Solution Manual Accounting Information Systems Global Edition 16th Edition B

Solution

CHAPTER 1 ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 1.1

Discuss the concept of a system and the issues of goal conflict and goal congruence.

A system is a set of two or more components that are somehow interrelated and interact together to achieve a specific goal. A system usually consists of smaller components called subsystems. These subsystems have specific and defined functions, which interact with and support the larger system.

The concept of systems is key to information technology and AIS. All systems, including the AIS, must work to achieve one or more organizational goals. Goal conflict results when a decision or action of a subsystem is inconsistent with another subsystem or the system (organization) as a whole. Suppose the sales department aims to maximize revenue by offering generous discounts to customers, while the finance department is responsible for controlling costs and maintaining profit margins. In this scenario, there is a goal conflict between increasing sales and maintaining profitability. Goal congruence results when a subsystem achieves its goals while contributing to the organization's overall goal. Subsystems should maximize organizational goals.

1.2

What are the steps involved in the decision-making process? Provide some examples of how AI and Data Analytics can facilitate the decision-making process.

Decision making is a complex, multistep activity: identify the problem, collect and interpret information, evaluate ways to solve the problem, select a solution methodology, and implement the solution. An AIS can provide assistance in all phases of decision making. Reports can help to identify potential problems. Decision models and analytical tools can be provided to users. Query languages can gather relevant data to help make the decision. Various tools, such as graphical interfaces, can help the decision maker interpret decision model results, evaluate them, and choose among alternative courses of action. In addition, the AIS can provide feedback on the results of actions.

An AIS can help improve decision making in several ways: • • •

•

It can identify situations requiring management action. For example, a cost report with a large variance might stimulate management to investigate and, if necessary, take corrective action.

It can reduce uncertainty and thereby provide a basis for choosing among alternative actions.

It can store information about the results of previous decisions, which provides valuable feedback that can be used to improve future decisions. For example, if a company tries a particular marketing strategy and the information gathered indicates that it did not succeed, the company can use that information to select a different marketing strategy.

It can provide accurate information in a timely manner. For example, Walmart has an enormous database that contains detailed information about sales transactions at each of its stores. It uses this information to optimize the amount of each product carried at each store.

It can analyze sales data to discover items that are purchased together and can use such information to improve the layout of merchandise or to encourage additional sales of related items. For example, Amazon uses its sales database to suggest additional books for customers to purchase.

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1.3

A software company in Munich is organizing a competition, inviting business ideas that promote the use of smartphone technology to conduct business. You enter your business plan, an initiative to involve unemployed teenagers and young adults from local communities to generate business and employment, and it was so well received that you were awarded a special prize of €5,000. You plan on using your prize money to implement your idea. a. Identify key decisions you need to make, the information you require to make these key decisions, and the five major business processes you need to engage in. b. Identify the external parties with whom you would need to exchange information and specify the information you will receive from these parties and the information that you will send to these parties.

Answers will vary, but the main aim is to get students to understand (for part a) how the business processes, key decisions, and information needs are all intertwined (as shown in Table 1-2). This then links to the external parties (part b) in Figure 1-1.

Some points that the students may mention: a. Key Decisions: Budget Allocation: Determining efficient utilization of €5,000 among various business needs.

Recruitment Strategy: Identifying the criteria and methods to recruit unemployed teenagers and young adults.

Training Program: Identifying training needs and designing an appropriate training program.

Technology Investment: Selecting the right smartphone technology and software applications.

Marketing Strategy: Promote the business initiative to potential clients and the local community. b. External Parties and Information Exchange: Smartphone Suppliers: Information on product options, prices, and service agreements, followed by procurement.

Trainer: Training content and method; exchange requirements and schedules.

Legal Advisors: Information on legal compliance pertinent to the business model and operational plans.

Marketing Agencies: Market analysis and marketing strategies suitable to the business goals and target demographics.

Local Employment Agencies: Data on potential recruits to send employment opportunities and company information.

1.4

How do an organization’s business processes and lines of business affect the design of its AIS? Give several examples of how differences among organizations are reflected in their AIS.

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An organization’s AIS must reflect its business processes and its line of business. For example: • • • •

• •

1.5

Manufacturing companies will need a set of procedures and documents for the production cycle; non-manufacturing companies do not.

