Chapter 1 Solutions Introduction to AIS
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Turner/Accounting Information Systems, 2e
Solutions Manual
Chapter 1
Concept Check
1. d
2. d
3. b
4. c
Discussion Questions
11. (SO 1) How might the sales and cash collection processes at a Wal-Mart store differ
from the sales and cash collection processes at McDonald’s? Wal-Mart sells items
12. (SO 1) Can you think of any procedures in place at McDonald’s that are intended to
ensure the accuracy of your order? Student responses may vary, however,
13. (SO 1) How might the sales and cash collection processes at Boeing Co. (maker of
commercial passenger jets) differ from the sales and cash collection processes at
Chapter 1 Solutions Introduction to AIS
McDonald’s? Boeing does not sell to end-user consumers; rather, it sells to
14. (SO 1) Are there business processes that do not in some way affect accounting
records or financial statements? There may be processes that do not directly affect
15. (SO 2) Briefly describe the five components of an accounting information system.
1. Work steps within a business process that capture accounting data as the
business process occurs.
2. Manual or computer-based records that capture the accounting data from
the business processes.
16. (SO 2) Describe how sales data are captured and recorded at a restaurant such as
Applebee’s. At most Applebee’s restaurants, a server writes the order on a pad and
17. (SO 2) What occurs in an accounting information system that classifies accounting
transactions? For each business process that affects accounting records, the
accounting information system must capture any resulting accounting data, record
the data, process it through classification, summarization, and consolidation, and
generate appropriate reports.
18. (SO 2) What are the differences between internal reports and external reports
generated by the accounting information system? Internal reports are used by
Chapter 1 Solutions Introduction to AIS
decisions about investing or extending credit to the organization.
19. (SO 3) What types of businesses are in the supply chain of an automobile
manufacturer? The types of businesses in an automaker’s supply chain are often
20. (SO 3) When a company evaluates a supplier of materials, what kinds of
characteristics might be evaluated? The supplier’s characteristics that are likely to
21. (SO 3) How do you think a company may be able to influence a supplier to meet its
business processing requirements? A company may be able to influence a supplier
22. (SO 4) Describe any IT enablement that you have noticed at a large retail store such
as Wal-Mart or Target. The most noticeable IT enablement is the use of bar coded
systems on the products and how they are read by the cash registers.
23. (SO 4) How do you think the World Wide Web (WWW) has led to business process
reengineering at companies such as Lands End or J.Crew? Prior to the World Wide
24. (SO 4) What two kinds of efficiency improvement result from business process
reengineering in conjunction with IT systems? The use of IT systems usually leads
to two kinds of efficiency improvements. First, the underlying processes are
reengineered (through rethinking and redesign) to be conducted more efficiently.
Second, the IT systems improve the efficiency of the underlying processes.
25. (SO 5) Explain the differences between a field, a record, and a file. A field is one set
of characters that make up a single data item. For example, last name would be a
Chapter 1 Solutions Introduction to AIS
26. (SO 5) Explain why random access files would be preferable to sequential access
files when payroll personnel are changing a pay rate for a single employee. When
27. (SO 5) Why do real-time systems require direct access files? If transactions are to
be processed online and in real-time, it is necessary that the computer access a
single record immediately. Thus, direct access files are required so the records can
be accessed in real-time.
28. (SO 5) Why is data contained in the data warehouse called nonvolatile? Each time
29. (SO 5) How is an extranet different from the Internet? The extranet allows access
30. (SO 6) Prepare a list of the types of businesses that you have been in that use point
of sale systems. Student responses may vary, but would likely include department
stores, grocery stores, specialty stores, restaurants, gas stations, and car washes.
31. (SO 6) What do you think would be the advantages of an e-payables system over a
traditional system that uses paper purchase orders and invoices? An e-payables
system should be faster and more efficient than a paper-based system. In addition,
fewer processing errors should be expected from an e-payables system.
32. (SO 7) Describe why enterprise risk management is important. All organizations
33. (SO 7) What is the difference between general controls and application controls?
Chapter 1 Solutions Introduction to AIS
intended to insure that inputs are accurate and complete, processing is accurate and
complete, and that outputs are properly distributed, controlled, and disposed.
34. (SO 7) In what way is a code of ethics beneficial to an organization? If top
35. (SO 8) What roles do accountants have in relation to the accounting information
Brief Exercises
36. (SO 1) For each category of business processes (revenue, expenditure, conversion,
administrative), give an example of a business process. Student responses are likely
to vary greatly, as they may refer to any of the subprocesses within each category.
