Complete Solutions for Accounting Information System 12e by Marshall B. Romney
Paul J. Steinbart

All 22 Chapter's End Questions Solved

All Solution are in .doc format.

Chapter 1 accounting information systems: An overview

Chapter 2 Overview of Business Processes

Chapter 3 SYSTEMS DEVELOPMENT AND DOCUMENTATION TECHNIQUES

Chapter 4 RELATIONAL DATABASES

Chapter 5 COMPUTER FRAUD

Chapter 6 COMPUTER FRAUD AND ABUSE TECHNIQUES

CHAPTER 7 CONTROL AND ACCOUNTING INFORMATION SYSTEMS

CHAPTER 8 INFORMATION SYSTEM CONTROLS for SYSTEMS RELIABILITY

Part 1: Information Security

Chapter 9  INFORMATION SYSTEMS CONTROLS FOR SYSTEMS RELIABILITY – Part 2: Confidentiality and Privacy

Chapter 10 INFORMATION SYSTEMS CONTROLS FOR SYSTEMS RELIABILITY – PART 3: PROCESSING INTEGRITY AND AVAILABILITY

Chapter 11 AUDITING COMPUTER-BASED INFORMATION SYSTEMS

Chapter 12 THE REVENUE CYCLE: SALES AND CASH COLLECTIONS

Chapter 13 THE EXPENDITURE CYCLE: PURCHASING AND CASH DISBURSEMENTS

Chapter 14 THE PRODUCTION CYCLE

Chapter 15 THE HUMAN RESOURCES MANAGEMENT/PAYROLL CYCLE

Chapter 16 GENERAL LEDGER AND REPORTING SYSTEM

Chapter 17 DATA MODELING AND DATABASE DESIGN

Chapter 18 IMPLEMENTING AN REA MODEL IN A RELATIONAL DATABASE

Chapter 19 SPECIAL TOPICS IN REA MODELING

Chapter 20 INTRODUCTION TO SYSTEMS DEVELOPMENT; SYSTEMS ANALYSIS

Chapter 21 AIS DEVELOPMENT STRATEGIES

Chapter 22 SYSTEMS DESIGN, IMPLEMENTATION, AND OPERATION

 

chapter 1

accounting information systems: An overview

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 not?

1.2      Can the characteristics of useful information listed in Table 1-1 be met simultaneously?  Or does achieving one mean sacrificing another?

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.

 

  1. 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.
  2. 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.

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.

1.5      Figure 1-4 shows that organizational culture and the design of an AIS influence one another.  What does this imply about the degree to which an innovative system developed by one company can be transferred to another company?

1.6      Figure 1-4 shows that developments in IT affect both an organization’s strategy and the design of its AIS.  How can a company determine whether it is spending too much, too little, or just enough on IT?

1.7      Apply the value chain concept to S&S.  Explain how it would perform the various primary and support activities.

1.8        Information technology enables organizations to easily collect large amounts of information about employees. Discuss the following issues:

 

  1. To what extent should management monitor employees’ e-mail?

 

  1. To what extent should management monitor which Web sites employees visit?

 

  1. c.       To what extent should management monitor employee performance by, for example, using software to track keystrokes per hour or some other unit of time? If such information is collected, how should it be used?
  2. d.      Should companies use software to electronically “shred” all traces of e-mail?
  3. e.      Under what circumstances and to whom is it appropriate for a company to distribute information it collects about the people who visit its Web site?

 

Problems

1.1      Information technology is continually changing the nature of accounting and the role of accountants. Write a two-page report describing what you think the nature of the accounting function and the accounting information system in a large company will be like in the year 2020.