Government agencies need procedures to track separately all inflows and outflows from various funds, to ensure that legal requirements about the use of specific funds are followed.

Financial institutions do not need extensive inventory control systems.

Passenger service companies (e.g., airlines, bus, and trains) generally receive payments in advance of providing services. Therefore, extensive billing and accounts receivable procedures are not needed; instead, they must develop procedures to account for prepaid revenue.

Construction firms typically receive payments at regular intervals, based on the percentage of work completed. Thus, their revenue cycles must be designed to track carefully all work performed and the amount of work remaining to be done.

Service companies (e.g., public accounting and law firms) do not sell physical goods and, therefore, do not need inventory control systems. They must develop and maintain detailed records of the work performed for each customer to provide backup for the amounts billed.

Tracking individual employee time is especially important for these firms because labor is the major cost component.

Figure 1-5 shows that organizational culture and the design of an AIS influence one another.

What does this imply about the degree to which an innovative system developed by one company can be transferred to another company?

Since people are one of the basic components of any system, it will always be difficult to transfer successfully a specific information systems design intact to another organization. Considering in advance how aspects of the new organizational culture are likely to affect acceptance of the system can increase the chances for successful transfer. Doing so may enable the organization to take steps to mitigate likely causes of resistance. The design of an AIS, however, itself can influence and change an organization’s culture and philosophy. Therefore, with adequate top management support, implementation of a new AIS can be used as a vehicle to change an organization. The reciprocal effects of technology and organizational culture on one another, however, mean that it is unrealistic to expect that the introduction of a new AIS will produce the same results observed in another organization.

1.6

Why are accounting software packages designed with separate transaction modules?

Since every organization does not necessarily use all of the transaction cycles in its operations, it is to the advantage of the organization to be able to “pick and choose” from among various software modules that track and record different transaction cycles. For example, a law firm would have no need to implement a production cycle module. Also, the nature of a transaction cycle varies across the broad spectrum of business organizations. Again, a law firm would have a revenue cycle, but it would not involve the purchase, receipt, and payment for products or merchandise; likewise, a retail store chain may not sell any consulting services to its customers.

1.7

Apply the value chain concept to S&S. Explain how it would perform the various primary and support activities.

The value chain classifies business activities into two categories: primary and support.

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The five primary activities at S&S: a. Inbound logistics includes all processes involved in ordering, receiving, and temporarily storing merchandise that is going to be sold to S&S customers. b. S&S does not manufacture any goods, thus its operations activities consists of displaying merchandise for sale and protecting it from theft. c. Outbound logistics includes delivering the products to the customer. d. Sales & marketing includes ringing up and processing all sales transactions and advertising products to increase sales. e. Service includes repairs, periodic maintenance, and all other post-sales services offered to customers.

The four support activities at S&S: a. Firm infrastructure includes the accounting, finance, legal, and general administration functions required to start and maintain a business. b. Human resource management includes recruiting, hiring, training, evaluating, compensating, and dismissing employees. c. Technology includes all investments in computer technology and various input/output devices, such as point-of-sale scanners. It also includes all support activities for the technology. d. Purchasing includes all processes involved in identifying and selecting vendors to supply goods and negotiating the best prices, terms, and support from those suppliers.

1.8

Information technology enables organizations to easily collect large amounts of information about employees. Discuss the following issues: These questions involve traditional economic cost/benefit issues and less well-defined ethical issues. a. To what extent should management monitor employees’ e-mail?

Generally, the courts have held that organizations have the right to monitor employees’ email.

Such monitoring can have disastrous effects on employee morale, however. On the other hand, it might provide legitimate information about group members’ individual contributions and productivity. b. To what extent should management monitor which Web sites employees visit?

Students are likely to argue whether or not this should be done. One potential benefit that could be argued is the likelihood that if employees are aware that they will be monitored they will be less prone to surf the Web for non-work-related uses. c. To what extent should management monitor employee performance by, for example, using software to track keystrokes per hour or some other unit of time? If such information is collected, how should it be used?

Arguments pro and con can be generated about the effects of such monitoring on performance and on morale. Clearly, the specifics of any incentive schemes tied to such metrics are important.

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d. Should companies use software to electronically “shred” all traces of e-mail?

