END OF CHAPTER MATERIAL

CONCEPT CHECK

  1. images 1. Which of the following statements is not true?
    1. Accounting information systems must maintain both detail and summary information.
    2. Business processes may vary from company to company.
    3. Regardless of the extent of computerization, all accounting information systems must capture data from the transactions within business processes.
    4. Business processes categorized as expenditure processes are not intended to be processes that serve customers.
  2. 2. In a manual system, an adjusting entry would most likely be initially recorded in a
    1. special journal
    2. subsidiary ledger
    3. general journal
    4. general ledger
  3. 3. Which of the following is not a disadvantage of maintaining legacy systems?
    1. There are fewer programmers available to support and maintain legacy systems.
    2. They contain invaluable historical data that may be difficult to integrate into newer systems.
    3. Hardware or hardware parts may be unavailable for legacy systems.
    4. It can be difficult to integrate various legacy systems into an integrated whole.
  4. 4. Which of the following is not an advantage of cloud computing when compared to client-server computing?
    1. It is more scalable.
    2. It is less costly.
    3. It increases the amount of computer infrastructure in a company.
    4. It has expanded availability.
  5. 5. Which of the following is a disadvantage of purchased accounting software, compared with software developed in-house?
    1. It is custom-designed for that company.
    2. It is less costly.
    3. The implementation time is shorter.
    4. There are fewer bugs.
  6. 6. Which of the following is not a method of updating legacy systems?
    1. Enterprise application integration
    2. Backoffice ware
    3. Screen scraper
    4. Complete replacement
  7. 7. When categorizing the accounting software market, a company with revenue of $8 million would most likely purchase software from which segment?
    1. Small company
    2. Midmarket
    3. Beginning ERP
    4. Tier 1 ERP
  8. 8. An IT system that uses touch-screen cash registers as an input method is called
    1. electronic data interchange
    2. e-business
    3. point of sale system
    4. source documents and keying
  9. 9. When similar transactions are grouped together for a specified time for processing, it is called
    1. online processing
    2. real-time processing
    3. batch processing
    4. group processing
  10. 10. Which of the following is not correct regarding the ways that real-time systems differ from batch systems?
    Real-time Systems Batch Systems
    a. Must use direct access files. Can use simple sequential files.
    b. Processing occurs on demand. Processing must be scheduled.
    c. Processing choices are menu-driven. Processing is interactive.
    d. Supporting documents are prepared as items are processed. Supporting documents are prepared during scheduled runs.
  11. 11. In documenting systems, which pictorial method is described as a method that diagrams the actual flow and sequence of events?
    1. System flowchart
    2. Process map
    3. Data flow diagram
    4. Entity relationship diagram
  12. 12. (CMA Adapted) A company in Florida provides certified flight-training programs for aspiring new pilots of small aircraft. Although awarding a pilot's license requires one-on-one flight time, there is also much preparatory training conducted in classroom settings. The company needs to create a conceptual data model for its classroom training program, using an entity-relationship diagram. The company provided the following information:

    Floridian Flight, Inc., has ten instructors who can teach up to 30 pilot trainees per class. The company offers ten different courses, and each course may generate up to eight classes.

    Identify the entities that should be included in the entity-relationship diagram:

    1. Instructor, Floridian Flight Inc., pilot trainee
    2. Instructor, Floridian Flight Inc., course, enrollment, class
    3. Floridian Flight Inc., enrollment, course, class, pilot trainee
    4. Instructor, course, enrollment, class, pilot trainee

DISCUSSION QUESTIONS

  1. 13. (SO 1) What is the relationship between business processes and the accounting information system?
  2. 14. (SO 1) Why is it sometimes necessary to change business processes when IT systems are applied to business processes?
  3. 15. (SO 2) Are manual systems and processes completely outdated?
  4. 16. (SO 2) What is the purpose of source documents?
  5. 17. (SO 2) What are some examples of turnaround documents that you have seen?
  6. 18. (SO 2) Why would the training of employees be an impediment to updating legacy systems?
  7. 19. (SO 2) Why is it true that the accounting software in and of itself is not the entire accounting information system?
  8. 20. (SO 2) How is integration across business processes different between legacy systems and modern, integrated systems?
  9. 21. (SO 3) How does client–server computing divide the processing load between the client and server?
  10. 22. (SO 3) Why do you think the client computer may be a better computer platform for presentation of data?
  11. 23. (SO 4) What are the distinguishing characteristics of cloud computing?
  12. 24. (SO 4) Why do you think a company would benefit from using cloud computing rather than client–server computing?
  13. 25. (SO 4) If your personal data were stored on a server in cloud computing, would you have any concerns about it?
  14. 26. (SO 5) Why do you think there are different market segments for accounting software?
  15. 27. (SO 5) How would accounting software requirements for large corporations differ from requirements for small companies?
  16. 28. (SO 5) What are some of the differences between ERP systems and accounting software for small companies?
  17. 29. (SO 5) Why would accounting software development companies be interested in expanding their software products into other market segments?
  18. 30. (SO 6) Given the business and accounting environment today, do you think it is still important to understand the manual input of accounting data?
  19. 31. (SO 6) What are the advantages to using some form of IT systems for input, rather than manual input?
  20. 32 (SO 6) Why would errors be reduced if a company switched input methods from manual keying of source documents to a bar code system?
  21. 33. (SO 7) In general, what types of transactions are well suited to batch processing?
  22. 34. (SO 7) Why might the time lag involved in batch processing make it unsuitable for some types of transaction processing?
  23. 35. (SO 7) How would real-time processing provide a benefit to managers overseeing business processes?
  24. 36. (SO 8) How do internal reports differ from external reports?
  25. 37. (SO 8) What are some examples of outputs generated for trading partners?
  26. 38. (SO 8) Why might it be important to have internal documents produced as an output of the accounting information system?
  27. 39. (SO 9) How does documenting a system through a pictorial representation offer benefits?

