Accounting Information Systems
Solutions Manual
for Accounting Information Systems
15th Edition
by Marshall B Romney
, Accounting Information Systems
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 produce 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 situations
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 producing it.
Therefore, organizations may produce information
that they expect will produce benefits 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 private
organization. Examples include the tax reports
required by the IRS and disclosure requirements 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 information is
, Accounting Information Systems
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 that 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. Your business plan won second place in a
local competition, and you are using the $10,000 prize
to support yourselves as you start your company.
a. Identify the key decisions you need to make to be
successful entrepreneurs, the information 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. Identify the external
parties, and specify the information received from
and sent to each of them.
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 their group.
b. Identify the external users of information and
specify the information received from and sent to
each of them.
One group is selected to present their answers to the
class. The other groups are told to challenge the
group’s answers, provide alternative answers, and chip
in with additional answers not provided by the selected
group. Since the group that presents is not selected
until after the time has expired, 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
, Accounting Information Systems
―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
Table 1-2 and Figure 1-1 as well as others not shown, as
a retail operation differs from an application
development enterprise.
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 identify the information needed to make
key decisions in the company’s business processes and
the key information interchanges with external parties.
All the data needed to produce this information must be
entered into the AIS, processed, stored, protected, and
made available to the appropriate 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 production 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 followed.
Financial institutions do not need extensive
inventory control systems.
Passenger service companies (e.g., airlines, bus,
and trains) generally receive payments in advance of
providing services. Therefore, extensive billing
and accounts receivable procedures are not needed;
instead, they must develop procedures to account for
prepaid revenue.
Solutions Manual
for Accounting Information Systems
15th Edition
by Marshall B Romney
, Accounting Information Systems
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 produce 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 situations
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 producing it.
Therefore, organizations may produce information
that they expect will produce benefits 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 private
organization. Examples include the tax reports
required by the IRS and disclosure requirements 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 information is
, Accounting Information Systems
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 that 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. Your business plan won second place in a
local competition, and you are using the $10,000 prize
to support yourselves as you start your company.
a. Identify the key decisions you need to make to be
successful entrepreneurs, the information 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. Identify the external
parties, and specify the information received from
and sent to each of them.
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 their group.
b. Identify the external users of information and
specify the information received from and sent to
each of them.
One group is selected to present their answers to the
class. The other groups are told to challenge the
group’s answers, provide alternative answers, and chip
in with additional answers not provided by the selected
group. Since the group that presents is not selected
until after the time has expired, 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
, Accounting Information Systems
―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
Table 1-2 and Figure 1-1 as well as others not shown, as
a retail operation differs from an application
development enterprise.
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 identify the information needed to make
key decisions in the company’s business processes and
the key information interchanges with external parties.
All the data needed to produce this information must be
entered into the AIS, processed, stored, protected, and
made available to the appropriate 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 production 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 followed.
Financial institutions do not need extensive
inventory control systems.
Passenger service companies (e.g., airlines, bus,
and trains) generally receive payments in advance of
providing services. Therefore, extensive billing
and accounts receivable procedures are not needed;
instead, they must develop procedures to account for
prepaid revenue.
