Chapter 11: End-of-Chapter Questions

I. The firm’s management and individuals and organizations in the firm’s environment use the output of the accounting information system.

2. Data manipulation includes classifying, sorting, calculating, and summarizing.

3. An AIS output can be triggered by an action or a time schedule.

4. A corporation is required by law to provide the stockholders with an accounting of their investment. This requirement is best satisfied by means of an accounting information system. Other firms have an accounting information system to accomplish the same objective for the owners. Even if these environmental requirements were not present, management would still insist on an accounting information system to provide the information necessary to run the business.

5. The accounting information system provides problem-solving information to management in the form of hardcopy documents and screen displays. These outputs typically include the standard accounting reports.

6. Manufacturers, wholesalers, and retailers would use the distribution system.

7. The name context diagram is appropriate because it presents the system in the context of its environment.

8. The four environmental elements of the distribution system include customers, management, suppliers, and the materials stockroom. Management and the stockroom exist within the firm; the other two exist outside.

9. A DFD can show both physical and conceptual flows. In the distribution system context diagram in Figure 11.2, physical flows are illustrated by the Shipments and the Stock. All other flows are conceptual.

10. The Figure 0 diagram shows the major subsystems of a system.

11. Before a firm accepts a sales order it ensures that the sales orders are complete and that the customer has a good credit record.

12. The Order Log can provide a record of how long it took to fill each customer order. This data can provide the basis for order filling standards.

13. You would find an open order in the order entry subsystem, an outstanding invoice in the accounts receivable subsystem, and an outstanding purchase order in the accounts payable subsystem.

14. A stockout represents a zero balance on hand whereas a backorder represents a negative balance on hand.

15. There is no need to check the reorder point when the balance on hand quantity has not been reduced by a sale.

16. A bill is another name for an invoice, and they both serve as the official notification to a customer of an amount due. A statement is a reminder that the customer has not paid one or more invoices.

17. You extend a line item by multiplying the unit price times the quantity.

18. A receivable usually becomes past due after thirty days.

19. The receiving subsystem notifies the inventory, purchasing, and accounts payable subsystems upon a receipt. The notification is accomplished by the Received items, Filled purchase orders, and Received purchases data flows respectively.

20. A firm will not pay a supplier’s invoice unless there is a record that (1) the firm ordered the merchandise, (2) the merchandise was received, and (3) an invoice was received.

21. The accounting information system contributes to problem solving by providing management information and a rich database.

Topics for Discussion

1. Answers will vary.

2. The easiest data flows to accomplish electronically are the Sales orders, Invoices, Statements, Payments by customers, Purchase orders, Supplier invoices, Supplier payments, Payments to suppliers, Income statement, Balance sheet, Budget reports, and Other reports. Except for the management reports, the electronic transmissions can be accomplished with EDI. There are no information or data flows that could not be handled electronically.

3. The Add new receivables and Delete paid receivables processes are triggered by actions. The Prepare statements and Provide general ledger data are triggered by time schedules.