chapter 1

accounting information systems: An overview

Suggested Answers to Discussion Questions

1.1 Discuss the concept of a system and the issues of goal conflict and goal
congruence.

A system is a set of two or more components that are somehow interrelated

and interact together to achieve a specific goal. A system usually consists of
smaller components called subsystems. These subsystems have specific and
defined functions, which interact with and support the larger system. The
concept of systems is key to information technology and AIS. All systems,
including the AIS, must work to achieve one or more organizational goals.
Goal conflict results when a decision or action of a subsystem is inconsistent
with another subsystem or the system (organization) as a whole. Goal
congruence results when a subsystem achieves its goals while contributing to
the organization's overall goal. Subsystems should maximize organizational
goals.

1.2 Give an example of how an AIS can improve decision making and describe
the multistep activities involved in the process.

Decision making is a complex, multistep activity: identify the problem, collect

and interpret information, evaluate ways to solve the problem, select a
solution methodology, and implement the solution. An AIS can provide
assistance in all phases of decision making. Reports can help to identify
potential problems. Decision models and analytical tools can be provided to
users. Query languages can gather relevant data to help make the decision.
 Various tools, such as graphical interfaces, can help the decision maker
interpret decision model results, evaluate them, and choose among
alternative courses of action. In addition, the AIS can provide feedback on the
results of actions.

An AIS can help improve decision making in several ways:

 It can identify situations requiring management action. For example, a cost

report with a large variance might stimulate management to investigate and,
if necessary, take corrective action.
 It can reduce uncertainty and thereby provide a basis for choosing among
alternative actions.
 It can store information about the results of previous decisions, which
provides valuable feedback that can be used to improve future decisions. For
example, if a company tries a particular marketing strategy and the
information gathered indicates that it did not succeed, the company can use
that information to select a different marketing strategy.
 It can provide accurate information in a timely manner. For example,
Walmart has an enormous database that contains detailed information about
sales transactions at each of its stores. It uses this information to optimize
the amount of each product carried at each store.
 It can analyze sales data to discover items that are purchased together and
can use such information to improve the layout of merchandise or to
encourage additional sales of related items. For example, Amazon uses its
sales database to suggest additional books for customers to purchase.
1.3 A software company in Munich is organizing a competition, inviting
business ideas that promote the use of smartphone technology to conduct
business. You enter your business plan, an initiative to involve unemployed
teenagers and young adults from local communities to generate business
and employment, and it was so well received that you were awarded a
special prize of €5,000. You plan on using your prize money to implement
your idea.

a. Identify key decisions you need to make, the information you require
to make these key decisions, and the five major business processes you
need to engage in.
b. Identify the external parties with whom you would need to exchange
information and specify the information you will receive from these
parties and the information that you will send to these parties.

The author uses this as a class discussion: the typical process the author
follows is that students work through the content of a chapter before it is
covered in class. Students are required to answer questions (such as this one)
and submit it before the lecture. The author then assesses the answers, and,
based on problems identified within the answers, the lecture content would
be determined.

Students are thus required to complete the questions before coming to the
class. In class, the students are divided into small groups (about 4 – 5
students per group). Each small group has to come to some consensus about
the answers that they will present to the class. The groups could be randomly
allocated, or the groups could be based on similarity in initial ideas.

A group is then selected (or a group can volunteer) to present their answers
to the class. Since all students have had the opportunity to engage with the
content prior to the presentation in class, there should be meaningful
contributions and discussions about how the presented solutions could be
improved.

Answers will vary, but the main aim is to get students to understand (for part
a) how the business processes, key decisions, and information needs are all
intertwined (as shown in Table 1-2). This then links to the external parties
(part b) in Figure 1-1.

Since the scenario indicated the use of mobile phones to conduct business,
students should ideally relate their answers to some form of retail (buying /
selling of goods / services).
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.

