Multiple Choice Questions 1. Which of the following are parts of most accounting information systems?
a. Activities and documents only.b. Activities and technology only.c. Documents and technology only.D. Activities, documents and technology.
Answer: D Difficulty: Easy Learning objective: 1
2. Accounting information systems are designed to:
a. Minimize cost.b. Maximize use of information technology.C. Report information to decision makers.d. Eliminate the need for paper documents.
Answer: C Difficulty: Easy Learning objective: 1
3. Which of the following statements about accounting information systems is most true?
A. They transform data into information.b. They transform information into data.c. They transform data into decisions.d. They transform information into decisions.
Answer: A Difficulty: Easy Learning objective: 1
4. Accounting information systems:
a. Emphasize that the areas of accounting (financial, tax and so on) are separate and unrelated.
b. Focus on problems that have deterministic answers.C. Is an important foundation for the study of auditing.d. Is the most important area of accounting study.
A. Developing critical thinking and judgment skills.b. Finding the "one right answer" to a problem.c. Identifying deterministic solutions that can be applied universally.d. Computers and other forms of information technology.
Answer: A Difficulty: Easy Learning objective: 2
6. The study of accounting information systems incorporates knowledge from:
a. Management and finance only.b. Management and information systems only.c. Finance and information systems only.D. Management, finance and information systems.
Answer: D Difficulty: Easy Learning objective: 2
7. Consider the following two statements about accounting information systems: (i) AIS incorporates more problems with deterministic solutions than other areas of accounting. (ii) AIS is more integrative than other areas of accounting. Which of the statements is/are true?
a. i only.B. ii only.c. Both i and ii.d. Neither i nor ii.
Answer: B Difficulty: Easy Learning objective: 3
8. Which of the following links the study of accounting information systems with the study of intermediate accounting?
A. Discussion of the FASB Conceptual Framework.b. An emphasis on finding one right answer to every problem.c. No need for judgment or decision making.d. Memorizing the standards for preparing financial statements.
Answer: A Difficulty: Easy Learning objective: 3
9. _____ in an accounting information system helps promote _____ in the financial statements.
a. Documents, accuracy.B. Internal controls, reliability.c. Information technology, matching.
15. Evaluating information reliability is part of:
a. Information relevance.b. Information overload.C. Information literacy.d. Information transformation.
Answer: C Difficulty: Easy Learning objective: 5
16. Accounting information systems incorporate interrelated activities such as:
a. Debiting and crediting accounts.b. Developing and solving problems with one right answer.C. Buying and selling inventory.d. Suggesting new elements and new levels for the conceptual framework.
Answer: C Difficulty:
MediumLearning objective: 1
17. Documents in an accounting information system are:
a. Always paper-based.b. Always electronic.
C. Either paper-based or electronic.d. Neither paper-based nor electronic.
Answer: C Difficulty:
MediumLearning objective: 1
18. Accounting information systems involve choices such as: (i) whether or not to incorporate information technology, (ii) whether or not to pre-number documents like checks.
A. i only.b. ii only.c. Both i and ii.d. Neither i nor ii.
19. Which of the following best demonstrates the relationship between accounting information systems and other areas of accounting?
a. Tax accountants have to create budgets.b. Auditors often prepare tax returns for their clients.C. Virtually all areas of accounting involve inputs, processes, outputs, storage and internal controls.d. Accounting information systems is the most important area of accounting.
Answer: C Difficulty:
MediumLearning objective: 2
20. Which of the following situations is most likely to require judgment and critical thinking?
A. Deciding which piece of software to adopt as an AIS processing tool.b. Determining whether to debit or credit cash.c. Presenting assets on the balance sheet in order of their liquidity.d. Preparing a statement of cash flows.
Answer: A Difficulty:
MediumLearning objective: 2
21. The relationship between accounting information systems and information technology is most clearly shown by: (i) using debits and credits to record transactions, (ii) incorporating journals and ledgers as processing tools.
a. i only.b. ii only.c. Both i and ii.D. Neither i nor ii.
