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