An organization’s AIS must reflect its business processes and its line of
business. For example:

 Manufacturing companies will need a set of procedures and documents for

the production cycle; non-manufacturing companies do not.
 Government agencies need procedures to track separately all inflows and
outflows from various funds, to ensure that legal requirements about
the use of specific funds are followed.
 Financial institutions do not need extensive inventory control systems.
 Passenger service companies (e.g., airlines, bus, and trains) generally
receive payments in advance of providing services. Therefore, extensive
billing and accounts receivable procedures are not needed; instead, they
must develop procedures to account for prepaid revenue.
 Construction firms typically receive payments at regular intervals, based on
the percentage of work completed. Thus, their revenue cycles must be
designed to track carefully all work performed and the amount of work
remaining to be done.
 Service companies (e.g., public accounting and law firms) do not sell
physical goods and, therefore, do not need inventory control systems.
They must develop and maintain detailed records of the work performed
for each customer to provide backup for the amounts billed. Tracking
individual employee time is especially important for these firms because
labor is the major cost component.

1.5 Figure 1-5 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?
Since people are one of the basic components of any system, it will always be
difficult to transfer successfully a specific information systems design intact to
another organization. Considering in advance how aspects of the new
organizational culture are likely to affect acceptance of the system can
increase the chances for successful transfer. Doing so may enable the
organization to take steps to mitigate likely causes of resistance. The design
of an AIS, however, itself can influence and change an organization’s culture
and philosophy. Therefore, with adequate top management support,
implementation of a new AIS can be used as a vehicle to change an
organization. The reciprocal effects of technology and organizational culture
on one another, however, mean that it is unrealistic to expect that the
introduction of a new AIS will produce the same results observed in another
organization.
1.6 Why are accounting software packages designed with separate transaction
modules?

Since every organization does not necessarily use all of the transaction cycles
in its operations, it is to the advantage of the organization to be able to “pick
and choose” from among various software modules that track and record
different transaction cycles. For example, a law firm would have no need to
implement a production cycle module. Also, the nature of a transaction cycle
varies across the broad spectrum of business organizations. Again, a law firm
would have a revenue cycle, but it would not involve the purchase, receipt,
and payment for products or merchandise; likewise, a retail store chain may
not sell any consulting services to its customers.

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

The value chain classifies business activities into two categories: primary and
support.

The five primary activities at S&S:

a. Inbound logistics includes all processes involved in ordering, receiving,
and temporarily storing merchandise that is going to be sold to S&S
customers.
b. S&S does not manufacture any goods, thus its operations activities
consists of displaying merchandise for sale and protecting it from theft.
c. Outbound logistics includes delivering the products to the customer.
d. Sales & marketing includes ringing up and processing all sales
transactions and advertising products to increase sales.
e. Service includes repairs, periodic maintenance, and all other post-sales
services offered to customers.

The four support activities at S&S:

 a. Firm infrastructure includes the accounting, finance, legal, and general
administration functions required to start and maintain a business.
b. Human resource management includes recruiting, hiring, training,
evaluating, compensating, and dismissing employees.
c. Technology includes all investments in computer technology and
various input/output devices, such as point-of-sale scanners. It also
includes all support activities for the technology.
d. Purchasing includes all processes involved in identifying and selecting
vendors to supply goods and negotiating the best prices, terms, and
support from those suppliers.