Answer: D Difficulty:
MediumLearning objective: 2
22. Problems in accounting information systems are often less likely to have deterministic answers than problems in other areas of accounting. Which of the following questions has a deterministic answer?
a. Should AIS documents be paper or electronic?B. What is the balance in cash as of August 19, 2006?c. What are the costs and benefits of using information technology in the AIS?d. At what point does an amount become "material" as the term is defined in the conceptual framework?
23. Which of the following do all areas of accounting have in common?
A. Providing information for decisions.b. Focusing on debits and credits.c. Preparing financial statements.d. Minimizing income taxes.
Answer: A Difficulty:
MediumLearning objective: 3
24. Both accounting information systems and intermediate accounting can incorporate the conceptual framework of accounting as a topic. Which part of the conceptual framework most closely corresponds with the "outputs" of an accounting information system?
a. Assumptions.b. Principles.c. Constraints.D. Elements of financial statements.
Answer: D Difficulty:
MediumLearning objective: 3
25. Which of the following is NOT an example of an input to the accounting information system?
a. Sales invoice.b. Purchase order.c. Customer check.D. Balance sheet.
Answer: D Difficulty:
MediumLearning objective: 4
26. Outputs from an accounting information system include: (i) income statements, (ii) tax returns, (iii) decisions.
A. i and ii only.b. ii and iii only.c. i and iii only.d. i, ii and iii.
Answer: A Difficulty:
MediumLearning objective: 4
27. Internal controls in an accounting information system help promote information integrity. Which of the following best explains the concept of information integrity?
a. Financial statements are subject to audit.b. Users can rely on the financial statements as the sole basis for decisions.C. The information in AIS outputs is reliable.d. Accounting information systems that incorporate computer software are more reliable than paper-based systems.
Answer: C Difficulty:
MediumLearning objective: 4
28. As the term is used in information literacy, "currency" means:
a. Information over one year old should not be used for decisions.b. Financial information is more important than non-financial information.C. Decision makers should pay attention to publication dates.d. Financial statements should be converted to US dollars whenever possible.
Answer: C Difficulty:
MediumLearning objective: 5
29. An author's identity and background are most closely related to which element of information competence?
A. Authority.b. Accuracy.c. Objectivity.d. Coverage.
Answer: A Difficulty:
MediumLearning objective: 5
30. Recently, Bumble Beasley was researching information published in 1985. Which of the following topics would he most likely consider "non-current" in his research?
a. Elements of financial statements.b. Basic parts of an accounting information system.C. Computer security techniques.d. Purpose of accounting.
Answer: C Difficulty:
MediumLearning objective: 5
31. Which of the following is the best example of "information" as the term is used in "accounting information systems?"
a. Rules of debit and credit.B. Budgets.c. Conceptual framework of accounting.d. Source documents.
Answer: B Difficulty: Medium
Learning objective: 1
32. The "information" in an accounting information system should be: (i) timely, (ii) truthful, (iii) reliable.
a. i and ii only.b. ii and iii only.C. i and iii only.d. i, ii and iii.
Answer: C Difficulty:
MediumLearning objective: 1
33. A well-designed accounting information system recognizes and adapts to the cost-benefit constraint of the conceptual framework. Which of the following is most likely to violate the cost-benefit constraint?
A. Translating financial statements into six major global languages.b. Giving every member of the accounting staff access to a network.c. Using debits and credits to record transactions.d. Converting financial statements prepared in one currency to another currency.
Answer: A Difficulty:
MediumLearning objective: 1
34. Which of the following best illustrates why accounting information systems is an important area of study for future accountants?
a. Making journal entries.b. Preparing financial statements.c. Memorizing the rules of debit and credit.D. Coping with uncertainty.
35. Studying accounting information systems is important because it helps future accountants develop critical thinking skills and professional judgment. Which of the following situations involves the use of professional judgment: (i) developing sales budgets, (ii) printing financial statements from a computer program, (iii) evaluating internal controls.
a. i and ii only.b. ii and iii only.C. i and iii only.d. i, ii and iii.
Answer: C Difficulty:
MediumLearning objective: 2
36. Which of the following questions is most likely to result in a deterministic answer?
A. How many units of inventory are on hand as of August 19, 2006?b. Which inventory items should we continue to sell?c. Which inventory items should be discontinued next year?d. What is the expected gross profit for 2007?
