sustainable
competitive advantage, (b) planning business processes focused on achieving strategic goals, (c)
identifying key profit drivers and developing benchmark metrics for them, (d) identifying opportunities and
assessing their risk, and (e) forecasting future performance.
(2) Implementation includes (a) operationalizing the strategic plan by dividing high-level business
processes into smaller processes and activities, (b) assigning employees to perform the activities, (c)
motivating employees to maximize their performance, and (d) embedding internal controls in processes
and systems to prevent and detect errors and fraud.
(3) Control by monitoring includes (a) evaluating the results of an activity or an entire business
process to see whether they meet expectations, (b) evaluating the operating results to see if the business
processes are achieving the organization's objectives, (c) monitoring key performance indicators and
comparing them to benchmarks, (d) auditing processes, systems, controls, and transactions, and (e)
comparing actual performance and metrics to forecasts and budgets.
(4) Changing and improving processes includes (a) changing plans and expectations or
changing an activity or a process so that actual results meet expectations, (b) prosecuting occupational
fraudsters to the full extent of the law and sending a message of zero tolerance for fraud to management
and other employees, and (c) improving internal controls to decrease opportunities for errors and fraud.
Management plans and implements processes to achieve its strategic objectives. The business events
and activities embedded in the business processes create data of interest to the firm. The database
management system (DBMS) captures the data for storage in the database. The data is processed and
retrieved in the form of reports, dashboards, and queries. Management uses the information retrieved
from the information system (including financial accounting information and cost accounting information)
to monitor the business processes to ensure that they do what they are supposed to do. If things go
wrong, management takes corrective action to change the business processes, business activities or
internal controls. The result is more planning, implementation, monitoring, and changing and improving
processes, and the cycle continues.
LO 3, Blooms: Application, Difficulty: Medium, TOT: 20 min., AACSB: Communication, AICPA AC: Systems and Process Management, Section: 1.3
DQ12. Student answers will vary.
Quality information for a business is the degree of fit of the information for a particular purpose in a
specified task setting. The information should meet overall expectations for its intended use, subject to
cost versus benefit considerations.
My choice of a fundamental characteristic is faithful representation or accuracy, meaning that the
information must correspondent with the facts or occurrences it represents, and be complete, unbiased
and free of material error or misstatement.
My choice of an enhancing characteristic is timeliness, which relates to the speed at which the information
can be available and still be quality information.
Fundamental characteristics are primary, and enhancing characteristics are secondary. The fundamental
characteristics make information more useful when compared to enhancing characteristics.
7 Solutions Manual Chapter 1 – Accounting as Information 1-7
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, SavageAccounting Information Systems, 2eChapter 1
If information is a faithful representation of an organization's financial results and condition (the financial
statements), this is a primary characteristic because, regardless of the enhancing characteristics, like
issuing the financial statements on time, materially inaccurate financial statements are of no use to
decision makers.
LO 3, Blooms: Comprehension, Difficulty: Easy, TOT: 20 min., AACSB: Reflective Thinking, AICPA AC: Systems and Process Management, Section: 1.3
DQ 13. Possible answers: Companies can balance profitability with ESG initiatives by making
sustainability a central part of their business model rather than viewing it as an additional expense. For
instance, energy efficiency, waste reduction, and sustainable supply chains can help reduce operating
expenses over time while supporting environmental goals. By lowering costs in the long run, companies
can maintain profitability while being socially responsible.
Additionally, prioritizing ESG can attract investors and customers who value corporate responsibility,
creating new growth opportunities. Investments in ESG can also differentiate a company in the market,
offering a competitive advantage through innovation, brand loyalty, and a positive public image.
LO 3, Blooms: Comprehension, Difficulty: Moderate, TOT: 12 min., AACSB: Ethics, AICPA AC: Systems and Process Management, Section: 1.3
DQ14. Student answers will vary but will likely include Excel, SQL databases, querying, and
visualization (Tableau, Power BI, etc.).
LO 4, Blooms: Comprehension, Difficulty: Easy, TOT: 15 min., AACSB: Technology, AICPA AC: Systems and Process Management, Section: 1.4
8 Solutions Manual Chapter 1 – Accounting as Information 1-8
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