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Test Bank with Solution Manual for Accounting Information Systems, 16th Edition by Marshall B Romney
Test Bank with Solution Manual for Accounting Information Systems, 16th Edition by Marshall B Romney
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Solutions Manual lFor
Accounting
InformationSystems
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16th Edition l
Marshall B. Romney l l
Paul John Steinbart
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Scott L. Summers
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l David A. Wood l l
All Chapters Solutions Manual Supplement files downloadlink
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at the end of this file.
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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 The value of information is the difference between the benefits realized from using that
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information and the costs of producing it. Would you, or any organization, ever produce
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information if its expected costs exceeded its benefits? If so, provide some examples. If not,
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why?
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Most organizations produce information only if its value exceeds its cost. However, there are two
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situations where information may be produced even if its cost exceeds its value.
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a. It is often difficult to estimate accurately the value of information and the cost of producingit.
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Therefore, organizations may produce information that they expect will produce benefits in
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excess of its costs, only to be disappointed after the fact.
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b. Production of the information may be mandated by either a government agency or a private l l l l l l l l l l l l l l
organization. Examples include the tax reports required by the IRS and disclosure
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requirements for financial reporting.
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1.2 Can the characteristics of useful information listed in Table 1-1 be met simultaneously? Or
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does achieving one mean sacrificing another?
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Several of the criteria in Table 1.1 can be met simultaneously. For example, more timely information
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is also likely to be more relevant. Verifiable information is likely to be more accurate.
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However, achieving one objective may require sacrificing another. For example, ensuring that
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information is more complete may reduce its timeliness. Similarly, increased verifiability and accuracy
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may reduce its timeliness.
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The decision maker must decide which trade-offs are warranted in each situation.
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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 tosupport
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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 engagein.
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b. Your company will need to exchange information with various external parties. Identifythe
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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,told to
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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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group. l
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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 (business
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processes, key decisions, and information needs) and Figure 1-1 (interactions with external parties).
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Student answers should contain many of the things in Table 1-2 and Figure 1-1 aswell as others not
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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 the data needed to produce this information must
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be entered into the AIS, processed, stored, protected, and 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 home
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much better than a lecture would. It also keeps the students more engaged in the material.
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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 their
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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 l l l l l l l l l l l
various funds, to ensure that legal requirements about the use of specific funds are followed.
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• Financial institutions do not need extensive inventory control systems. l l l l l l l l
• Passenger service companies (e.g., airlines, bus, and trains) generally receive payments in l l l l l l l l l l l
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 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 1-5 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 system can
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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 change an
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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 effects
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of technology and organizational culture on one another, however, mean that it is unrealistic to expect
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that the introduction of a new AIS will produce the same results observed in another organization.
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1.6 Figure 1-5 shows that developments in IT affect both an organization’s strategy and the design
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of its AIS. How can a company determine whether it is spending too much, too little,or just
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enough on IT?
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There is no easy answer to this question. Although a company can try to identify the benefits of a new
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IT initiative and compare those benefits to the associated costs, this is often easier said than done.
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Usually, it is difficult to measure precisely the benefits of new uses of IT. Nevertheless, companies
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should gather as much data as possible about changes in market share, sales trends, costreductions, and
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other results that can plausibly be associated with an IT initiative and that were predicted in the
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planning process.
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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.
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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 to l l l l l l l l l l l
customers. l
The four support activities at S&S:
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a. Firm infrastructure includes the accounting, finance, legal, and general administration l l l l l l l l l
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. l l l l
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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