Answer: A Difficulty:
MediumLearning objective: 2
37. Which of the following statements is/are true when comparing accounting information systems with basic financial accounting: (i) problems never have "one right answer," (ii) computers are essential to both areas.
a. i only.b. ii only.c. i and ii.D. Neither i nor ii.
Answer: D Difficulty:
MediumLearning objective: 3
38. Which of the following accounting areas involves professional judgment: (i) accounting information systems, (ii) budgeting, (iii) choosing between FIFO and LIFO.
a. i and ii only.b. ii and iii only.c. i and iii only.D. i, ii and iii.
39. The cost/benefit constraint mentioned in the FASB conceptual framework is important in all areas of accounting. Which of the following is a cost that should be considered in many AIS tasks?
a. Producing financial statements more quickly.b. Basing decisions on more accurate information.C. Considering the effects of decisions on human behavior.d. Memorizing the rules for preparing financial statements.
Answer: C Difficulty:
MediumLearning objective: 3
40. System outputs in an AIS include the general-purpose financial statements, variance analysis reports and:
a. Journal entries.B. Schedules of accounts receivable and accounts payable.c. Bank statements.d. More efficient processes.
Answer: B Difficulty:
MediumLearning objective: 4
41. Source documents in an accounting information system include sales invoices, purchase orders and:
A. Bank statements.b. Reports of projected stock prices.c. Evaluations of accounting staff.d. Currency and coin.
Answer: A Difficulty:
MediumLearning objective: 4
42. Internal controls such as ____ help promote information reliability in the accounting information system.
a. Financial statements.B. Bank reconciliations.c. Budgets.d. Computers.
43. The web site for Dell Computers is an example of ___ information.
a. Scholarly.b. Practitioner.C. Sponsored/commercial.d. Accurate.
Answer: C Difficulty:
MediumLearning objective: 5
44. Which type of information would be most useful in deciding whether or not to create a wireless network as part of an accounting information system?
a. Scholarly.B. Practitioner.c. Sponsored/commercial.d. Cultural.
Answer: B Difficulty:
MediumLearning objective: 4
45. "Coverage" is one basis for evaluating Internet information in the list developed by the University of Maryland. Which of the following statements on a web site would cause you to question its coverage?
a. This web site was last updated on August 19, 2006b. Contact Bumble Beasley if you need a consultant on this topic.C. This web site is a work in progress.d. The content of this site is sponsored by XYZ Corporation.
Answer: C Difficulty:
MediumLearning objective: 5
46. Which of the following is a fact about accounting information systems?
a. They always involve computers.b. They do not report information unless it can be expressed financially.c. They provide the most important information for decision making.D. They involve interrelated parts.
The following scenario relates to Questions 47 through 50:Sebastian wrote a check to pay a supplier's invoice. The check had to be signed by two company officers and was later part of a monthly bank reconciliation. The canceled check was filed under the supplier's name.
47. The inputs mentioned in the preceding scenario are
A. The check and the invoice.b. The check and the bank reconciliation.c. The bank reconciliation and the file.d. The file and the supplier's invoice.
Answer: A Difficulty: Hard Learning objective: 4
48. The internal controls mentioned in the preceding scenario are:
a. The dual signatures on the check and the file.b. The bank reconciliation and the file.C. The dual signatures on the check and the bank reconciliation.d. The supplier's invoice and the bank reconciliation.
Answer: C Difficulty: Hard Learning objective: 4
49. In the preceding scenario, ___ was both an input and an output.
A. The invoice.b. The supplier's name.c. The two signatures.d. Sebastian.
Answer: A Difficulty: Hard Learning objective: 4
50. Filing the check under the supplier's name is an example of:
a. Input.b. Processing.c. Output.D. Storage.
Answer: D Difficulty: Hard Learning objective: 4
Problems:
51. AIS definition - Use terms from the following list to fill in the blanks in the definition of
An accounting information system is a set of ___ ___, ___ and ___ designed to collect ___, process it and report ___ to a ___ group of internal and external ___ in organizations.
