Test Bank For Accounting Information Systems, 13th Edition

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1Copyright © 2015 Pearson Education, Inc.Accounting Information Systems, 13e(Romney/Steinbart)Chapter 1Accounting Information Systems: An Overview1.1Distinguish data from information, discuss the characteristics of useful information, andexplain how to determine the value of information.1) Which of the following statements below shows the contrast between data and information?A) Data is the output of an AIS.B) Information is the primary output of an AIS.C) Data is more useful in decision making than information.D) Data and information are the same.Answer: BObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic2) Information is best described asA) raw facts about transactions.B) data that has been organized and processed so that it is meaningful to the user.C) facts that are useful when processed in a timely manner.D) the same thing as data.Answer: BObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic3) The value of information can best be determined byA) its usefulness to decision makers.B) its relevance to decision makers.C) the benefits associated with obtaining the information minus the cost of producing it.D) the extent to which it optimizes the value chain.Answer: CObjective: Learning Objective 1Difficulty:ModerateAACSB: Analytic4) An accounting information system (AIS) processes ________ to provide users with ________.A) data; informationB) data; transactionsC) information; dataD) data; benefitsAnswer: AObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic

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2Copyright © 2015 Pearson Education, Inc.5) ________ information reduces uncertainty, improves decision makers' ability to makepredictions, or confirms expectations.A) TimelyB) ReliableC) RelevantD) CompleteAnswer: CObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic6) Information that is free from error or bias and accurately represents the events or activities ofthe organization isA) relevant.B) reliable.C) verifiable.D) timely.Answer: BObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic7) Information that does not omit important aspects of the underlying events or activities that itmeasures isA) complete.B) accessible.C) relevant.D) timely.Answer: AObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic8) Information is ________ when two knowledgeable people independently produce the sameinformation.A) verifiableB) relevantC) reliableD) completeAnswer: AObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic

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3Copyright © 2015 Pearson Education, Inc.9) Data must be converted into information to be considered useful and meaningful for decisionmaking. There are six characteristics that make information both useful and meaningful. Ifinformation is free from error or bias and accurately represents the events or activities of theorganization, it is representative of the characteristic ofA) relevancy.B) timeliness.C) understandability.D) reliability.Answer: DObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic10) Inventory information is provided in real time by a firm's accounting information system.The accuracy of this information is questionable, however, since the production manager oftenreports stock outs of components that the system indicates are in stock. Which of the followingcharacteristics of useful information is absent in the situation described above?A) relevantB) reliableC) completeD) timelyE) understandableF) verifiableG) accessibleAnswer: BObjective: Learning Objective 1Difficulty:ModerateAACSB: Analytic11) Cheryl Metrejean has been the controller of Downtown Tires for 25 years. Ownership of thefirm recently changed hands and the new owners are conducting an audit of the financial records.The audit has been unable to reproduce financial reports that were prepared by Ms. Metrejean.While there is no evidence of wrongdoing, the auditors are concerned that the discrepanciesmight contribute to poor decisions. Which of the following characteristics of useful informationis absent in the situation described above?A) relevantB) reliableC) completeD) timelyE) understandableF) verifiableG) accessibleAnswer: FObjective: Learning Objective 1Difficulty:ModerateAACSB: Analytic