BRIEF EXERCISES

  1. 40. (SO 1) Think about your most recent appointment at the dentist's office. Describe the business processes that affected you as the patient/customer. In addition, describe the administrative and accounting processes that are likely to support this business.
  2. 41. (SO 2) Describe the purpose of each of the following parts of a manual system:
    1. Source document
    2. Turnaround document
    3. General ledger
    4. General journal
    5. Special journal
    6. Subsidiary ledger
  3. 42. (SO 2) Consider the accounting information system in place at an organization where you have worked. Do you think that it was a manual system, a legacy system, or an integrated IT system? Describe one or two characteristics of that accounting information system that lead you to your conclusion.
  4. 43. (SO 2) Suppose that a company wants to upgrade its legacy system, but cannot afford to completely replace it. Describe two approaches that can be used.
  5. 44. (SO 4) Both Gmail and iCloud for iTunes were mentioned as examples of cloud computing. Can you describe any other examples of cloud computing?
  6. 45. (SO 5, SO 7) Consider the real-world example of Cole Haan presented in this chapter.
    1. Use Exhibits 2-3 and 2-4 to help you determine the approximate range of Cole Haan's annual revenues.
    2. What are the advantages Cole Haan likely realized as a result of having real-time data available?
  7. 46. (SO 6) Using IT systems to input accounting data can reduce costs, time, and errors. Give an example showing how you think IT systems can lead to these reductions (cost, time, and errors).
  8. 47. (SO 8) Identify whether the following reports would be categorized as trading partner documents, internal documents, internal reports, or external reports:
    1. Daily cash receipts listing
    2. Accounts receivable aging
    3. Wire transfer of funds to a vendor
    4. Customer price list
    5. General ledger
    6. Statement of cash flows
    7. Sales invoice
    8. Production schedule
    9. Customer address list
    10. Payroll journal
  9. 48. (SO 8) Which type of accounting information system reports would likely be prepared most frequently by financial accountants? By managerial accountants?
  10. 49. (SO 9) Identify which of the cardinal relationships apply, from the following:
    1. Component part—product
    2. Customer—product
    3. Employee ID badge—employee
    4. Employee—supervisor
    5. Vendor—check

PROBLEMS

  1. 50. (SO 2) Suppose that a large company is considering replacing a legacy system that is nearing obsolescence. Describe any aspects of this decision that the company should consider.
  2. 51. (SO 1, SO 9) Visit the campus bookstore at your university. From what you see happening at the bookstore, try to draw a process map of how the processes at that store serve students, the customers.
  3. 52. (SO 5) Look at Exhibit 2-4 and pick one accounting software product from the midmarket segment and one software product from the tier 1 ERP segment. Using those brand names of software, search the Internet for information about those products. Based on your investigation, what are the differences between the two software products you chose? (Hint: To begin your search, you might try examining the following websites. www.accountingsoftware411.com, www.findaccountingsoftware, and www.2020software.com.)
  4. 53. (SO 6) Using an Internet search engine (such as Google, Yahoo, or Bing), search for the term “RFID.” From the results you find, describe how RFID will be used as an input method.
  5. 54. (SO 3) Using an Internet search engine (such as Google, Yahoo, or Bing), search for the terms “client–server” and “scalable.” From the results you find, explain why client–server systems are scalable.
  6. 55. (SO 4) Using an Internet search engine (such as Google, Yahoo, or Bing), search for the terms “Amazon elastic cloud.” Describe what you find. Why do you believe it is called elastic?