Chapter:02

Give three examples each of the advantages and the disadvantages of

an ERP system with a centralized database. How you can increase the
change of a successful ERP implementation?
Some possible advantages and disadvantages of an ERP system with a
centralized database are:
Advantages:
 It allows for working on cross-functional projects. A centralized
database speeds up the communication which occurs within an
organization1.
 It is easier to share ideas across analysts. By implementing a
strategy which centralizes information and analytics, those silos begin
to disappear1.
 Higher levels of security can be obtained. When there is long-term
funding granted to a centralized database, then there is a higher level
of data security which develops for the organization2.
Disadvantages:
 It can be costly and complex to implement. A centralized database
system requires a large investment in hardware, software, network
and personnel3.
 It can create a single point of failure. If the central server or database
goes down, the entire system can be affected and cause disruptions
to the business operations.
  It can reduce the autonomy and flexibility of the local units. A
centralized database system may impose a rigid and standardized
structure on the organization, which can limit the ability of the local
units to adapt to their specific needs and preferences3.
Some possible ways to increase the chance of a successful ERP
implementation are:
 Assess current systems and identify the gaps and opportunities for
improvement5.
 Define the project scope and goals and establish the guiding
principles1.
 Select the right ERP software that matches your business needs and
budget5.
 Configure the system and migrate the data from the existing
systems5.
5
 Test the system thoroughly and fix any errors or bugs .
 Train the employees and provide them with the necessary support
and resources5.
5
 Implement the system and monitor the performance and feedback .
 Provide ongoing maintenance and support and update the system as
needed5.
 Prioritize stakeholder engagement and tailor your messages based
on the audience6.
What is the purpose of turnaround documents? Give examples of
how companies use turnaround documents.
The purpose of turnaround documents is to facilitate the data entry
process by using computer-generated forms that are filled in by the
users and then returned to the issuer. Turnaround documents can
reduce the errors and costs associated with manual data entry and
increase the efficiency and accuracy of the information system12.
Some examples of how companies use turnaround documents are:
 Invoicing. A company can send an invoice to a customer with a
detachable section that the customer can fill in with the amount and
method of payment and then return along with the payment. This
section can identify the customer and the invoice number, which can
help the company to record the cash receipt and update the accounts
receivable1.
 Meter reading. A utility company can send a meter card to a customer
with a barcode that identifies the customer and the meter. The
customer can read the meter and write the reading on the card and
 then mail it back to the company. The company can scan the card
and use the barcode and the reading to calculate the bill and update
the customer account2.
 Surveying. A research company can send a survey form to a
respondent with a unique identification number and a set of
questions. The respondent can answer the questions and mail the
form back to the company. The company can use the identification
number and the answers to analyze the data and generate reports3.
Discuss the guidelines for a better coding system. Explain why
these guidelines are important, and what would happen if they are
not met.
Some possible guidelines for a better coding system are:
 Use clear and concise naming conventions. This helps to make the
code more readable and understandable by using meaningful and
consistent names for variables, functions, classes, and other
elements1.
 Keep the code organized and easy to navigate. This can be achieved
by using proper indentation, spacing, comments, and documentation
to structure the code and separate different sections or modules2.
 Use comments and documentation to explain the purpose and logic
of the code. This helps to provide context and clarity for the code and
make it easier for others to review, debug, and maintain the code2.
 Test the code thoroughly to ensure accuracy and reliability. This
involves using various methods and tools to check the code for
errors, bugs, vulnerabilities, and performance issues and fix them
before deploying the code2.
These guidelines are important because they can improve the quality,
efficiency, and security of the code and the software product. They can also
facilitate collaboration and communication among developers and
stakeholders and ensure compatibility and compliance with industry
standards and customer requirements.
If these guidelines are not met, the code may become messy, complex, and
difficult to understand and modify. The code may also contain errors, bugs,
or vulnerabilities that can compromise the functionality, performance, or
security of the software product. The code may also fail to meet the
expectations or specifications of the end-users or the industry. This can
result in lower customer satisfaction, higher maintenance costs, and lower
competitive advantage.
Some accounting students believe that they do not need to study
information systems to be good accountants. What are the
disadvantages of this point of view? What are the advantages of
accountants being involved in designing and preparing reports that
measure more than just financial performance?
Some possible disadvantages of this point of view are:
 Accounting students who do not study information systems may lack
the skills and knowledge to use and evaluate accounting information
technology, which is essential for modern accounting practice1.
 Accounting students who do not study information systems may miss
the opportunity to learn how to design and implement effective and
efficient accounting information systems that can improve the quality
and timeliness of accounting information2.
 Accounting students who do not study information systems may have
difficulty in understanding and communicating with information
systems professionals, who are often involved in accounting projects
and audits3.
 Accounting students who do not study information systems may be
less competitive and adaptable in the dynamic and complex
accounting environment, where information technology is constantly
changing and evolving1.
Some possible advantages of accountants being involved in designing and
preparing reports that measure more than just financial performance are:
 Accountants who are involved in designing and preparing non-
financial performance measures can help align the measures with the
organization’s strategy and goals, and ensure their relevance and
reliability4.
 Accountants who are involved in preparing non-financial performance
measures can help analyze and interpret the data and provide
insights and recommendations for improving the organization’s
performance4.
 Accountants who are involved in preparing non-financial performance
measures can help communicate the results and feedback to the
stakeholders, such as managers, employees, customers, and
investors, and enhance their understanding and satisfaction4.
 Accountants who are involved in preparing non-financial performance
measures can help broaden their perspective and skills, and add
more value to the organization and the society5.
 Chapter :03
3.1Identify the DFD from the following narrative: Henk
buys a new bicycle at a local shop and pays with his
debit card. The sales clerk enters the transaction in the
cash register. At the time of closing, the sales clerk
gives the register tape and the debit card PIN tape to his
manager.