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4Copyright © 2015 Pearson Education, Inc.12) In 2003, Singh Manufacturing implemented a Web-based information system that allows allemployees to access mission-critical information. The intention was to increase productionefficiency. Unfortunately, it had the opposite effect, as deliveries fell behind schedule and costsincreased. Shaman Gupta, the director of information technology services, asked Ashlee Wells tocome in and talk with him about the system. Ashlee is a long-time employee of Singh, and heropinion is valued by her peers and by her supervisor."So Ashlee, how's it going down there in the shop?""Not so good, Shaman. Used to be we got a weekly pick list so we knew how to plan production.Now, we got that computer system. Most of us can't figure out how to use it to do our jobs. Isthere some way to print out a pick list?"Shaman thought for a while before responding. "Well, Ashlee, to tell you the truth, I'm not sosure how to do it myself, but there must be a way. We'll bring in the consultants that helped usbuild the system. Maybe they can help."Which of the following characteristics of useful information is absent in the situation describedabove?A) relevantB) reliableC) completeD) timelyE) understandableF) verifiableG) accessibleAnswer: EObjective: Learning Objective 1Difficulty:ModerateAACSB: Analytic13) Wisconsin Dells, Wisconsin, is a popular tourist destination. During the winter months, thepopulation dwindles to a meager few, but when summer comes, the size of the town surges.Hunter Jackson is the town sanitation engineer. When the size of the town surges, so do hisresponsibilities. Among them is management of the sewage processing volume.In an interview with the local paper, Hunter complained that a report on tourist population thathe uses to adjust processing volume refers to data that was collected four days ago and it takeshim a week to make adjustments.Which of the following characteristics of useful information isabsent in the situation described above?A) relevantB) reliableC) completeD) timelyE) understandableF) verifiableG) accessibleAnswer: DObjective: Learning Objective 1Difficulty:ModerateAACSB: Analytic

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5Copyright © 2015 Pearson Education, Inc.14) A frantic Barney Rubble lost a large sale because he could not access the system to verify theinventory was in stock and ready to be shipped. Which of the following characteristics of usefulinformation is absent in the situation described above?A) relevantB) reliableC) completeD) timelyE) understandableF) verifiableG) accessibleAnswer: GObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic15) Message left on voicemail: "Hi Nikki! Just landed at the airport. How about dinner thisevening if you're available. Call me!" Which of the following characteristics of usefulinformation is absent in the situation described above?A) relevantB) reliableC) completeD) timelyE) understandableF) verifiableG) accessibleAnswer: CObjective: Learning Objective 1Difficulty:ModerateAACSB: Analytic16) Chopra, Limited, is an Indian company operating in New York state. It offers stylized,boutique public relations services to upscale retailers in quaint New England towns. A majorsource of revenue is a weekly newsletter that reports on current and projected tourist travel andspending patterns. Preparation of the newsletter requires study and analysis of weatherconditions, economic activity, and travel costs. It is available at an annual subscription rate of$299.99. There are currently 190 subscribers. Preparation and distribution of the newsletter costs$12,000 annually. The value of information to subscribers isA) $236.83.B) $44,998.10.C) less than $63.16.D) at least $300.00.Answer: DObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic

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6Copyright © 2015 Pearson Education, Inc.17) Baggins Incorporated identifies new product development and product improvement as thetop corporate goals. An employee developed an innovation that will correct a shortcoming in oneof the company's products. Although Baggins current Return on Investment (ROI) is 15%, theproduct innovation is expected to generate ROI of only 12%. As a result, the employee fails tofollow up. As a result, awarding bonuses to employees based on ROI resulted inA) goal conflict.B) information overload.C) goal congruence.D) decreased value of information.Answer: AObjective: Learning Objective 1Difficulty:DifficultAACSB: Analytic18) Which of the following tradeoffs between characteristics of useful information isleastobjectionable?A) incomplete information received on a timely basisB) irrelevant information received in an understandable formatC) unreliable information easily accessibleD) verifiable information received in unreadable formatAnswer: AObjective: Learning Objective 1Difficulty:ModerateAACSB: Analytic19) Which of the following isnotone of the three basic types of data about a specific salestransaction that should be captured by an Accounting Information System?A) name of the employee who completed the saleB) daily sales quotaC) product soldD) dateAnswer: BObjective: Learning Objective 1Difficulty:EasyAACSB: Analytic20) Define the concept of a system.Answer: A system is a set of two or more components that are somehow interrelated and interacttogether to achieve a specific goal.Objective: Learning Objective 1Difficulty:EasyAACSB: Analytic