Arguments can be raised on both sides of this issue. Try to get students to go beyond the legal ramifications of recent news stories and to explore the ethical implications of destroying different kinds of email. e. Under what circumstances and to whom is it appropriate for a company to distribute information it collects about the people who visit its Web site?

Direct students to the guidelines followed by organizations that certify how various web sites use the information they collect. Students are likely to make the argument that personal information is inherently private and sacrosanct. To challenge that view, ask them about the legitimacy of developing and maintaining a reputation. Doesn’t that involve the divulgence and sharing of personal information among strangers? Ask the class if it is feasible (or undesirable) to totally prevent or prohibit such sharing of information.

The instructor should also refer the students to GAPP, as one of its criteria concerns sharing information with 3rd parties. The instructor and the students could read the GAPP criterion about sharing data together, and then discuss what they think. Remind the students that GAPP is not regulatory law – just recommended best practice.

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SUGGESTED ANSWERS TO THE PROBLEMS 1.1

IT is changing the nature of accounting and the role of accountants. Write a two-page report describing what you think will be the nature and the value of the accounting function in a large company in the future.

Numerous answers are possible. Several articles addressing this topic have appeared in Strategic Finance and the Journal of Accountancy.

Some points that students can integrate into their report can be: − − − −

Automation of Repetitive Tasks: Accounting software are increasingly automating traditional accounting tasks such as bookkeeping, and compliance reporting.

Transition Towards Advisory Roles: Accountants are transitioning from record-keeping to value added tasks such as providing strategic advice.

Provision of Large Amounts of Data: Accountants are using data for insightful analyses.

Predictive Analytics: Accountants are using historical data to forecast future financial scenarios.

Some potential roles that accountants can assume in the future: − − − − 1.2

Strategic Decision-Making: Provide data-driven insights that inform business strategy.

Risk Management: Better identify and manage financial risks.

Technology Integration Specialists: Play a key role in integrating new financial technologies into business practices.

Sustainability Reporting: Measure and report on non-financial aspects of business, such as social and environmental impact.

The annual report is considered by some to be the single most important printed document that companies produce. In recent years, annual reports have become large documents. They now include such sections as letters to the stockholders, descriptions of the business, operating highlights, financial review, management discussion and analysis, a discussion of company internal controls, segment reporting, inflation data, and the basic financial statements. The expansion has been due in part to a general increase in the degree of sophistication and complexity in accounting standards and disclosure requirements for financial reporting.

The expansion also is reflective of the change in the composition and level of sophistication of users. Current users include not only stockholders but also financial and securities analysts, potential investors, lending institutions, stockbrokers, customers, employees, and—whether the reporting company likes it or not—competitors. Thus, a report originally designed as a device for communicating basic financial information now attempts to meet the diverse needs of an ever-expanding audience.

Users hold conflicting views on the value of annual reports. Some argue that they fail to provide enough information, whereas others believe disclosures in annual reports have expanded to the point where they create information overload. Others argue that the future of most companies depends on acceptance by the investing public and by its customers; therefore, companies should take this opportunity to communicate well-defined corporate strategies.

Adapted from the CMA Examination

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a. Identify and discuss the basic factors of communication that must be considered in the presentation of the annual report.

The annual report is a one-way communication device. This requires an emphasis on clarity and conciseness because there is no immediate feedback from the readers as to what messages they are receiving.

The preparer must attempt to identify the users/audience of the report, and to determine their values, beliefs, and needs. Then the preparer can determine the language, i.e., words and phrases that would be appropriate and familiar to the users/audience.

The preparer must also consider the organization of the material in the report. Logical ordering and attractive formatting facilitate the transmission of ideas. b. Discuss the communication problems a corporation faces in preparing the annual report that result from the diversity of the users.

The different users of annual reports have differing information needs, backgrounds, and abilities. For some users, the annual report may serve as an introduction to the company and/or the only significant information about the company. By using the report to communicate to all users, the problems the corporation faces include the following.

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In an attempt to reach several audiences, a company may include information for each audience. Consequently, the annual report may grow in size and complexity to the point where it contains more information than many users want to receive or are able to comprehend, i.e., information overload. In some cases, technical concepts may be reduced to concepts that are more common; this reduces precision and conciseness thereby leading to more generalizations.