CASES

  1. 56. In both Chapters 1 and 2, examples of restaurants and fast food chains were used to describe business processes, as they are deemed to be readily familiar to many students. On the basis of your experiences from using the drive-through window at a fast food chain, prepare one each of the three listed pictorial representations of the food-ordering and delivery processes. Your drawings should portray the restaurant's perspective—that is processing a sales transaction via the drive–through window.
    1. Process map
    2. Document flowchart
    3. Data flow diagram
  2. 57. Mary Morrissey is a college student. Each Monday through Thursday, she commutes to her classes at Tannell Technical College (TTC). Each semester, Mary pays for on-campus parking privileges. Before Wednesday of the week prior to each new semester, Marie writes a check to TTC Parking Services for $150. She writes her student identification number on the check's memo line and then mails the check to the TTC Parking Services Office.

    Upon receipt of student checks, TTC's Parking Services Office clerk issues a current semester parking decal and a receipt for payment received. These items are mailed to each student at the address noted on the check. A daily listing of checks received is prepared and filed by date. A photocopy of the check is made and placed in a file organized by the student's last name. Accordingly, each student has a parking file maintained in the TTC Parking Services office. The checks are endorsed and deposited in the bank on a daily basis. Once each month, the TTC Parking Services office manager reconciles the bank statement.

    Prepare the following pictorial presentations of TTC's parking services processes:

    1. Process map
    2. Document flowchart
    3. Data flow diagram

CONTINUING CASE: ROBATELLI'S PIZZERIA

Reread the Robatelli's case material at the end of Chapter 1 and then consider the following additional information:

This chapter presented a process map (Exhibit 2-10), a document flowchart (Exhibit 2-11), and a data flow diagram (Exhibit 2-12) for a small, local restaurant. In those exhibits manual records and documents, as well as manual processes, are depicted. On the basis of the case information and the three chapter exhibits mentioned, complete the following requirements:

Required: Describe how each of the following types of orders at Robatelli's differs from the processes and document flow mentioned in Exhibits 2-10 through 2-12.

  1. In-store orders
  2. Telephone orders
  3. Internet orders

SOLUTIONS TO CONCEPT CHECK

  1. (SO 1) Which of the following statements is not true? d. Business processes categorized as expenditure processes are not intended to be processes that serve customers is not a true statement. All business processes either directly or indirectly serve customers. For example, the process to purchase inventory is necessary for stocking inventory to sell to customers.
  2. (SO 2) In a manual system, an adjusting entry would most likely be initially recorded in a c. general journal. The general journal is the book of original entry for nonroutine transactions, closing entries, and adjusting entries.
  3. (SO 2) The choice that is not a disadvantage of maintaining legacy systems is b. they contain invaluable historical data that may be difficult to integrate into newer systems. Since legacy systems may have a large amount of historical data that is difficult to integrate into newer systems, it may be an advantage to keep the legacy system and not lose access to the historical data.
  4. Which of the following is not an advantage of cloud computing when compared to client-server computing? a. It increases the amount of computer infrastructure in a company. Cloud computing reduces, not increases, the amount of computer infrastructure.
  5. (SO 2) The choice that is not an advantage of purchased accounting software, compared with software developed in-house, is a. It is customdesigned for that company. Purchased software is developed to suit the needs of a broad range of customers. Often, companies will purchase and then modify accounting software to meet their specific needs, but the software is not purchased already customized.
  6. (SO 5) The choice that is not a method of updating legacy systems is b. backoffice ware. Screen scrapers, EAIs, and replacement are all methods to update a legacy system. Backoffice ware is not.
  7. (SO 5) When categorizing the accounting software market, a company with revenue of $8 million would most likely purchase software from the b. midmarket. Of the four market segments, midmarket is generally considered to comprise companies ranging from $250,000 to $10 million in revenue.
  8. (SO 6) An IT system that uses touch-screen cash registers as an input method is called a c. point of sale system. Point of sale systems are popularly used at retail stores and fast food restaurants. In retail locations, POS systems use bar code readers; but in fast food and casual eating establishments' POS systems, the server enters customer orders on a touch screen.
  9. (SO 7) When similar transactions are grouped together for a specified time for processing, it is called c. Batch processing.
  10. (CMA Adapted) (SO 7) The choice that is not true regarding the differences in the ways that real-time systems differ from batch systems is
    Real-time Systems Batch Systems
    c. False: Processing choices are menu-driven. False: Processing is interactive.
  11. (SO 9) In documenting systems, the pictorial method described as a method that diagrams the actual flow and sequence of events is a b. process map.
  12. (CMA Adapted) (SO 9) In the classroom flight training program example, the entities that should be included in the entity-relationship diagram are d. instructor, course, enrollment, class, pilot trainee.

1The Harvard Crimson, www.thecrimson.com/you-tube-video/2011/2/11/au-bon-pain-ipad/

2http://www.youtube.com/watch?v=TiaI4Rc0xQI&feature=related

3http://www.talenttech.com

4www.microsoft.com/casestudies/Microsoft-Office-365/Thomas-Kemper-Soda-Company/SodaMaker-Saves-40-Hours-a-Week-by-Communicating-in-the-Cloud/4000010673

5http://www.sap.com/solutions/business-suite/erp/financials/pdf/CS_Cole_Haan.pdf

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