Answer:An accounting information system is a set of interrelated activities, documents and technologies designed to collect data, process it and report information to a diverse group of internal and external decision makers in organizations. Difficulty: Easy Learning objective: 1
52. Parts of an AIS - Match each item on the right with the most appropriate question on the left, based on the structure of most accounting information systems.
a. What processes are necessary to promote information integrity in the AIS?b. Under what conditions can/should data be destroyed?c. If computer-based tools are used in the AIS, which software and hardware packages should be implemented?d. How many copies of each source document will be required?e. Beyond the general-purpose financial statements, what other reports will managers and system users need?
Solution: 1. D; 2. A; 3. E; 4. C; 5. B
Difficulty: Easy Learning objective: 4
53. AIS and other areas of accounting - Indicate whether each of the following statements regarding accounting information systems is (a) always true, (b) sometimes true or (c) never true. You do not need to write a justification for the statements that are sometimes true.
1. A well designed accounting information system can help fulfill some elements of the FASB Conceptual Framework.2. Accounting information systems problems are often open-ended.3. All areas of accounting can involve problems with deterministic responses.
4. All problems in accounting information systems involve every area of accounting.5. Because many AIS problems don't have one right answer, those same problems don't have any wrong answers either.6. Other areas of accounting, such as financial and managerial accounting, do not involve open-ended problems.7. Problems in accounting information systems do not have deterministic responses.8. Solutions to problems in AIS and other areas of accounting always involve the use of information technology.9. The general-purpose financial statements link accounting information systems with other areas of accounting.10. The study of internal controls can link accounting information systems with other areas of accounting.
54. Importance of AIS study - Accounting information systems is important because it helps students develop their ability to respond to open-ended problems. Which of the following are open-ended? Place an "X" in the appropriate column.
55. Information evaluation criteria - Bumble Beasley took two introductory accounting courses as part of his college degree; his major was engineering. He started his own engineering consulting company and later published an article in an engineering journal titled "The Relationship between Engineering and the FASB Conceptual Framework." The article, which contained no references to other documents, discussed five elements of financial statements and referred readers to Bumble's web site. His web site featured an "under construction" icon; its primary purpose was to obtain consulting clients for Bumble's firm.
Based on the preceding scenario, identify one phrase/sentence that violates each of the following criteria for evaluating information. For example, "discussed five elements of financial statements" violates the "accuracy" criterion since the conceptual framework discusses eight elements.
Answer:
Difficulty: Medium
Learning objective: 5
56. Elements of the AIS - Most accounting information systems comprise five components; they are listed below, along with examples of each from the text. In the space provided, provide one additional example of each element.
57. AIS structure - Ben and Uma own and operate Framing World, a company that frames diplomas, professional certificates and other documents. Customers bring in the documents they want framed; Ben or Uma fills out a sales order noting the client's information (name, address and so on), the type of document to be framed and the details of the framing itself (such as the type and color of frame). They also scan the document to the store's internal computer network for reference purposes. Most documents are framed by hand, but Framing World also uses some specialized equipment for more complex jobs. The company maintains its accounting records in a general ledger system; the firm's accountant prepares monthly reports, such as income statements and bank reconciliations, using spreadsheets and word processing software. Work in process and finished goods inventory are kept secure with alarm systems and video surveillance.
Accounting information systems typically comprise five elements. Analyze the preceding narrative by identifying specific examples of each element. Record your responses in the grid below.
58. Accounting information system definition - According to the text, an accounting information system is a set of interrelated activities, documents and technologies designed to collect data, process it and report information to a diverse group of internal and external decision makers in organizations. Consider that definition in light of the following scenario:
A local video store purchases multiple copies of popular movies and television series by issuing electronic purchase orders. When the movies come in, a clerk fills out a receiving report and puts the movies on the shelves by category (e.g., all the comedies together). Each copy of each movie receives a bar code that identifies it for inventory purposes. When a client selects a movie to rent, a clerk scans the bar code; the company's information system updates its database. The client receives an invoice noting the title of the video, the rental date, the clerk's name and the due date. At the end of each month, the store manager downloads the rental and purchase information and transmits it to the store's accountant. The accountant prepares a monthly income statement, balance sheet and bank reconciliation and sends them back to the store within three days. The store manager reviews all three with the employees.
Analyze the video store's accounting information system by identifying two examples of each item in the grid below. Record your answers in the spaces provided.