•

Care must be taken in the presentation of information. Words and phrases familiar to one user group may not be understood by those in other user groups. Graphic displays that are meaningful to some may be meaningless to others.

c. Select two types of information found in an annual report, other than the financial statements and accompanying footnotes, and describe how they are helpful to the users of annual reports.

Other than the financial statements and accompanying footnotes, an annual report provides information concerning • • • • • •

Management's discussion and analysis of results.

Organizational objectives, strategies, and management's outlook for the future.

Board of Directors members and the officers and top management of the organization.

Segment data and performance information.

New initiatives and research information.

Recent stock price history and stock information.

Students will have many and varied answers as to how the information is helpful, which should lead to a rich class discussion. This discussion can be combined with the discussion of part e.

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d. Discuss at least two advantages and two disadvantages of stating well-defined corporate strategies in the annual report.

Stating well-defined corporate strategies in a company's annual report accomplishes the following: Advantages: • Communicates the company's plan for the future and resolves any disparate issues.

• Provides a vehicle for communicating the company's strengths.

• Builds investor confidence and portrays a positive image.

Disadvantages: • Locks management into fulfilling stated objectives and strategies, causing inflexibility.

• Communicates to unintended users who could put the company at risk (i.e., competitors). e. Evaluate the effectiveness of annual reports in fulfilling the information needs of the following current and potential users: shareholders, creditors, employees, customers, and financial analysts Annual reports fulfill users' information needs as discussed below.

1. Shareholders. Annual reports meet the statutory requirement that publicly held corporations are to report annually to stockholders and report on the stewardship of management to both current and potential stockholders. The annual report gives shareholders financial and operating information such as income from operations, earnings per share, the Balance Sheet, Cash Flow Statement, and related footnote disclosure that potential shareholders need to evaluate the risks of and potential returns on investment.

However, the volume of data presented in annual reports can result in information overload that reduces the value of the reports. Confusion can result from reducing technical concepts to common concepts or by the presentation of duplicate messages by different forms of media.

2. Creditors. The annual report of public companies provides financial information as well as trend information. This allows creditors to project financial solvency and to evaluate the company’s ability to repay loans.

3. Employees. The annual report gives the employees information such as a description of the company's pension plan and the employee stock incentive plan. This gives employees a base from which to compare their benefits program to those of other companies. Annual reports also provide employees with a year-end review of the results to which they have contributed during the year. In this sense, the annual report provides reinforcement and rewards. The annual report also informs or reminds employees of the organization's values and objectives and sensitizes them to the aspects of the organization with which they are not familiar. On the other hand, the employee already knows how the organization is performing so the annual report does not provide any substantive additional information.

4. Customers. The annual report provides customers with trend information and management performance information. They can use this to assess the company's past and current performance.

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5. Financial analysts. The set of audited comparative financial statements provides the basis for analysis done by financial analysts. Notes, which are an integral part of the statements, describe or explain various items in the statements, present additional detail, or summarize significant accounting policies. Financial analysts are the most sophisticated class of users of annual reports. However, some data may be too condensed. Analysts may also need information in addition to that provided in annual reports to facilitate their analyses. f.

Annual reports are public and accessible to anyone, including competitors. Discuss how this affects decisions about what information should be provided in annual reports.

Management may omit information entirely from the annual report or disguise it because competitors have access to annual reports. The objective of reporting should be to reveal as much as possible without giving away proprietary information or a competitive edge.

1.3

Alexander Forbes, a diversified financial services organization, is one of the major financial services organizations in Africa, providing financial solutions to individual and corporate customers. Their services include retirement planning, asset and wealth management, medical insurance, and consulting. Headquartered in Johannesburg, South Africa, the company has operations in eight regions across sub-Saharan Africa and the Channel Islands, employing over 3,000 people. It reported operating income of ZAR 3,647 million (South African rand) for the year 2017–18.

In recent years, Alexander Forbes has embarked on simplifying the company structure to enable better collaboration across divisions. One of the structural changes was the separation of the technology function from the operations function to create an information technology (IT) function as a revenue-generating cluster.

The IT function is responsible for modernizing systems to provide, among other services, a single customer view. This made it possible for Alexander Forbes to use IT as a strategic tool.

One of the ways in which this is being achieved is the company’s health insurance services.