The DFD (Data Flow Diagram) for this narrative involves:

1. External Entities:
a. Henk
b. Local shop
c. Manager
2. Processes:
a. Purchase transaction
b. Transaction entry in cash register
c. Closing process
3. Data Flows:
a. Information about the bicycle purchase flows from Henk
to the local shop.
b. Transaction details flow from the sales clerk to the cash
register.
c. At closing, the register tape and debit card PIN tape
flow from the sales clerk to the manager.
4.Data Stores:
a. Cash register (stores transaction data)
b. Manager (stores the register tape and debit card PIN
tape)
This forms a basic DFD capturing the flow of information in
the described scenario
3.2 Do you agree with the following statement: “Any one of
the systems documentation
procedures can be used to adequately document a given
system”? Explain.

No, I don't agree with the statement. Different systems may

require different documentation procedures based on their
complexity, purpose, and audience. The choice of documentation
procedures depends on factors such as the nature of the system,
the intended users of the documentation, and the specific details
that need to be conveyed.
For example, a highly technical system may necessitate detailed
technical documentation, while a user-focused system might
require more user-friendly manuals. Additionally, regulatory
requirements, industry standards, and the development
methodology can influence the choice of documentation
procedures.
In summary, the most suitable documentation procedures depend
on the unique characteristics and requirements of the system
being documented.

3.3 Compare the guidelines for preparing flowcharts, BPDs,

and DFDs. What general
design principles and limitations are common to all three
documentation techniques?

Guidelines for preparing Flowcharts, BPDs, and DFDs:

Flowcharts:

Used for process visualization.

Symbols include rectangles (processes), diamonds (decisions),
and arrows (flow).
Suitable for detailing steps and decision points in a process.

Business Process Diagrams (BPDs):

Focus on business processes and activities.

Use swimlanes to show responsibilities.
Emphasize the flow of activities within an organization.
Data Flow Diagrams (DFDs):

Emphasize the flow of data through a system.

Symbols include circles (processes), arrows (data flow), and data
stores.
Levels (context, level 0, level 1) show increasing detail.

Common General Design Principles:

Clarity: Ensure diagrams are clear and easily understandable.

Consistency: Maintain consistency in symbols and notation.
Accuracy: Reflect the actual processes or systems accurately.
Relevance: Include only essential details for the intended
audience.
Hierarchy: Represent information in a hierarchical manner,
especially in DFDs.
Common Limitations:

Abstraction: All three techniques involve some level of

abstraction, potentially missing finer details.
Scope: The scope of each technique might be limited to specific
aspects, potentially requiring supplementary documentation for a
comprehensive understanding.
Dynamic Aspects: These techniques may not explicitly capture
dynamic aspects of a system, such as time sequences.
Assumption of Understanding: Users need to be familiar with the
symbols and notations used in each technique.
In summary, while each technique has its specific focus and
symbols, common principles like clarity and consistency apply.
However, they share limitations in terms of abstraction, scope,
dynamic representation, and reliance on user understanding of
symbols.

3.4 Explain the difference between a system flowchart and a

program flowchart.
System Flowchart:
Purpose: Illustrates the entire information system, depicting how
data moves through various processes and data stores.
Scope: Encompasses the entire system, including interactions
with external entities.
Components: Represents processes, data stores, data flows, and
external entities.
Program Flowchart:
Purpose: Focuses on the logic of a specific program or module
within the system.
Scope: Limited to the activities and logic within a particular
program.
Components: Represents detailed program logic, decision points,
and processing steps
Relationship:
A system flowchart provides an overview of the entire system,
showing how different programs and modules interact.
 Program flowcharts, on the other hand, provide detailed insight
into the logic and processing steps of individual programs or
modules.
Together, they contribute to a comprehensive understanding of
the system: the system flowchart gives a holistic view, while
program flowcharts provide detailed insights into specific program
functionalities.
In essence, the system flowchart serves as a higher-level
diagram, guiding how various programs work together, while
program flowcharts delve into the specifics of individual programs
within system.