1.2      Adapted from the CMA Examination

a.    Identify and discuss the basic factors of communication that must be considered in the presentation of the annual report.</para></listitem>

b.    Discuss the communication problems a corporation faces in preparing the annual report that result from the diversity of the users being addressed.

c.     Select two types of information found in an annual report, other than the financial statements and accompanying footnotes, and describe how they are helpful to the users of annual reports.

d.   </inst>Discuss at least two advantages and two disadvantages of stating well-defined corporate strategies in the annual report.</para></listitem>

 

e.    Evaluate the effectiveness of annual reports in fulfilling the information needs of the following current and potential users: shareholders, c</para></listitem>reditors</para></listitem>, <listitem><para><inst></inst>employees</para></listitem>, c<ustomers, and f</para></listitem>inancial analysts</para></listitem></orderedlist></listitem>

f.     Annual reports are public and accessible to anyone, including competitors.  Discuss how this affects decisions about what information should be provided in annual reports.

1.3      The use of IT at USAA

a.    Why should USAA collect data on which auto parts are fixed most frequently?  What could it do with this data?</para></listitem>

b.   Even though USAA offered to waive the deductible, the repair shops still managed to convince 95% of the owners to replace rather than repair their damaged windshields.  How could USAA use its AIS to persuade more shop owners to repair rather than replace their windows?</para></listitem>

  1. a.      How does the image-processing system at USAA add value to the organization?
  2. b.      How do the remote deposit capture and mobile banking system at USAA add value to the organization?
  3. c.       Do an Internet search and find out what other advancements USAA has introduced.  Write a brief paragraph on each new application or other newsworthy item you find (maximum limit of three applications or items).  

1.4      Match the description in the right column with the information characteristic in the left column.

1.  Relevant

a.  The report was carefully designed so that the data contained on the report became information to the reader

2.  Reliable

b.  The manager was working one weekend and needed to find some information about production requests for a certain customer.  He was able to find the report on the company’s network.

3.  Complete

c.  The data on a report was checked by two clerks working independently

4.  Timely

d.  An accounts receivable aging report that  included all customer accounts

5.  Understandable

e.  A report checked by 3 different people for accuracy

 6.  Verifiable

f.  An accounts receivable aging report used in credit granting decisions

7.  Accessible

g.  An accounts receivable aging report was received before the credit manager had to make a decision whether to extend customer credit

 

 

1.5   The Howard Leasing Company

  1. a.       What is an accounts receivable aging report?
  2. Why is an accounts receivable aging report needed for an audit?
  3. What is an accounts receivable aging report used for in normal company operations?
  4. What data will you need to prepare the report?
  5. Where will you collect the data you need to prepare the report?
  6. How will you collect the necessary data for the report?
  7. What will the report look like (i.e., how will you organize the data collected to create the information your supervisor needs for the audit)? Prepare an accounts receivable aging report in Excel or another spreadsheet package.
  8. How will you distribute the report? How many copies will you make? Who should receive the copies? What security features will you implement?

1.6      The use of IT at Tesco

a.    What kind of information do you think Tesco gathers? 

  1. a.       How do you think Tesco has motivated over 12 million customers to sign up for its Clubcard program? 
  2. b.      What can Tesco accomplish with the Clubcard data it collects?  Think in term of strategy and competitive advantage.
  3. c.       What are some of the disadvantages to the Clubcard program?
  4. d.      Do an Internet search to find out how Tesco is doing in comparison to Wal Mart and other grocers and retailers.  Write a few paragraphs explaining your findings.

1.7    Have you ever imagined having one electronic device that does everything you would ever need?  Mobile phone makers in Japan have gone beyond the imagining phase.  Cell phones in Japan are becoming more versatile than ever. Newer models of cell phones contain a myriad of applications and can do many of the things that a personal computer (PC) can do.  PCs are also able to function as phones.  A small but growing number of professionals are trading in their laptops for handheld computers.  Cell phone manufacturers in the United States and elsewhere are quickly catching up to their Japanese counterparts.

  1. a.      What commercial activities can be done with a cell phone?  With a cell phone/PC combination device?  What do you do when you’re on your cell phone?  What do you expect to be doing in five years?

b.    How can businesses utilize this technology to attract more customers, sell more products, advertise their products, facilitate the sale of products, and conduct and manage their businesses more efficiently and effectively?

c.     What are some problems or drawbacks you can see with using these devices in business?