37. (SO 2) Think of a company that you have worked for or with which you have done
business. Which departments within the company need reports generated by the
accounting information systems? Student responses are likely to vary greatly, as
38. (SO 3) Explain a supply chain linkage and give an example. A supply chain linkage
is the connection of activities in the supply chain, including the entities, processes,
and information flows that involve the movement of materials, funds, and related
information through the full logistics process – from the acquisition of raw materials
Chapter 1 Solutions Introduction to AIS
a secondary supplier that provided the fabric from which the shirt was constructed,
and a farmer who raised cotton used to make the fabric.
39. (SO 4) Explain how business process reengineering occurs. Also, explain how it
differs from the typical changes in company policies. With business process
reengineering (BPR), the underlying business processes are reengineered to be
40. (SO 5) For an accounts receivable system, what kind of data would be found in the
master files and transaction files, respectively? An accounts receivable master file
41. (SO 5) Describe the differences in the following three types of processing:
a. Batch processing involves the grouping of similar transactions to be processed
42. (SO 5) The networks discussed in this chapter were LANs, Internet, intranet, and
extranet. Explain each. A LAN is a computer network that spans a relatively small
43. (SO 7) Give a brief summary of each of the following:
a. enterprise risk management is an ongoing strategy-setting and risk assessment
process that is effected by top management but involves personnel across the
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44. (SO 9) Describe why accountants should be concerned about ethics. Accountants
should be concerned about ethics because accounting information systems are
45. (SO 9) Kelli Droyer is currently pursuing her accounting degree at Bromfeld
University. She has excelled in each of her major courses to date; however, she
tends to struggle in her computer classes and with assignments requiring use of
computer technology. Nevertheless, Kelli confidently claims that she will become an
excellent accountant. Comment on the practical and ethical implications of her
position. Kelli is mistaken in her position for the following reasons:
• Practically speaking, accountants need to be well-informed about the operation
of accounting information systems, which nearly always involve computer
technology. The AIS is the foundation of most accounting functions, so to resist
Problems
46. (SO 2) If an accounting information system were entirely a manual system (no
computers used), explain how data would be captured, recorded, classified,
summarized, and reported. Discuss how the sophistication of the company’s
computer system impacts the accounting output and, alternatively, how the
requirements for accounting outputs impact the design of the accounting information
system. In a manual accounting information system, data would be captured on
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47. (SO 1,3) Classify each of the following processes as either a revenue process,
expenditure process, conversion process, or administrative process:
a. Selling common stock to raise capital – ADMINISTRATIVE
b. Purchasing electronic components to manufacture DVD players –
EXPENDITURE
c. Moving electronic components from the stockroom to the production floor to
begin making DVD players – CONVERSION
48. (SO 1) Business processes are composed of three common stages: an initial event,
a beginning, and an end. For items a through h listed in Problem 47, identify the
applicable initial event, beginning, and end of the process. Student responses may
vary as their experiences are likely to be different. Different businesses may have
different events that trigger these processes; however, the following are common
examples:
a. Selling common stock to raise capital: Initial Event – Contacting and
communicating with investors; Beginning – Receiving consideration from
investor; End – Recording transactions in the accounting records.
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inventory from the stockroom; End – Recording the receipt of goods in the
production area.
g. Buying fixed assets: Initial Event – Planning for an expenditure as part of a
capital budgeting process; Beginning – Placing an order for the fixed asset; End
– Receiving the asset and recording it in a subsidiary ledger.
h. Moving manufactured DVD players from the production floor to the warehouse:
Initial Event – Receiving notification from the Production department regarding
completion of products; Beginning – Removing finished goods from the
production floor; End – Recording the receipt of finished goods in the warehouse.
49. (SO 1,2,7) Each of the points listed next represents an internal control that may be
implemented within a company’s accounting information system to reduce various
risks. For each point, identify the appropriate business process (revenue,
expenditure, conversion, administrative). In addition, refer to the description of
business processes under Study Objective 2 in the chapter, and identify the
appropriate subprocess. (Some subprocesses may be used more than once, and
others may not be used at all.)
a. Customer credit must be authorized before a business transaction takes place.