Chapter-5
5.1 The first step of an analytics mindset is to ask the right questions. How do
you learn how to ask the right questions? How would you teach someone else
how to ask the right questions?
Learning to ask the right questions in analytics is a skill that can be developed with
practice and experience. Here are some steps to guide you:
1. Understand the Business Context: Before you can ask the right questions,
you need to understand the business context 12. This includes understanding
the company’s strategy, goals, budget, and target customers12.
2. Define the Problem: The next step is to define the problem you’re trying to
solve12. This will help you focus your questions on the most relevant and
important issues12.
3. Formulate Specific and Focused Questions: The right questions are specific
and focused1. They should be based on the problem you’re trying to solve
and the business context1.
4. Use a Framework: Using a framework can help you structure your questions
and ensure you’re covering all the necessary aspects 1. For example, the
author Brent Dykes suggests thinking about the journey, not about isolated
touchpoints1.
5. Incorporate Business Context: Avinash Kaushik, the analytics evangelist for
Google, suggests incorporating business context into your questions 1. He
says, "Before you provide the data, ask the requestor what is the business
question they are trying to answer. Then fulfill that need."1
To teach someone else how to ask the right questions, you could guide them
through these steps and provide examples of good and bad questions 1. You could
also give them opportunities to practice formulating their own questions and
provide feedback to help them improve12.
5.2 This chapter discusses several different ways to structure data warehouses,
data marts, and data lakes. Discuss the diagrams listed in the book or diagram
your own structures for data warehouses, data marts, and data lakes, and
discuss the pros and cons of each structure
A data warehouse, a data mart, a data lake, and a data swamp are different ways of
storing and organizing data for different purposes. Here are some diagrams and
pros and cons of each structure:
 A data warehouse is a centralized repository of integrated data from multiple
sources that supports business intelligence and analytics. A data warehouse
typically has a predefined schema that organizes data into tables and
columns based on business requirements. A data warehouse can be
represented as a star or snowflake schema, where a central fact table
contains measures and keys to connect to dimension tables that contain
descriptive attributes1
o Pros: A data warehouse provides a consistent and reliable source of
data for analysis and reporting. It enables fast and complex queries on
structured data. It supports data quality and governance by applying
data cleansing and validation rules.
o Cons: A data warehouse can be expensive and time-consuming to
design, build, and maintain. It may not be able to handle unstructured
or semi-structured data. It may not be able to accommodate frequent
changes in data sources or business needs.
 A data mart is a subset of a data warehouse that focuses on a specific subject
area or business function. A data mart can be created by extracting,
transforming, and loading (ETL) data from a data warehouse or directly
from operational data sources. A data mart can also have a star or snowflake
schema, but with fewer tables and columns than a data warehouse2
o Pros: A data mart can provide faster and more tailored access to data
for a specific user group or department. It can improve query
performance and reduce the load on the data warehouse. It can also
enable more flexibility and autonomy for data analysis and reporting.
o Cons: A data mart can create data redundancy and inconsistency if not
aligned with the data warehouse. It can also increase the complexity
and cost of data management and integration. It may not be able to
support cross-functional or enterprise-wide analysis.
  A data lake is a large-scale repository of raw data in its native format. A data
lake can store structured, semi-structured, and unstructured data from
various sources without imposing a predefined schema. A data lake can be
represented as a collection of files and folders, where each file contains data
and metadata. A data lake can also use a distributed file system, such as
Hadoop, to store and process large volumes of data3
o Pros: A data lake can store any type and amount of data without losing
its original form and granularity. It can support a variety of data
processing and analysis methods, such as batch, real-time, streaming,
and machine learning. It can also enable more agility and innovation
by allowing users to explore and discover new insights from data.
o Cons: A data lake can pose challenges for data quality, security, and
governance. It can be difficult to find, access, and understand data
without proper metadata and cataloging. It can also require specialized
skills and tools to extract value from data.
 A data swamp is a data lake that has become unusable due to poor data
quality, lack of metadata, or ineffective data management. A data swamp can
result from storing data without proper planning, governance, or
maintenance. A data swamp can be represented as a cluttered and chaotic
collection of files and folders, where data is inaccessible, incomprehensible,