59. Evaluating sources of information - Bumble Beasley's accounting information systems professor assigned a paper on methods for safeguarding inventory. In his research, Bumble identified five sources of information, described in the table below:
The assignment directions clearly state that Bumble may use no more than three sources for the paper, and Bumble has decided to use the University of Maryland evaluation criteria (authority, accuracy, objectivity, currency and coverage) as the basis for his selection. Which three of the five sources should Bumble use? For the other two sources, which University of Maryland criteria made them undesirable?
Solution: Sources to use: 2, 3, and 5; Sources not to use: 1 (violates authority) and 4 (violates currency)
Difficulty: Hard Learning objective: 5
60. Conceptual framework - The FASB Conceptual Framework links accounting information systems with other areas of accounting, such as intermediate accounting and auditing. The first level of the conceptual framework explains the objective of financial reporting; the second level discusses elements of financial statements and qualitative characteristics. The framework's third level presents twelve fundamental accounting ideas (listed below), organized in three categories. Identify each category with its proper name from the conceptual framework, then organize the ideas based on the three categories. Use the grid provided for your answers.
The following scenario applies to Questions 61 through 65:
A fellow student in one of your classes struck up a conversation one day. "What's your major," he asked. "Accounting," you replied. "Wow I've heard accounting is a tough major. What accounting classes are you taking this term?" You started talking about your accounting information systems course, and your friend asked you the question(s) noted below. Prepare a written response for your friend.
61. List and discuss three ways accounting information systems is related to other areas of accounting.
Answer: Accounting information systems is related to other areas of accounting in at least the following ways. First, its emphasis is on providing information for making decisions. Second, it often involves responding to problems with non-deterministic answers. Third, its focus is frequently, but not exclusively, on financial information.
62. Your friend said: "I thought accounting was all about numbers and columns, but your AIS class sounds different than that." Explain to your friend why the study of accounting information systems is important for future accountants.
Answer: AIS is an important area of study for future accountants because it helps them learn how to promote information integrity and system reliability through sound internal controls. AIS also help future accountants master many of the technologies they may use in practice. And, it helps them understand and document business processes carefully and completely. Difficulty: Medium
Learning objective: 2
63. Your friend works at a local retail store. Use the five generic parts of most accounting information systems to demonstrate how AIS concepts would be applied in your friend's job.
Answer: Accounting information systems have five generic parts: inputs, processes, outputs, storage and internal controls. In a video store, a system input could be a customer invoice, which would be used for recording the sale. Processes in the video store's accounting information system would include items like posting entries into the general ledger, while outputs could be the financial statements and reports of rental frequency for specific titles. Data could be stored in filing cabinets or on a computer disk. As internal controls, video surveillance and daily bank deposits would help promote efficiency, effectiveness and reliable financial statements. Difficulty: Medium
Learning objective: 4
64. You mention to your friend that AIS study often requires significant amounts of research, and that you're learning how to differentiate and evaluate information you find on the Internet. Distinguish the three types of information discussed in the text.
Answer: The three information types discussed in the text are: practitioner, commercial and scholarly. Although the three share some similarities, they are differentiated by at least the following items: (a) nature of authors, (b) publication venues, (c) overall purpose. For example, a scholarly article might be authored by a university professor with advanced research training. Commercial information might be published on a company's own web site. And the purpose of practitioner information would be to improve accounting practice. Difficulty: Hard Learning objective: 5
65. You tell your friend about some of the topics you'll be studying this term in AIS: information technology, financial statements, internal control, business documents and decision making. "Information technology" is mentioned specifically in the definition of an accounting information system presented in the text; information technology can also be used as a processing tool. Relate the remaining four items (financial statements, internal control, business documents and decision making) to the definition of AIS.
Answer: The text provides the following definition of an accounting information system: An accounting information system is a set of interrelated activities, documents and technologies designed to collect data, process it and report information to a diverse group of internal and external decision makers in organizations. Financial statements are information, while internal controls are part of the interrelated activities referred to in the definition. Business documents are referenced both by "documents" and "data." Decision making is explicitly mentioned by referring to internal and external decision makers. Difficulty: Hard Learning objective: 1