The company keeps track of its customers in an integrated database so that customer care representatives are able to handle queries and transactions for customers across all healthcare products.

The database tracks all claims submitted by their customers, including visits made by healthcare professionals, medication, procedures, and treatments. In case of prescriptions for which cheaper options, often in the form of generic alternatives, are available, customers are immediately informed via text message to their mobile phones. However, it is often found that customers prefer the more expensive medication rather than the generic alternative. A record of co-payment is maintained on the database for such customers since the company does not cover the full cost of relatively expensive medication.

All claims submitted by customers are digitized and can be easily retrieved if any queries arise. Customers can also access their historical records through the company’s website.

Customers can install the company’s mobile application to submit claims and check their status.

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REQUIRED a. Why should Alexander Forbes collect data on the medications that are prescribed? What could the company do with this data?

The benefits a company realizes from gathering and storing data should be greater than the cost of collecting the data. Since customers will submit their claims anyway, the company has access to all the claim data, so there should not be no additional costs incurred for gathering data. The biggest cost incurred would be for storing the data, followed by the processing and aggregating of the data.

Alexander Forbes could share the collected, processed data with pharmaceutical companies as well as pharmacies / dispensaries to show trends in the types of medication prescribed over time. This would assist the pharmaceutical companies with their production schedules, and it would assist pharmacies / dispensaries in having accurate stock levels. b. Although customers are informed of cheaper generic alternatives to expensive medication, many customers opt for the latter even though they have to make a co-payment. AIS can be used for data analysis and reporting, cost benefit analysis, promotion for generic medication in terms of cost savings, and equivalent effectiveness. How can Alexander Forbes use its AIS to persuade pharmacies to encourage customers to opt for the more affordable generic alternatives?

The company could publish summary figures on the types of medication dispensed and the copayments incurred by customers at the different dispensing groups, thus demonstrating to the public where medication might be more affordable.

Another influence could be that pharmacies / dispensaries could use the information to more aggressively promote cheaper alternatives. c. How does digitizing the claims add value to the organization?

Digitizing the claims adds value since the business process is streamlined and queries can be handled more effectively and efficiently. It is no longer necessary for customer representatives to search manually through paper documents – searches can be done electronically. It is easy to lose paper documents (for example separate pages of claims or payments made) or to misfile paper documents in incorrect folders. These issues with paper documents resulted in delays when issues had to be resolved. With digitized documents, it is much easier to search for information and resolve issues, as documents are rarely missing or misfiled. Customer service representatives can easily access all required information while the representative is talking to the customer over the phone (or while handling queries online / via the mobile application). d. How does the mobile application add value to the organization?

The mobile application allows customers to submit claims and query anything at any time and any place that suits them. Customers can scan (or take a picture) of a claim whenever it is convenient for the customer – the customer is not restricted to specific times and locations. The customer does not have to visit a branch or get to a post office to either deliver or send off claim documentation.

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can search through claims and communication history because the integrated database makes this information available to both the customer and the customer representative. e. Use the Internet to find other IT improvements that Alexander Forbes has introduced outside of their healthcare division. Write a short paragraph on each new application or other newsworthy item you find.

Students should be able to find newsworthy items that might be of interest. Here are some interesting articles – not necessarily all positive news, but newsworthy nonetheless. Ensure that the links are still active before sharing them with students. https://www.businesslive.co.za/bd/companies/financial-services/2018-12-11-failed-it-upgradedrags-alexander-forbes-into-a-loss/ https://www.moneyweb.co.za/moneyweb-radio/cancelled-it-project-impacts-alexander-forbesinterims/ 1.4

Match the description in the right column with the correct information characteristic in the left column.