1.8     Classify each of the following items as belonging in the revenue, expenditure, human resources/payroll, production, or financing cycle.

  1. Purchase raw materials
  2. Pay off mortgage on factory
  3. Hire a new assistant controller
  4. Establish a $10,000 credit limit for a new customer
  5. Pay for raw materials
  6. Disburse payroll checks to factory workers
  7. Record goods received from vendor
  8. Update the allowance for uncollectible accounts
  9. Decide how many units to make next month
  10. Complete picking ticket for customer order

11.Record factory employee timecards

  1. Sell concert tickets
  2. Draw on line-of-credit
  3. Send new employees to a business ethics course

15.Pay utility bills

  1. Pay property taxes on office building
  2. Pay federal payroll taxes
  3. Sell DVD player
  4. Collect payment on customer accounts
  5. Obtain a bank loan
  6. Pay sales commissions
  7. Send an order to a vendor
  8. Put purchased goods into the warehouse

Cases

1-1         The Web site for this book contains an adaption of Russell L. Ackoff’s classic article “Management Misinformation Systems” from Management Science.  In the article, Ackoff identified five common assumptions about information systems and then explained why he disagreed with them.

Read the five assumptions, contentions, and Ackoff’s explanations.  For each of the five assumptions, decide whether you agree or disagree with Ackoff’s contentions.  Prepare a report in which you defend your stand and explain your defense.

CHAPTER 2

Overview of Business Processes

2.1    Table 2-1 lists some of the documents used in the revenue, expenditure, and human resources cycle.  What kinds of input or output documents or forms would you find in the production (or conversion) cycle?

2.2    With respect to the data processing cycle, explain the phrase “garbage in, garbage out.” How can you prevent this from happening?

2.3    </inst><para>What kinds of documents are most likely to be turnaround documents?  Do an internet search to find the answer and to find example turnaround documents.

2.4    The data processing cycle in Figure 2-1 is an example of a basic process found throughout nature.  Relate the basic input/process/store/output model to the functions of the human body.

2.5    Some individuals argue that accountants should focus on producing financial statements and leave the design and production of managerial reports to information systems specialists.  What are the advantages and disadvantages of following this advice?  To what extent should accountants be involved in producing reports that include more than just financial measures of performance?  Why?</para></question></general-problem></problemset>

2.1    The chart of accounts must be tailored to an organization’s specific needs.  Discuss how the chart of accounts for the following organizations would differ from the one presented for S&S in <link linkend="ch02table04" preference="0">Table 2-2<xref linkend="ch02table04" label="2-4"/></link>.</para>

2.2    <para>Design a chart of accounts for SDC.  Explain how you structured the chart of accounts to meet the company’s needs and operating characteristics.  Keep total account code length to a minimum, while still satisfying all of Mace’s desires.</para><source>

                                                                                               

2.3   An audit trail enables a person to trace a source document to its ultimate effect on the financial statements or work back from amounts in the financial statements to source documents.  Describe in detail the audit trail for the following:</para>

2.4    Your nursery sells various types and sizes of trees, bedding plants, vegetable plants, and shrubs.  It also sells fertilizer and potting soil.  Design a coding scheme for your nursery.

2.5    Match the following terms with their definitions

 

TERM

DEFINITION

a.  data processing

  1. Contains summary-level data for every asset, liability, equity, revenue, and expense account

b.  source documents

2.   Items are numbered consecutively to account for all items; missing items cause a gap in the numerical sequence

c.  turnaround documents

3.   Path of a transaction through a data processing system from point of origin to final output, or backwards from final output to point of origin

d.  source data automation

4.   List of general ledger account numbers; allows transaction data to be coded, classified, and entered into proper accounts; </para  <para>facilitates preparation of financial statements and reports

