MEDEXCELLENCE
Chapter 1: Accounting Information Systems and Firm Value
Multiple Choice Questions ALL CHAPTERS
1. (LO 1-1) Accounting information systems VERIFIED ANSWERS
a. are always computerized.
b. report only financially related information.
c. are information systems that record, process, and report on transactions to provide
financial and nonfinancial information for decision making and control.
d. require a CITP designation to understand.
S
Answer: C
R
2. (LO 1-1) Which of the following is a characteristic of relevance?
VE
a. Materiality
b. Timeliness
c. Verifiable
d. Cost to generate
Answer: A
IE
H
3. (LO 1-2) Which of the following is considered to be mandatory information required by a
AC
regulatory body?
a. 10-Q submission to the Securities and Exchange Commission
b. The cost to produce a Samsung Galaxy
M
c. The number of organic bananas that are sold at Whole Foods on July 28
d. The cost to build an all-new Starbucks restaurant in Shenzhen, China
EA
Answer: A
4. (LO 1-4) The correct order of events in the value chain is
R
a. Inbound logistics ➛ Operations ➛ Service.
D
b. Inbound logistics ➛ Outbound logistics ➛ Marketing and sales.
c. Inbound logistics ➛ Operations ➛ Outbound logistics.
d. Inbound logistics ➛ Operations ➛ Marketing and Sales.
Answer: C
5. (LO 1-8) Which system contributes information on direct labor to a cost accounting system?
a. Supply chain management system (SCMS)
b. Financial reporting system (FRS)
c. Customer Relational Management System (CRM)
1
, MEDEXCELLENCE
d. Human resource management system (HRMS)
Answer: D
6. (LO 1-7) A supply chain
a. supplies jewelry chains.
b. refers to the flow of materials, information, payments, and services.
c. is similar in function and purpose to the value chain.
d. does not apply to a service firm like an accounting firm.
Answer: B
S
7. (LO 1-7) Customer relationship management software does not include information about
R
a. current customers.
VE
b. prospective customers.
c. former customers.
d. current employees.
Answer: D
IE
H
8. (LO 1-6) An information system that measures and records accounting transactions and
reports them in the financial statements is called a
AC
a. financial reporting system (FRS).
b. enterprise system (ES).
c. manufacturing system (MS).
d. cost accounting system.
M
Answer: A
EA
9. (LO 1-3) What is the name of the position for a person responsible for determining
Information needs of a business and designing a system to meet those needs?
R
a. Chief information officer
b. Controller
D
c. IT auditor
d. Systems analyst
Answer: D
10. (LO 1-9) The balance sheet account most likely affected by an AIS investment in supply
chain management software would be
a. inventories.
b. fixed assets.
c. cash and cash equivalents.
2
, MEDEXCELLENCE
d. unearned revenue.
Answer: A
11. (LO 1-7) The software/system that helps make sure the retail firm doesn’t have a stockout is
a. supply chain management software.
b. customer relationship management software.
c. enterprise systems.
d. human resource systems.
Answer: A
S
12. (LO 1-9) Data analytics performed to identify the most profitable customers would be
R
most likely to affect which income statement account?
VE
a. Selling, general, and administrative expenses (SG&A)
b. Interest expense
c. Revenues
d. Cost of goods sold
Answer: C
IE
H
13. (LO 1-7, LO 1-9) Customer relationship management systems would generally be considered
to be an
AC
a. internal business process.
b. external business process.
c. interior business process.
M
d. exterior business process.
EA
Answer: B
14. (LO 1-3) An auditor testing internal controls would generally be considered to fill which
role with respect to accounting information systems?
R
a. User
D
b. Manager
c. Designer
d. Evaluator
Answer: D
15. (LO 1-2) Which of these represents the proper transformation from data to decision
according to the information value chain?
a. Data ➛ Information ➛ Knowledge ➛ Decision
b. Data ➛ Knowledge ➛ Information ➛ Decision
3
, MEDEXCELLENCE
c. Data ➛ Business event ➛ Information ➛ Decision
d. Data ➛ Analysis ➛ Information ➛ Decision
Answer: A
Discussion Questions
1. Brainstorm a list of discretionary information that might be an output of an accounting
information system and be needed by Starbucks. Prioritize which items might be most
S
important and provide support.
R
Answers will vary. Here are some potential answers:
The cost of a cup of coffee, by type: Breakfast blend, Cafe estima, caffe Verona, espresso roast,
VE
Ethiopia sidamo, French roast, Gold Coast blend, Guatemala Antigua, house blend, Italian
roast, Kenya coffee, komodo dragon blend, organic Serena blend, organic shade grown
Mexico, Sumatra, decaf caffe Verona, decaf espresso roast, decaf house blend, and decaf
Sumatra!
Monthly Sales per square foot of retail space. IE
H
Employee cost for each operating hour.
AC
Advertising expenditures per dollar of sales.
The cost of condiments per dollar sales of coffee. Condiments might include sweeteners, liquid
creamers, cream canisters, sugar packets, sugar canisters, stir sticks!
M
The cost of electricity per operating hour each month of the year.
EA
2. Explain the information value chain. How do business events turn into data then into
R
information and then into knowledge? Give an example starting with the business event of the
purchase of a Super Smash Bros. Nintendo Switch Game at GameStop all the way to giving
D
useful information for the CEO and other decision makers.
The information value chain represents the overall transformation from a business need and
business event (like each individual sale of U.S. flag) to an ultimate decision. The information
value chain might be represented considering the purchase of a Nintendo Switch Game at Best
Buy in the following way:
The game will be recorded as sales revenue and then after deducting its costs will add to or
subtract from corporate income. The cash from the game sale will also add to the operating
cash flows.