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7Copyright © 2015 Pearson Education, Inc.21) Define data, information, and how the value of information is determined.Answer: Data: facts that are collected, entered, recorded, stored, and processed by an AIS.Information: data that has been organized and processed and is meaningful to its users. Suchinformation is accessible, relevant, timely, reliable, verifiable, complete, and understandable.Information is of value when the benefits received from using or acting upon it outweigh the costto produce the information.Objective: Learning Objective 1Difficulty:EasyAACSB: Analytic22) Discuss the concept of a system and the issues of goal conflict and goal congruence.Answer: A system is a set of two or more components that are somehow interrelated and interacttogether to achieve a specific goal. A system usually consists of smaller components calledsubsystems. These subsystems have specific and defined functions, which interact with andsupport the larger system. The concept of systems is key to information technology and AIS. Allsystems, including the AIS, must work to achieve one or more organizational goals. Goalconflict results when a decision or action of a subsystem is inconsistent with another subsystemor the system (organization) as a whole. Goal congruence results when a subsystem achieves itsgoals while contributing to the organization's overall goal. Subsystems should maximizeorganizational goals.Objective: Learning Objective 1Difficulty:ModerateAACSB: Analytic23) Discuss the seven characteristics of useful information.Answer: The seven characteristics of useful information are: relevant, reliable, complete, timely,understandable, verifiable and accessible. These characteristics are qualities that informationshould possess to be useful in a business environment. Briefly stated, in order for information tobe useful it must be: 1) relevant, meaning that it reduces uncertainty and adds to the decision-making process; 2) reliable information is information that is free from error, and is accurate inits nature; 3) complete information is information that does not omit any important data, facts, oraspects about events or activities; 4) information is timely when it is fully available to enable thedecision-making process to proceed; 5) understandable information must be both in anintelligible and useful format; 6) information is considered verifiable if two people, actingindependently of each other, produce the same information or the same results. 7) Information isaccessible if it is available to users when they need it and in a format they can use.Objective: Learning Objective 1Difficulty:ModerateAACSB: Analytic

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8Copyright © 2015 Pearson Education, Inc.24) Discuss the concept of a system and the issues of goal conflict and goal congruence.Answer: A system is a set of two or more components that are somehow interrelated and interacttogether to achieve a specific goal. A system usually consists of smaller components calledsubsystems. These subsystems have specific and defined functions, which interact with andsupport the larger system. The concept of systems is key to information technology and AIS. Allsystems, including the AIS, must work to achieve one or more organizational goals. Goalconflict results when a decision or action of a subsystem is inconsistent with another subsystemor the system (organization) as a whole. Goal congruence results when a subsystem achieves itsgoals while contributing to the organization's overall goal. Subsystems should maximizeorganizational goals.Objective: Learning Objective 1Difficulty:ModerateAACSB: Analytic1.2Explain the decisions an organization makes and the information needed to make them.1) Paid time-off policies, job descriptions, and procedures manuals are examples of informationneeded to support key decisions in what business process?A) hire and train employeesB) acquire inventoryC) sell merchandiseD) collect payment from customersAnswer: AObjective: Learning Objective 2Difficulty:EasyAACSB: Analytic2) Before a firm can identify the information needed to effectively manage a process, the firmmustA) understand the process .B) hire programmers.C) purchase computers and/or workstations.D) obtain internet access.Answer: AObjective: Learning Objective 2Difficulty:EasyAACSB: Analytic3) Identify the piece of information below that is typically needed to acquire a building.A) job descriptionsB) vendor performanceC) market coverageD) capacity needsAnswer: DObjective: Learning Objective 2Difficulty:ModerateAACSB: Analytic