I 1. Access restricted E 2. Accurate B 3. Available H 4. Reputable D 5.Complete K 6. Concise L 7. Consistent M 8. Current N 9. Objective F 10. Relevant G 11. Timely J 12. Useable A 13. Understandable C 14. Verifiable

a. A report was carefully designed so that its data was easily comprehended by the reader. b. A manager working on the weekend needed information about a customer’s production requests and found it on the company’s network. c. Before production reports are accepted, two clerks working independently must produce the same information. d. An accounts receivable aging report included all customer accounts. e. A report was checked by three different people to make sure it was correct. f. An accounts receivable aging report is used in credit-granting decisions. g. An accounts receivable aging report was received before the credit manager had to decide whether to extend credit to a customer. h. Needing help with a decision, a manager sought the opinion of a highly regarded expert. i. To protect intellectual property, a company encrypted the data, stored it in a very secure facility, and limited its use to five people. j. Tired of keying supplier prices into a database, a purchasing manager insisted the data be sent in machine readable form. k. After a lengthy, rambling presentation, a CEO insisted future presentations contain only pertinent facts and last no more than 30 minutes. l. A new manager insisted that monthly reports look the same so she could compare a new month’s results to those of previous months. m. After making a decision based on outdated data, a new CFO required all analysis to be conducted with up-to-date data. n. Reluctant to rely on his personal feelings about a decision, a manager sought the opinion of an outside expert.

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1.5

EC Coaches is a privately held, medium-sized company that operates a fleet of luxury coaches, semi-luxury and commuter buses, and a variety of luxury and standard vehicles.

Ranging from five to 60 seaters, these vehicles are leased to tour operators, universities, schools, charitable organizations, and other businesses. To protect their investment in their vehicles and ensure that they provide their customers with vehicles in immaculate condition, EC Coaches has a maintenance facility where they do basic repairs and maintenance on their vehicles. Scheduled vehicle services are handled by agents according to the maintenance plans agreed at the time of purchase of the vehicle.

You were recently hired by EC Coaches and you are eager to demonstrate your worth to the company. Your supervisor asked you to prepare an accounts payable aging report as of the end of the year for use in the upcoming audit of the company’s financial statements.

REQUIRED a. What is an accounts payable aging report and what is it used for in company operations?

Student solutions will vary based on their background and education. The following are possible solutions.

An accounts payable aging report lists outstanding supplier / vendor account balances by the length of time outstanding. For example, in this case, this is a list of all agents with whom maintenance plans are agreed with the outstanding balances owed to them, as well as the length of time the balances had been outstanding. An accounts payable aging report is used in normal company operations to provide information for: • • •

Identifying major creditors – how much the business owes each creditor, and how long the outstanding balance has been owed.

Monitoring expenses – this helps with managing the cash flow of the business.

Identifying obligations that are due – and when those are due.

b. Why is an accounts payable aging report needed for an audit?

An accounts payable aging report is needed during an audit to determine which invoices are due and which invoices are overdue. Whenever the report is scrutinized, it is important to remember that not all supplier payment terms are the same – some may, for example, be that payment is made after 60 days, then invoices listed in the “before 60 days” column is not overdue yet. c. What data will you need to prepare the report. From where will you source the data and how?

To prepare an accounts payable aging report, all credit purchases from suppliers are needed – this information can be obtained from invoices indicating the amount outstanding, the length of time the balance had been outstanding, and the due date for payment. The data needed to prepare the accounts payable aging report can be collected from the purchase transactions, cash disbursement files, and cash disbursement tables. If the data is in machine-readable form, it can be collected by preparing and running programs or queries that will extract the purchases and cash payable data. If the data is maintained on paper, it can be collected from daily or monthly purchase reports and daily or monthly cash disbursements reports.

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d. What will the report look like (i.e., how will you organize the data collected to create the information your supervisor needs for the audit)? Prepare an accounts payable aging report template in Excel or another spreadsheet software.

The account payable aging report should look something like the following, whether it is prepared on paper or in Excel: Supplier Number

Supplier Name

0-30 Days Outstanding

31-60 Days Outstanding

61-90 Days Outstanding

91+ Days Outstanding

e. How do you plan to distribute the report, and how many copies will you produce? Who should receive these copies, and what security features do you intend to implement?

The accounts payable aging report should be restricted to employees with operational or authoritative responsibility for supplier accounts, such as the accounts payable clerk and the controller. If the report is in an electronic form, access to the report should be restricted to appropriate authorized personnel. If the report is distributed on paper, only as many copies as necessary should be produced and they should be delivered in a manner that ensures the confidentiality of the data. Security features could include placing the report on a passwordprotected server or encrypting the file prior to emailing it or placing it on a server.

