1. An accounting information system (AIS) collects and processes data into useful information for management decision making, provides controls to safeguard assets, and reviews past business transactions. 2. Key aspects that influence AIS design include organizational culture, information technology, business strategy, and the legal environment. 3. The five major business processes are the procurement cycle, revenue/receipts cycle, expenditure/payment cycle, production/conversion cycle, and the financing cycle.

1. Accounting Information System
True/False Indicate whether the statement is true or false.
____ 1. An AIS designer, who is very competent with information technology skills, will be successful in designing an information
system regardless of his/her understanding of the organization that he/she is designing for.
____ 2. Collecting and monitoring data about a business activity may change the manner in which employees perform that activity.
____ 3. When making a design choice regarding the amount of information to provide to a decision maker, providing more
information is always better
____ 4. An accounting information system should capture the financial measures of a transaction, without regard to the
operational data of that transaction.
____ 5. Special forms, called source documents, provide improved control over data collection.
____ 6. A control account contains all of the detailed subaccount data for a general ledger account.
____ 7. Organizations should take advantage of every opportunity to invest in information technology in order to improve their AIS
____ 8. Data and information are among an organization's most valuable assets.
____ 9. Within an organization, it is acceptable to allow one person to both authorize sales transactions and record purchase
transactions
____ 10. Lower bandwidth allows data to be transmitted faster
Multiple Choice Identify the choice that best completes the statement or answers the question.
____ 11. A widely used method that uses the same key to encrypt and decrypt a data transmission is referred to as:
a
.
PKI. c
.
DES.
b
.
none of the above d
.
digital signature.
____ 12. Information can improve decision making in what way?
a
.
All of the above. c
.
It identifies situations requiring management
action.
b
.
It provides a basis for choosing among
alternative actions
d
.
Provides valuable feedback that can be used to
improve future decisions.
____ 13. In order for an accounting information system to meet the needs of systems users, one must take into account the types
of decisions that are made. Decisions vary from repetitive and routine to nonrecurring and non-routine. How would you
classify a decision where no framework or model exists for the decision?
a
.
Semi-structured c
.
Structured
b
.
Unstructured d
.
All of the above

2. ____ 14. Which of the following best describes the sequence of the supply chain?
a
.
Raw materials supplier, manufacturer,
distributor, retailer, and consumer
c
.
Raw materials supplier, manufacturer, retailer,
distributor, and consumer
b
.
Manufacturer, distributor, raw materials
supplier, retailer, and consumer
d
.
Retailer, distributor, manufacturer, raw
materials supplier, and consumer
____ 15. Which of the following is not one of the three important functions that an accounting information system performs?
a
.
It assures that management's decisions
optimize the profitability of the company.
c
.
It provides adequate controls to safeguard the
organization's assets, including its data. These controls
ensure that the data is available when needed and that it
is accurate and reliable.
b
.
It processes data into information that is
useful for making decisions that enable
management to plan, execute, and control
activities.
d
.
It collects and stores data about activities and transactions
so that the organization can review what has happened in
the business.
____ 16. Which of the following must not be performed by the person responsible for custody of inventory?
a
.
Paying cash to vendors c
.
Authorization to move inventory to shipping
b
.
Receiving cash from customers d
.
Authorization to write off bad debt
____ 17. Which of the following is NOT a "primary activity" that directly provides value to the customer?
a
.
Operations c
.
Inbound logistics
b
.
Human resources d
.
Outbound logistics
____ 18. Which of the following is not one of the primary activities in the value chain of an organization?
a
.
Purchasing c
.
Operations
b
.
Outbound Logistics d
.
Marketing and Sales
____ 19. The use of EDI by small businesses is increasing because of
a
.
the Internet and HTML. c
.
cheaper computing power and graphical user interface.
b
.
third-party proprietary networks d
.
the Internet and XML.
____ 20. Which of the following does not influence the design of an Accounting Information System (AIS)?
a
.
Information Technology c
.
Legal environment
b
.
Organizational culture d
.
Business strategy
____ 21. Which of the following is NOT one of the five major business processes or transaction cycles?

3. a
.
Financing c
.
Production
b
.
Expenditure d
.
All of the above are major cycles.
____ 22. The third function of the AIS is to provide adequate internal controls to accomplish three basic objectives. Identify the
improper objective.
a
.
Ensure that business activities are performed
efficiently and in accordance with management's
objectives while also conforming to any
applicable regulatory policies
c
.
Safeguard organizational assets, including its
data
b
.
Ensure that the information that is produced by
the system is reliable
d
.
Ensure that the information that is produced
by the system is relevant
____ 23. Specific types of duties must be kept separate in order to achieve good internal control. Which of the following
must not be performed by the individual responsible for receiving cash from the customers?
a
.
Authorizing the receipt of goods c
.
Managing the purchases journal
b
.
Writing off uncollectable customer accounts d
.
Updating shipping records for goods sold
____ 24. Which of the following accurately depicts the components of an accounting information system?
a
.
People, procedures, and information
technology
c
.
People, forms, and reports
b
.
People, procedures, and paper d
.
Procedures, paper, and information
technology
____ 25. Communication software manages data flow across a network by performing the following functions:
a
.
controlling the transfer of data, files and
messages.
c
.
controlling the transfer of data, files and
messages.
b
.
all of the above. d
.
controlling access to network devices.
____ 26. Identify the two basic strategies noted in the text
a
.
High quantity producer strategy and loss
leader strategy
c
.
Low cost producer strategy and
product/service differentiation strategy
b
.
Product/service differentiation strategy and
loss leader strategy
d
.
Low cost producer strategy and high quantity
producer strategy
____ 27. Identify the three strategic positions which an organization might adopt
a
.
Variety-based, access-based, and needs-
based
c
.
Customer-based, product-based, location-
based
b
.
Customer-based, product-based, access-
based
d
.
Access-based, needs-based, and product
based
____ 28. Listed below are the four of the characteristics that make information useful and meaningful. Pick the characteristic that
relates to information's ability to reduce uncertainty