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9Copyright © 2015 Pearson Education, Inc.4) Identify the piece of information below that is typically needed to acquire inventory.A) job descriptionsB) vendor performanceC) market coverageD) capacity needsAnswer: BObjective: Learning Objective 2Difficulty:ModerateAACSB: Analytic5) Identify the piece of information below that is typically needed to hire and train employees.A) job descriptionsB) vendor performanceC) market coverageD) capacity needsAnswer: AObjective: Learning Objective 2Difficulty:EasyAACSB: Analytic6) How can query languages be used to help make better decisions?A) They can suggest a course of action.B) They can gather relevant data for decision making.C) They can help the decision maker to interpret results.D) They can model choose among alternative courses of action.Answer: BObjective: Learning Objective 2Difficulty:DifficultAACSB: Analytic7) What is a key decision that needs to be made with regards to selling merchandise?A) which credit cards to acceptB) which employees to hireC) which public accounting firm to employD) how much capital to acquireAnswer: AObjective: Learning Objective 2Difficulty:EasyAACSB: Analytic

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10Copyright © 2015 Pearson Education, Inc.8) What is a key decision that needs to be made with regards to acquiring inventory?A) which credit cards to acceptB) which employees to hireC) which vendors to useD) how much capital to acquireAnswer: CObjective: Learning Objective 2Difficulty:ModerateAACSB: Analytic9) What is a key decision that needs to be made with regards to acquiring equipment?A) the locationB) pro forma income statementC) how much capital to acquireD) job descriptionsAnswer: AObjective: Learning Objective 2Difficulty:EasyAACSB: Analytic1.3Identify the information that passes between internal and external parties and an AIS.1) One group that relies on both the adequate collection and transformation of data for decision-making purposes for an organization isA) management.B) interested outsiders.C) competitors.D) the government.Answer: AObjective: Learning Objective 3Difficulty:EasyAACSB: Analytic2) Who of the following isnota stakeholder with whom an accounting information systemtypically communicates directly?A) Wall Street industry analystB) venture capitalistC) company that supplies raw materialsD) company that purchases finished goods for resale to consumersAnswer: AObjective: Learning Objective 3Difficulty:ModerateAACSB: Analytic

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11Copyright © 2015 Pearson Education, Inc.3) In which transaction cycle would customer sales transaction information be most likely to passbetween internal and external accounting information systems?A) the revenue cycleB) the expenditure cycleC) the human resources / payroll cycleD) the financing cycleAnswer: AObjective: Learning Objective 3Difficulty:ModerateAACSB: Analytic4) In which transaction cycle would information for inventory purchases be most likely to passbetween internal and external accounting information systems?A) the revenue cycleB) the expenditure cycleC) the human resources / payroll cycleD) the financing cycleAnswer: BObjective: Learning Objective 3Difficulty:ModerateAACSB: Analytic5) In which transaction cycle would information for paying employees be most likely to passbetween internal and external accounting information systems?A) the revenue cycleB) the expenditure cycleC) the human resources / payroll cycleD) the financing cycleAnswer: CObjective: Learning Objective 3Difficulty:ModerateAACSB: Analytic6) In which transaction cycle would information for paying interest be most likely to passbetween internal and external accounting information systems?A) the revenue cycleB) the expenditure cycleC) the human resources / payroll cycleD) the financing cycleAnswer: DObjective: Learning Objective 3Difficulty:ModerateAACSB: Analytic

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12Copyright © 2015 Pearson Education, Inc.7) In which transaction cycle would information for borrowing money be most likely to passbetween internal and external accounting information systems?A) the revenue cycleB) the expenditure cycleC) the human resources / payroll cycleD) the financing cycleAnswer: DObjective: Learning Objective 3Difficulty:ModerateAACSB: Analytic8) In which transaction cycle would information for hiring employees be most likely to passbetween internal and external accounting information systems?A) the revenue cycleB) the expenditure cycleC) the human resources / payroll cycleD) the financing cycleAnswer: CObjective: Learning Objective 3Difficulty:EasyAACSB: Analytic9) Identify the party below that isnotexternal to the firm.A) customerB) vendorC) government agenciesD) CEOAnswer: DObjective: Learning Objective 3Difficulty:ModerateAACSB: Analytic10) Identify the party below that isnotinternal to the firm.A) customerB) managementC) employeesD) CEOAnswer: AObjective: Learning Objective 3Difficulty:EasyAACSB: Analytic