Revenue process, sales subprocess
b. An authorized price list of goods for sale is provided. Revenue process, sales
subprocess
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i. Employee wage rates and paycheck deductions must be authorized by
management. Expenditure process, payroll subprocess
j. Specific procedures such as the performance of a background check are carried
out for all new employee hires. Expenditure process, payroll subprocess
k. The purchasing manager is notified when stock levels are low so that items may
be restocked to prevent backorders. Conversion process, resource management
subprocess
50. (SO 3) Using an internet search engine, search for the terms “RFID” and “supply
chain.” Put both of these terms in your search and be sure that “supply chain” is in
quotation marks. Read some of the resulting web sites you find and answer these
questions:
a. What is RFID? Radio-frequency identification (RFID) technology helps
companies identify and manage large lots of goods, typically received and stored
in cartons or on skids. The cartons or skids include tags that are encoded with
identifying information about the items, their supplier, and their purchase
transaction. These tags can be instantly read and recorded by the company
through the use of antennae or battery-operated transmitters and radio waves.
51. (SO 7) Go to the COSO web site and locate the guidance on enterprise risk
management. The executive summary of the article “Enterprise Risk Management –
Integrated Framework” can be downloaded at no cost. Read the sections titled
“Roles and Responsibilities” and “Use of this Report.” Describe the roles that
various parties should play in enterprise risk management. Although everyone within
a business entity has responsibility for its ERM processes, the chief executive officer
is ultimately responsible and must assume ownership of the process. Accordingly,
the CEO should bring together key managers from each functional area to plan,
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52. (SO 9) Using an internet search engine, search for the term (in quotations) “earnings
management.” From the items you read, answer the following questions:
a. Is earnings management always criminal? No, earnings management is not
always illegal. Since accounting principles allow for some flexibility, accountants
may use the discretion at their disposal in preparing financial statements.
b. Is earnings management always unethical? No, earnings management is not
53. (SO 9) Using an internet search engine, search for “HealthSouth” and “fraud” or
“Scrushy” (the name of the company’s CEO). Explain the fraud that occurred at
HealthSouth Corporation. What was the ultimate result of the prosecution of
HealthSouth officials? HealthSouth’s fraud was an elaborate earnings management
scheme whereby earnings were overstated by at least $1.4 billion. False revenues
Cases
54. Gas-Up & Go Mart and the accounting information system.
1. Accounting data is likely to be captured at Gas-Up & Go at the gas pump if the
customer uses a debit card or credit card to pay for a gas purchase at the pump.
Even if the customer chooses to pay inside, the information pertaining to the sale
of gasoline is recorded at the pump. The snacks must be purchased inside the
store, but can be added to the gasoline charge. The accounting effect is that the
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3. Internal controls would include the security cameras in the store and gas filling
area, as well as reconciliation procedures. Like the McDonalds’ example, a
manager is likely to close and reconcile the cash register and gas pump sales at
the end of the day.
4. The summarization of accounting data is likely to occur at the end of the period
when financial reports are prepared. These steps are probably accomplished by
the computer software.
55. Business processes and IT enablement at fast food restaurants. Student responses
may vary, but are likely to consistent with the following:
a. List and describe four different activities that are manual parts of business
processes at a restaurant such as Wendy’s. Manual processes are required to:
• greet customers at the drive-through window or counter
• enter customer orders on the cash register touch-screens
• prepare the food
b. List and describe four different activities that are IT enabled parts of business
processes at a restaurant such as Wendy’s. IT enables processes are used to:
• record customer orders input in the cash registers. The system accumulates
sales data based on the orders transacted
• prepare sales amounts based upon the pre-programmed prices of items
ordered and applicable tax rates
56. Business processes at department stores.
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a. Describe any necessary supporting processes that precede the sale of a product
to you. Some of the supporting processes that precede a sale to a customer
include acquiring, pricing and display of the merchandise, hiring and training
sales personnel and cashiers, preparation of cash register drawers with
57. Business processes at Culpe’s Cues Co.
a. What are the business processes that apply to this business? The business
processes described include the expenditure process involved in purchasing
materials needed to manufacture pool cues and disbursing cash to suppliers for
materials purchased. The case also describes revenues processes for sales of
b. How would the business processes change if Culpe’s Cues expanded to a
regional focus? If Culpe’s Cues expanded to a regional focus, it is likely that its
business would grow. James and Rebecca Culpe may have difficulty managing
a regional business on their own, so they would likely need to hire and train
employees to join their business. As more people became involved in the
business processes, they would need to determine how responsibilities would be
divided and how to implement internal controls in the processes. James Culpe
may no longer be able to personally handle all deliveries. The company’s
website may also need to be enhanced to handle the additional volume
anticipated in connection with the business expansion.
c. How would the business processes change if Culpe’s Cues began selling pool
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