Solutions Manual - Systems Understanding Business Processes 4e Bre...

Solutions Manual For Accounting Information Systems Understanding Business Processes 4e Brett Considine, Alison Parkes, Karin Olesen, Yvette Blount & Derek Speer Prepared by Brett Considine By 1 / 4

Chapter 1: Introduction

. 1.1

Chapter 1: Introduction

Discussion Questions 1.1 Describe some inputs, processes and outputs of an accounting information system.

(LO1, LO2, LO3)

Inputs: Sales order (record purchase requests from customers), purchase data (data about purchases initiated with our vendors), Receiving data (data about arriving goods), shipping data (data about goods sent to customers), invoices (received from vendors)

Processes: Check data is valid, sort data, manipulate data

Outputs: Invoice (sent to customer), cheque (sent to vendor), profit and loss report, accounts receivable report 1.2 What is the difference between data and information? (LO2) Data are the raw facts relating to or describing an event. For example, data relating to a sale could include the customer’s name, address, salesperson ID, the sale number, sale date, items purchased, quantity purchased and so on. On its own this data is not all that useful. However, through the application of rules and knowledge the data can be made meaningful, thus converting it to information. For example, the collection of data relating to sales may be summarised into sales by customer or sales by product, to provide information about high spending customers or slow moving products.

1.3 What is information overload? What are its consequences? (LO2) Information overload refers to the situation where an individual has more information than required and can’t meaningfully process this information when making a decision. The potential consequences of information overload include the production of reports and information that serves no purpose and deleterious decision making by employees who are unable to synthesise the volume of information that they are exposed to.

1.4 Briefly summarise the changing relationship between accounting and information systems. (LO4) This question can be answered with reference to Figure 1.5, which depicts the changing nature of and interaction between accounting and information systems. Regarding the role of accounting we see that initially accounting was the primary source of information for an organisation. In the original manual accounting environment, the people who did the accounting also represented the technology of the system – the accountant kept records and stored data and synthesised it into reports. In essence, the accounting function and the information technology function were one.The advent of computing technology and other processing technologies described in the chapter were based around ways of making the accounting task easier. When the information technology first hit organisations it was predominantly seen as a way of helping the accountant – thus information systems were the domain of the accountant. This is represented in the top part of figure 1.5. The domain of information technology soon expanded, encompassing more than just 2 / 4

Solution Manual to accompany Accounting Information Systems 4e . 1.2 accounting. As a consequence, we have the scenario depicted with the intersecting circles in figure 1.5. With the growth of information systems, the traditional roles of data management and storage that were previously the domain of the accountant began to be consumed by the information systems domain, with the accounting function being separate from the technology that allowed its execution. Finally, technology was incorporated to many areas of the organisation, not just the accounting role. The technology/information systems role became the focus, and it served many areas of the business, of which accounting was one. Thus accounting became a user of the information systems function in order to complete its tasks. Thus accounting has gone from being in control of the information systems function to being a user of the information systems function as technology has advanced and it has become necessary for people to be experts in technology.

1.5 Compare the role of the accountant today to his or her role before the introduction of computer technology. How have the responsibilities and duties changed over time? (LO4) The discussion of this question can be tied into the discussion in question 1.4. What becomes evident from the historical discussion of the evolution of the accounting and information systems function is that the accountant has gone from being responsible for both the accounting function and the information management function associated with accounting to just being responsible for the accounting function. The technically qualified personnel, who do not necessarily have accounting skills, have become responsible for the information storage function associated with accounting. In a sense, the responsibilities of the accountant have been reduced, since they have lost direct control of the information storage function associated with the accounting discipline.Some may also argue that this shift has created a greater need for accountants to be trained not just in the technical skills of accounting but also in skills of information management, for example information systems. 3 / 4

Chapter 1: Introduction

. 1.3 1.6 What are some of the uses of accounting information? Provide five examples of how accounting information may be used and who it would be used by. (LO5) The table below provides some typical examples of how accounting information may be used.

USER USES OF ACCOUNTING INFORMATION

Shareholder Uses the general purpose financial reports to assess the performance of the company they have invested in, assessing both historical performance and using the historical information to make predictions about future performance.Managers Are commonly exposed to bonus schemes that are based on profit levels or other financial performance indicators. Thus managers have accounting information being used as a performance assessment device.Union May use financial reports of companies – particularly profit information – to substantiate claims for higher wages for union members.Bank Will look at financial performance and financial position information when assessing credit worthiness of loan applicants.Suppliers A company’s suppliers may wish to view financial information before entering in to long term supply agreements, in order to ensure that the company is able to meet the terms of the agreement and pay for the supplies that are purchased.

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