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13Copyright © 2015 Pearson Education, Inc.1.4Describe the major business processes present in most companies.1) Obtaining financing from outside investors is part of which cycle?A) the revenue cycleB) the financing cycleC) the production cycleD) the payroll cycleAnswer: BObjective: Learning Objective 4Difficulty:EasyAACSB: Analytic2) The ________ isnota transaction cycle.A) general ledger and reporting cycleB) expenditure cycleC) revenue cycleD) human resources cycleAnswer: AObjective: Learning Objective 4Difficulty:ModerateAACSB: Analytic3) Identify the false statement below.A) Retail stores do not have a production cycle.B) Financial institutions have installment-loan cycles.C) Every organization should implement every transaction cycle module.D) A service company does not have an inventory system.Answer: CObjective: Learning Objective 4Difficulty:EasyAACSB: Analytic4) Transaction cycles can be summarized on a high level as "give-get" transactions. An exampleof "give-get" in the revenue cycle would beA) give cash, get goods.B) give goods, get cash.C) give cash, get labor.D) give cash, get cash.Answer: BObjective: Learning Objective 4Difficulty:EasyAACSB: Analytic

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14Copyright © 2015 Pearson Education, Inc.5) Groups of related business activities such as the acquisition of merchandise and payment ofvendors are calledA) transaction cycles.B) economic cycles.C) business events.D) transactions.Answer: AObjective: Learning Objective 4Difficulty:EasyAACSB: Analytic6) The transaction cycle that includes the events of hiring employees and paying them is knownas theA) revenue cycle.B) expenditure cycle.C) human resources cycle.D) financing cycle.Answer: CObjective: Learning Objective 4Difficulty:EasyAACSB: Analytic7) The transaction cycle approach yields efficiencies when processing of a large number oftransactions becauseA) a large number of transactions within a given cycle can be categorized into a relatively smallnumber of distinct types.B) transaction cycles are easier to computerize.C) the transaction cycle approach represents the natural order of business.D) transaction cycles are easy to understand.Answer: AObjective: Learning Objective 4Difficulty:ModerateAACSB: Analytic8) Paying state payroll taxes is part of which transaction cycle?A) human resources/payrollB) expenditureC) financingD) revenueAnswer: AObjective: Learning Objective 4Difficulty:ModerateAACSB: Analytic

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15Copyright © 2015 Pearson Education, Inc.9) Who of the following wouldnotbe involved in the revenue cycle?A) accounts payable clerkB) customerC) cashierD) credit managerAnswer: AObjective: Learning Objective 4Difficulty:EasyAACSB: Analytic10) How are "Give and Take" transactions classified in business today and what impact does thishave on AIS?Answer: The concept of "Give and Take" transactions has been used to classify businesstransactions into "cycles" that have starting points, processes, and end points (or closure). Themajority of business transactions can be classified as revenue, expenditure, human resources(payroll), production, and financing cycles. AIS has been modeled after these transaction cyclesto achieve its basic functions of collecting and processing data, providing information useful fordecision making, and establishing adequate controls.Objective: Learning Objective 4Difficulty:ModerateAACSB: Analytic1.5Explain what an accounting information system (AIS) is and describe its basic functions.1) An accounting information system must be able to perform which of the following tasks?A) collect transaction dataB) process transaction dataC) provide adequate controlsD) all of the aboveAnswer: DObjective: Learning Objective 5Difficulty:EasyAACSB: Analytic2) Which of the following isnotan example of a common activity in an AIS?A) buy and pay for goods and servicesB) sell goods and services and collect cashC) summarize and report results to interested partiesD) record sales calls for marketing purposesAnswer: DObjective: Learning Objective 5Difficulty:EasyAACSB: Analytic

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