4. a
.
Verifiable c
.
Relevant
b
.
Understandable d
.
Complete
____ 29. AIS adds value to an organization by:
a
.
Improving efficiency c
.
Sharing knowledge
b
.
Improving the internal control structure. d
.
all of the above
____ 30. Which of the following is NOT one of the support activities in the value chain of an organization?
a
.
Service c
.
Purchasing
b
.
Human Resources d
.
Firm Infrastructure
____ 31. Management by exception:
a
.
requires a periodic comparison of each unit's
activities with past performance
c
.
is a technique whereby exceptional
performance is guaranteed
b
.
None of the above d
.
is a technique of hands-off management,
unless current performance does not meet
the expectations established in the budget
____ 32. A digital certificate:
a
.
is a reliable third party that authenticates the
message sender.
c
.
is an electronic message uniquely identifying
the message sender.
b
.
is a summary of a plain text document. d
.
is used to identify the owner of a private key
and related public key.
____ 33. Which of the following is not one of the three important functions that an accounting information system performs?
a
.
It processes data into information that is
useful for making decisions that enable
management to plan, execute, and control
activities.
c
.
It collects and stores data about activities and
transactions so that the organization can
review what has happened in the business.
b
.
It assures that management's decisions
optimize the profitability of the company.
d
.
It provides adequate controls to safeguard
the organization's assets, including its data.
These controls ensure that the data is
available when needed and that it is accurate
and reliable.
____ 34. What is data?
a
.
The same thing as information c
.
A character in the Star Trek series
b
.
All of the facts that are collected, stored, and
processed by an information system
d
.
All of the debit and credit information about
each transaction

5. ____ 35. The posting process:
a
.
is used to place post-it notes on all items that
need attention
c
.
occurs as needed
b
.
is used to meter the outgoing mail d
.
summarizes the amounts recorded in the
journals to the ledgers
____ 36. While more is often considered better, we reach a point at which our human minds cannot effectively absorb and process
more information. This condition is called
a
.
Neural Collapse c
.
None of the above
b
.
Decision Aid Deficient d
.
Information Overload
____ 37. While general ledgers are used to summarize every asset, liability, equity, revenue, and expense account, subsidiary
ledgers are used to summarize subaccounts for particular general ledger accounts. Identify the general ledger account
that typically does not have a subsidiary ledger.
a
.
Accounts Receivable c
.
Fixed Assets
b
.
Purchases d
.
Inventory
____ 38. A chart of accounts:
a
.
provides an audit trail c
.
is a list of all accounts in the organization with each
account identified by a three- or four-digit code
b
.
is a list of all permanent accounts in the
organization. Temporary accounts, such as
revenue and expense accounts, are not
included in the chart of accounts.
d
.
None of the above
____ 39. An accounting information system adds value to an organization in many ways. Which of the following is not a way in
which the AIS adds value?
a
.
All of the above are ways in which an AIS
adds value to the organization.
c
.
Monitoring outputs for defects to increase
product quality
b
.
Providing more accurate information d
.
Monitoring outputs for defects to reduce the
amount of waste
____ 40. An intranet
a
.
provides everyone access to the World Wide
Web.
c
.
allows two or more companies to share
internal information via the World Wide Web
b
.
none of the above d
.
provides a company an internal means of
communicating via the World Wide Web.

6. ____ 35. The posting process:
a
.
is used to place post-it notes on all items that
need attention
c
.
occurs as needed
b
.
is used to meter the outgoing mail d
.
summarizes the amounts recorded in the
journals to the ledgers
____ 36. While more is often considered better, we reach a point at which our human minds cannot effectively absorb and process
more information. This condition is called
a
.
Neural Collapse c
.
None of the above
b
.
Decision Aid Deficient d
.
Information Overload
____ 37. While general ledgers are used to summarize every asset, liability, equity, revenue, and expense account, subsidiary
ledgers are used to summarize subaccounts for particular general ledger accounts. Identify the general ledger account
that typically does not have a subsidiary ledger.
a
.
Accounts Receivable c
.
Fixed Assets
b
.
Purchases d
.
Inventory
____ 38. A chart of accounts:
a
.
provides an audit trail c
.
is a list of all accounts in the organization with each
account identified by a three- or four-digit code
b
.
is a list of all permanent accounts in the
organization. Temporary accounts, such as
revenue and expense accounts, are not
included in the chart of accounts.
d
.
None of the above
____ 39. An accounting information system adds value to an organization in many ways. Which of the following is not a way in
which the AIS adds value?
a
.
All of the above are ways in which an AIS
adds value to the organization.
c
.
Monitoring outputs for defects to increase
product quality
b
.
Providing more accurate information d
.
Monitoring outputs for defects to reduce the
amount of waste
____ 40. An intranet
a
.
provides everyone access to the World Wide
Web.
c
.
allows two or more companies to share
internal information via the World Wide Web
b
.
none of the above d
.
provides a company an internal means of
communicating via the World Wide Web.