or unreliable4
o Pros: A data swamp does not have any obvious advantages, except
that it may still contain some potentially valuable data that can be
salvaged with proper data cleansing and organization.
o Cons: A data swamp can waste time, money, and resources by storing
data that is not useful or usable. It can also create risks for data
security, privacy, and compliance. It can also hinder data analysis and
decision making.
5.3 Companies are automating many accounting tasks. Is automation good or
bad? Consider this question from the view of accounting students, accounting
practitioners, other business professionals, and society as a whole. What should
be done to achieve the good aspects of automating accounting tasks while
minimizing the poor aspects?
Automation in accounting, like in many other fields, has both positive and negative
aspects. Let’s consider these from the perspective of different stakeholders:
Accounting Students:
 Positive: Automation can reduce the time and effort spent on routine and
repetitive tasks, allowing students to focus more on strategic, analytical, and
advisory skills12. It can also provide students with opportunities to learn and
 use new technologies, which can enhance their employability and career
prospects12.
 Negative: Automation may reduce the demand for traditional accounting
roles, which could make the job market more competitive for students 12. It
may also require students to learn new skills and adapt to new ways of
working, which could be challenging12.
Accounting Practitioners:
 Positive: Automation can increase the efficiency, accuracy, and consistency
of accounting tasks, which can improve the productivity and effectiveness of
practitioners12. It can also enable practitioners to add more value to their
organizations by providing more timely and insightful financial
information12.
 Negative: Automation may threaten some traditional accounting roles, which
could lead to job displacement or restructuring 12. It may also require
practitioners to update their skills and change their work practices, which
could cause stress or resistance12.
Other Business Professionals:
 Positive: Automation can improve the quality and availability of financial
information, which can support better decision-making and performance
management for other business professionals12. It can also streamline the
interaction and collaboration between accounting and other business
functions12.
 Negative: Automation may change the nature and timing of financial
information, which could require other business professionals to adjust their
expectations and processes12. It may also raise issues of data privacy,
security, and governance, which could affect other business professionals12.
Society as a Whole:
 Positive: Automation can contribute to the economic growth and innovation
by increasing the efficiency and effectiveness of accounting 12. It can also
promote transparency and accountability by improving the quality and
accessibility of financial information12.
 Negative: Automation may lead to job losses or inequality in the accounting
profession, which could have social and economic impacts 12. It may also
raise ethical and legal issues related to data privacy, security, and
governance12.
To achieve the good aspects of automating accounting tasks while minimizing the
poor aspects, several actions could be taken:
 Education and Training: Accounting students and practitioners should be
educated and trained in the use of automation technologies and the
development of complementary skills12.
 Change Management: Organizations should manage the change process
effectively, including communication, consultation, support, and
adaptation12.
 Policy and Regulation: Policymakers and regulators should address the
social, economic, ethical, and legal implications of automation, including
job displacement, inequality, data privacy, security, and governance 12.
 Research and Innovation: Researchers and innovators should continue to
explore and develop new ways to use automation to enhance the value and
impact of accounting12.

5.4 The end of this chapter suggests that data analytics are not always
appropriate for a decision context. Identify three unique business situations
for which data analytics may not be appropriate. Identify why data analytics
are not appropriate in these situations and how a decision maker should
make their decision without using data.
Some possible business situations for which data analytics may not be
appropriate are:
 Ethical dilemmas: Data analytics cannot provide guidance on moral or
ethical issues, such as whether to fire an employee, donate to a charity, or
report a fraud. These decisions require human judgment and values that
cannot be quantified or analyzed by data.
 Creative or artistic endeavors: Data analytics cannot generate original or
innovative ideas, such as designing a logo, writing a novel, or composing a
song. These activities require human imagination and expression that cannot
be replicated or predicted by data.
 Emergencies or crises: Data analytics may not be useful or feasible in
situations that require immediate or urgent action, such as responding to a
natural disaster, a terrorist attack, or a medical emergency. These situations
may not have enough data available or time to analyze it, and may require
human intuition and courage to deal with the uncertainty and risk.

Chapter: 04