4
Chapter 1: Accounting Information Systems and Firm Value
Multiple Choice Questions ALL CHAPTERS
1. (LO 1-1) Accounting information systems VERIFIED ANSWERS
a. are always computerized.
b. report only financially related information.
c. are information systems that record, process, and report on transactions to provide
financial and nonfinancial information for decision making and control.
d. require a CITP designation to understand.
S
Answer: C
R
2. (LO 1-1) Which of the following is a characteristic of relevance?
VE
a. Materiality
b. Timeliness
c. Verifiable
d. Cost to generate
Answer: A
IE
H
3. (LO 1-2) Which of the following is considered to be mandatory information required by a
AC
regulatory body?
a. 10-Q submission to the Securities and Exchange Commission
b. The cost to produce a Samsung Galaxy
M
c. The number of organic bananas that are sold at Whole Foods on July 28
d. The cost to build an all-new Starbucks restaurant in Shenzhen, China
EA
Answer: A
4. (LO 1-4) The correct order of events in the value chain is
R
a. Inbound logistics ➛ Operations ➛ Service.
D
b. Inbound logistics ➛ Outbound logistics ➛ Marketing and sales.
c. Inbound logistics ➛ Operations ➛ Outbound logistics.
d. Inbound logistics ➛ Operations ➛ Marketing and Sales.
Answer: C
5. (LO 1-8) Which system contributes information on direct labor to a cost accounting system?
a. Supply chain management system (SCMS)
b. Financial reporting system (FRS)
c. Customer Relational Management System (CRM)
1
, MEDEXCELLENCE
d. Human resource management system (HRMS)
Answer: D
6. (LO 1-7) A supply chain
a. supplies jewelry chains.
b. refers to the flow of materials, information, payments, and services.
c. is similar in function and purpose to the value chain.
d. does not apply to a service firm like an accounting firm.
Answer: B
S
7. (LO 1-7) Customer relationship management software does not include information about
R
a. current customers.
VE
b. prospective customers.
c. former customers.
d. current employees.
Answer: D
IE
H
8. (LO 1-6) An information system that measures and records accounting transactions and
reports them in the financial statements is called a
AC
a. financial reporting system (FRS).
b. enterprise system (ES).
c. manufacturing system (MS).
d. cost accounting system.
M
Answer: A
EA
9. (LO 1-3) What is the name of the position for a person responsible for determining
Information needs of a business and designing a system to meet those needs?
R
a. Chief information officer
b. Controller
D
c. IT auditor
d. Systems analyst
Answer: D
10. (LO 1-9) The balance sheet account most likely affected by an AIS investment in supply
chain management software would be
a. inventories.
b. fixed assets.
c. cash and cash equivalents.
2
, MEDEXCELLENCE
d. unearned revenue.
Answer: A
11. (LO 1-7) The software/system that helps make sure the retail firm doesn’t have a stockout is
a. supply chain management software.
b. customer relationship management software.
c. enterprise systems.
d. human resource systems.
Answer: A
S
12. (LO 1-9) Data analytics performed to identify the most profitable customers would be
R
most likely to affect which income statement account?
VE
a. Selling, general, and administrative expenses (SG&A)
b. Interest expense
c. Revenues
d. Cost of goods sold
Answer: C
IE
H
13. (LO 1-7, LO 1-9) Customer relationship management systems would generally be considered
to be an
AC
a. internal business process.
b. external business process.
c. interior business process.
M
d. exterior business process.
EA
Answer: B
14. (LO 1-3) An auditor testing internal controls would generally be considered to fill which
role with respect to accounting information systems?
R
a. User
D
b. Manager
c. Designer
d. Evaluator
Answer: D
15. (LO 1-2) Which of these represents the proper transformation from data to decision
according to the information value chain?
a. Data ➛ Information ➛ Knowledge ➛ Decision
b. Data ➛ Knowledge ➛ Information ➛ Decision
3
, MEDEXCELLENCE
c. Data ➛ Business event ➛ Information ➛ Decision
d. Data ➛ Analysis ➛ Information ➛ Decision
Answer: A
Discussion Questions
1. Brainstorm a list of discretionary information that might be an output of an accounting
information system and be needed by Starbucks. Prioritize which items might be most
S
important and provide support.
R
Answers will vary. Here are some potential answers:
The cost of a cup of coffee, by type: Breakfast blend, Cafe estima, caffe Verona, espresso roast,
VE
Ethiopia sidamo, French roast, Gold Coast blend, Guatemala Antigua, house blend, Italian
roast, Kenya coffee, komodo dragon blend, organic Serena blend, organic shade grown
Mexico, Sumatra, decaf caffe Verona, decaf espresso roast, decaf house blend, and decaf
Sumatra!
Monthly Sales per square foot of retail space. IE
H
Employee cost for each operating hour.
AC
Advertising expenditures per dollar of sales.
The cost of condiments per dollar sales of coffee. Condiments might include sweeteners, liquid
creamers, cream canisters, sugar packets, sugar canisters, stir sticks!
M
The cost of electricity per operating hour each month of the year.
EA
2. Explain the information value chain. How do business events turn into data then into
R
information and then into knowledge? Give an example starting with the business event of the
purchase of a Super Smash Bros. Nintendo Switch Game at GameStop all the way to giving
D
useful information for the CEO and other decision makers.
The information value chain represents the overall transformation from a business need and
business event (like each individual sale of U.S. flag) to an ultimate decision. The information
value chain might be represented considering the purchase of a Nintendo Switch Game at Best
Buy in the following way:
The game will be recorded as sales revenue and then after deducting its costs will add to or
subtract from corporate income. The cash from the game sale will also add to the operating
cash flows.
4
