Accounting Information Systems Ch. 1

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Chapter 1

______ by itself does not help make decisions. It must be converted into information before it is useful.

Data

_____ is a collection of unprocessed facts, figures, statistics, etc. that can be processes to create information.

Data

Data that is processed(sorted, filtered, categorized, aggregated, etc.) into a product that has the potential to impact a decision.

Information

Detailed methods, procedures and routines established to acheive a specific goal.

Systems

An integrated set of components for collecting, storing, processing and communicating information.

Information System

____ _____ have nothing to do with technology

Information System

A set of detailed methods, procedures and routines established or formulated to convert data into information.

Data Information System

A framework designed in 1970 as a guide for development of future accounting principles. Designed mainly for users without power (external users).

FASB Conceptual Framework

Three levels of the FASB Conceptual Framework?

Objective, Qualitative and Assumptions

First level of the FASB Conceptual Framework?

Objective

The ______ of the FASB Conceptual Framework is to provide information for decision making.

Objective

The second level of the FASB Conceptual Framework is _______ ________.

Qualitative Characteristics

Two types of qualitative characteristics?

Primary, Secondary

Primary Qualitative Characteristics consists of __________ and __________.

Relevance, Reliability

Secondary Qualitative Characteristics consists of __________ and __________.

Comparability, consistency

Information is ___________ when it impacts the decision.

Relevant

__________ is when information can be trusted.

Reliability

The third level of the FASB Conceptual Framework consists of _____________ , __________ and __________.

Assumptions, Principles and constraints

4 Assumptions of the FASB Conceptual Framework?

Economic Entity, Going Concern, Periodicity, monetary unit

Assumption that states a business is separate from its owners

Economic Entity

Assumption that states a business will survive long enough to meet its current obligations.

Going Concern

Assumption that states the life of a business is divided into time periods for financial reporting.

Periodicity

Assumption that states the value of a dollar is stable.

Monetary Unit

4 Principles in the third level of the FASB Conceptual Framework?

Historical Cost, Realization, Matching and Full Disclosure

In AIS, items are generally recorded at their _______ ________

Historical Cost

Revenue may be _________ when the earnings process is essentially complete via evidence that an agreement exists, delivery has occurred or services have been rendered, the seller's price is fixed and determinable, and collectability is reasonably assured.

Realized

__________ expenses should appear on the income statementwith the revenue they halped generate.

Matching

Principle that states we should give decision makers all the information they need.

Full Disclosure

4 Constraints of the third level of the FASB Conceptual Framework?

Cost Effectiveness, Materiality, Conservatism and Industry Practices

Constraint that states the benefit of having information must exceed the cost of obtaining it.

Cost Effectiveness

Constraint that states the dollar amounts must be large enough to make a difference in decisions.

Materiality

Constraint that states when choosing between accounting practices, make the choice that presents the "worst case" scenario. Choose a scenario that results in highest expense, lowest income, highest liability and lowesr asset.

Conservatism

Constraint that states we should follow the conventions of the industry in financial reporting.

Industry Practices

A well designed AIS relates to conceptual framework by:

capturing data on the element for the financial statements, transferring data into relevant and reliable information and takes into account cost-benefit constraint.

Capturing data on the element for the financial statement consists of

providing information about assets, liabilities, equity, expenses, revenues, etc.

Transferring data into relevant and reliable information consists of:

giving further information beyond just the element that will help in decision making. Includes non-financial information. Foe example, transaction histories.

Taking into account cost benefit constraint consists of :

taking into account that the AIS benefits should exceed the costs in creating and maintaining such a system. Benefits may be economical, behavioral, psychological or financial.

3 Characteristics of accounting data?

primarily financial data, transaction based and generated in the process of operations

An integrated set of components for collecting, storing, processing and presenting financial information as well as protecting the information integrity by having well designed systems that serve both internal and external users by assisting in the decisicion making process.

Accouting Information Systems

In a _______ system people do the processing, forms capture and move data, storage is in physical files and reports are documents.

Manual

In an ________ system computers do the data capturing and processing, data is moved internally within the computer electronically or externally via telecommunications, storage is in permanent or temporary computer files and reports are electronically generated and distributed.

Automated

5 parts that compromise an AIS:

Inputs, Processes, Outputs, Storage and Internal Controls

______ consist of sales invoices, purchase orders and considers the types of source documents the user will require and what information the documents will contain.

Input

__________ are for the purpose of design and audit under the considerations of the kind of tools that are needed for processing, should tools be manual or computerized and what kind of hardware and software should be installed.

Processes

________ are the financial statements and internal reports. When creating these it is important to consider what type of reports are needed and how the system will help in the production of these reports.

Output

________ is either stored locally or remotely (external network). Consider how the data should be stored (paper, electronically), where it should be stored and for how long.

Storage

______ _______ consist of passwords, segregation of duties and back ups. Taken into consideration should be what are the necessary controls and do the benefits outweigh the costs?

Internal Controls

Information systems that allow companies to inegrate information across operations on a company wide basis throughout marketing, management, finance, HR, etc.

Enterprise Wide Information System

A set of generic interrelated activities common to many business firms that result in the creation of value for a firm.

Value Chain

A group of related activities performed by a business to create value by converting inputs into outputs.

Business Processes

a _____ _____ is made up of all the business processes of an enterprise

Value Chain

What are some examples of business processes that involve AIS?

Sales or revenues, cash collections, purchases, cash disbursements, conversion or production and payroll.

A statement that defines or constrains some aspect of the business. It is intended to assert business structure or to control or influence the behavior of the business.

Business Rule

The business rules that concern a project are _____, meaning they cannot be broken down any further.

atomic

An illustration or description of a process expressed in terms of its business rules.

Business Rule Model

An example of the Business Rule Model is:

the process a student goes through to purchase a book from an online bookstore.

"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?

This web site is a work in progress.

An author's identity and background are most closely related to which element of information competence?

Authority

According to the text, information about accounting information systems on the Internet falls into ___ main groups.

Three

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?

ii only

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?

Considering the effects of decisions on human behavior

Accounting information systems are designed to

Report information to decision makers.

Internal controls in an accounting information system help promote information integrity. Which of the following best explains the concept of information integrity?

The information in AIS outputs is reliable.

Which of the following is NOT an example of an input to the accounting information system?

Balance sheet

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?

ii only

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.
The inputs mentioned in the preceding scenario are

The check and the invoice

A typical accounting information system comprises ___ parts.

Five

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?

Practitioner

Which of the following is a fact about accounting information systems?

They involve interrelated parts

The study of accounting information systems incorporates knowledge from:

Management, finance and information systems

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.

i and iii only

What are the 5 parts of an Accounting Information System (AIS)?

Input, processes, output, storage and internal controls

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