CHAPTER 1 Accounting Information Systems: An Overview

Question 1

1. Data differ from information in which way?
   a. Data are output, and information is input.
   b. Information is output, and data are input.
   c. Data are meaningful bits of information.
   d. There is no difference.

Answer 1

b. Information is output, and data are input. [Correct.]

Question 2

2. The business processes that include goods storage, receiving vendor invoices, and updating
payable accounts is called
a. the expenditure cycle. 
b. the revenue cycle. 
c. the production or conversion cycle. 
d. the financing cycle.

Answer 2

a. the expenditure cycle.

Question 3

3. Which of the following is a primary activity in the value chain?
   a. purchasing
   b. accounting
   c. post-sales service
   d. human resource management

Answer 3

c. post-sales service [Correct. Service is a primary activity.]

Question 4

4. Which transaction cycle includes interactions between an organization and its suppliers?
   a. revenue cycle
   b. expenditure
   c. human resources/payroll cycle
   d. general ledger and reporting system

Answer 4

b. expenditure [Correct.]

Question 5

5. Which of the following is NOT a means by which information improves decision making?
   a. increases information overload
   b. reduces uncertainty
   c. provides feedback about the effectiveness of prior decisions
   d. identifies situations requiring management action

Answer 5

a. increases information overload [Correct. Decision makers receiving too much information
have difficulty incorporating all of the information into their decision framework,
and, as a result, decision quality can be reduced rather than improved.]

Question 6

6. In the value chain concept, upgrading IT is considered what kind of activity?
   a. primary activity
   b. support activity
   c. service activity [
   d. structured activity

Answer 6

b. support activity [Correct. Technology activities, including investing in IT, are considered
a support activity.]

Question 7

7. When a subsystem’s goals are inconsistent with the goals of another subsystem, or with
the system as a whole, it is called
a. goal conflict.
b. goal congruence. 
c. both definitions are wrong.

Answer 7

a. goal conflict. [Correct. When a subsystem’s goals are inconsistent with the goals of
another subsystem or the system as a whole.]

Question 8

8. Which of the following is a function of an AIS?
   a. reducing the need to identify a strategy and strategic position
   b. transforming data into useful information
   c. allocating organizational resources
   d. automating all decision making

Answer 8

b. transforming data into useful information [Correct. This is one of the primary functions
of an AIS.]

Question 9

9. Transforming data into information so that management can plan, execute, control, and
   evaluate activities, resources, and personnel is part of which component of an AIS?
   a. The people who use the system.
   b. The procedures and instructions used to collect, process, and store data.
   c. The data about the organization and its business activities.
   d. The software used to process the data.

Answer 9

b. The procedures and instructions used to collect, process, and store data.

Question 10

10. A report telling how well all approved vendors have performed in the prior 12 months is
    information that is MOST needed in which business process?
    a. paying vendors
    b. acquiring inventory
    c. selling merchandise
    d. paying employees

Answer 10

b. acquiring inventory [Correct. Companies want to acquire inventory from companies
that have performed well in the past. A vendor performance report would disclose
whether the vendor shipped inventory on time, whether the inventory was of the requested
quality, whether the prices were as agreed upon, etc.]