e.  general ledger

5.   Contents of a specific field, such as “George” in a name field

f.  subsidiary ledger

6.   Portion of a data record that contains the data value for a particular attribute, like a cell in a spreadsheet

g.  control account

7.   Company data sent to an external party and then returned to the system as input

h.  coding

8.   Used to record infrequent or non-routine transactions

i.  sequence code

9.   Characteristics of interest that need to be stored

j.  block code

10. The steps a company must follow to efficiently and effectively process data about its transactions

k. group code

11. Something about which information is stored

l.  mnemonic code

12. Stores cumulative information about an organization; like a ledger in a manual AIS.

m.  chart of accounts

13. Contains detailed data for any general ledger account with many individual subaccounts

n. general journal

14. Contains records of individual business transactions that occur during a specific time period

o.  specialized journal

15. Updating each transaction as it occurs

p.  audit trail

16. Devices that capture transaction data in machine-readable form at the time and place of their origin

q.  entity

17. Used to record large numbers of repetitive transactions

r.  attribute

18. Set of interrelated, centrally coordinated files

s.  field

19. Two or more subgroups of digits are used to code items

t.  record

20. Updating done periodically, such as daily

u.  data value

21. Systematic assignment of numbers or letters to items to classify and organize them

v.  master file

22. Letters and numbers, derived from the item description, are interspersed to identify items; usually easy to memorize

w.  transaction file

23. Initial record of a transaction that takes place; usually recorded on preprinted forms or formattted screens

x.  database

24. Fields containing data about entity attributes; <keyterm linkend="ch02kt29" role="strong" preference="1">like a row in a spreadsheet

y.  batch processing

25. Sets of numbers are reserved for specific categories of data

z.  online, real-time processing

26. The general ledger account corresponding to a subsidiary ledger, where the sum of all subsidiary ledger entries should equal the amount in the general ledger account

 

2.6    For each of the following scenarios identify which data processing method (batch or online, real-time) would be the most appropriate.

2.7    <para>After viewing the Web sites, and based on your reading of the chapter, write a 2 page paper that describes how an ERP can connect and integrate the revenue, expenditure, human resources/payroll, and financing cycles of a business.

 

2.8         Which of  the following actions update a master file and which would be stored as a record in a transaction file?

 

  1. Update customer address change
  2. Update unit pricing information
  3. Record daily sales
  4. Record payroll checks
  5. Change employee pay rates
  6. Record production run variances
  7. Record Sales Commissions
  8. Change employee office location
  9. Update accounts payable balance
  10. Change customer credit limit

11.Change vendor payment discount terms

  1. Record purchases

 

2.9        You were hired to assist Ashton Fleming in designing an accounting system for S&S.  Ashton has developed a list of the journals, ledgers, reports, and documents that he thinks S&S needs (see <link linkend="ch02table06" preference="1">Table 2-6<xref linkend="ch02table06" label="2-8"/></link>).  He asks you to complete the following tasks:</para>

a.      Specify what data you think should be collected on each of the following four documents: 

b.      Design a report to manage inventory.</para></listitem>

  1. Design a report to assist in managing credit sales and cash collections.
  2. Visit a local office supply store and identify what types of journals, ledgers, and blank forms for various documents (sales invoices, purchase orders, etc.) are available.  Describe how easily they could be adapted to meet S&S’s needs. 

 

2.1    Bar Harbor Blueberry Farm

Data from Case

 

Date

Supplier Invoice

Supplier Name

Supplier Address

Amount

March 7

AJ34

Bud’s Soil Prep, Inc.

PO Box 34

$2,067.85

March 11

14568

Osto Farmers Supply

45 Main

$     67.50

March 14

893V

Whalers Fertilizer, Inc.

Route 34

$5,000.00

March 21

14699

Osto Farmers Supply

45 Main

$3,450.37

March 21

10102

IFM Package Wholesale

587 Longview

$4,005.00

March 24

10145

IFM Package Wholesale

587 Longview

$   267.88

 

 

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Accounting Information System 12e Solution Manual

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