1.6

Albert Heijn (or AH) is arguably the largest retail chain in Europe, owning supermarkets, convenience stores, and online shopping services in food and other goods. AH prides itself on establishing the first modern supermarkets. Founded in 1887 in Oostzaan, the Netherlands, Albert Heijn grew from a humble grocery store to a chain of supermarkets. Its first supermarket was established in 1952 and, over the decades, AH has been the shopping destination of choice for the majority of the people living in the Netherlands, Belgium, and other European countries. The chain comprises more than 850 stores, including more than 200 franchisees.

AH is known for being an early adopter of information technology and has been one of the first supermarkets to take on a loyalty-card program. Customers can avail of a discount with a card called ‘Bonuskaart’ in Dutch. It is issued to them after their personal information is entered into a database.

This provides AH with a mine of information about its customers. It utilizes this information to expand its business and push sales.

REQUIRED a. What kind of information do you think AH gathers via its loyalty card program?

• •

The Bonuskaart application filled out in the store captures data such as customer names, addresses, household size, ages of children, dietary preferences, and income levels.

When the Bonuskaart is used to qualify for the discounts, Albert Heijn computers record everything a customer purchases.

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b. What can the AH accomplish with the data it collects? Think in terms of strategy and competitive advantage.

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Customized Coupons and promotions. Albert Heijn analyzes customer purchases and customizes its marketing based on the results. Quarterly, Albert Heijn mails active Bonuskaart customers three coupons for frequently purchased items and three coupons for items they are likely to buy or that Albert Heijn wants them to try. Albert Heijn is so good at understanding their customer’s tastes and preferences that their coupons are 10 to 15 times more likely to be used than other coupons. The quarterly mailing also contains vouchers that allow members to redeem their accumulated points. Some 95% of all vouchers are redeemed.

Cross marketing. Analysis of customer data allows Albert Heijn to discover unique buying habits. For example, men who purchased diapers for newborns buy more beer than the normal male – presumably because they are more likely to stay at home and less likely to go out.

Improved decision-making. Albert Heijn has been able to make better decisions and set better company goals than ever before. Using data on purchases and the ethnic makeup of the neighborhoods surrounding the stores, Albert Heijn is able to stock goods that have greater customer appeal. For example, Albert Heijn noticed that customers in a small store in a South Asian and Arab part of town were not buying complete meals. They went elsewhere to buy certain staple foods and Asian brands. Further analysis led to the decision to replace the small store with a Supercenter that offered more than 800 foreign products.

It included a halal butcher shop, the latest movies from India, Arabic and Asian newspapers, and an Indian jewelry counter. Albert Heijn also redesigned its shopping carts to handle the bulk purchases of its customers more easily.

Customer loyalty. Albert Heijn used Bonuskaart data to neutralize Wal-Mart’s most significant advantage. Albert Heijn identified 300 items that price-sensitive shoppers frequently purchased and lowered their prices. This kept the customers most likely to shop at Walmart from defecting.

New product rollouts. Analysis of Bonuskaart data showed that affluent customers were not buying certain products like fruit, cheese, and wine. This led to the introduction of a premium quality brand, “Albert Heijn’s Finest,” that successfully attracted affluent customers. Customer data also allows Albert Heijn to figure out quickly how new initiatives are working. For example, when Albert Heijn rolled out ethnic foods for Indians and Pakistanis, data analysis showed that white affluent customers were also buying the products. The rollout was quickly expanded to include them.

Improved supplier relationships. Outside companies are taking advantage of Albert Heijn’s data to improve their decision-making. When Kimberly-Clark introduced a premium toilet paper, it used Bonuskaart data to track who purchased it and who continued to purchase it.

Further analysis showed that those who bought the toilet paper also were big buyers of skin-care products. This allowed Kimberly-Clark to develop a marketing program that offered free beauty treatments to those who continued to buy the toilet paper.

c. What could be some of the risks of the card program?

Some critics believe that loyalty card programs • • • •

Are too expensive to maintain and that companies can buy data to achieve similar results for less than the loyalty program costs.

Slow down checkout lines.

Are a threat to the customer’s privacy and customer’s data.

Complexity to manage the loyalty card. © 2025 Pearson Education Ltd. Downloaded by: chuemorris@gmail.com

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1.7 Match each of the following terms with its definition.

1. _J Accounting a. Exceeding the amount of information a human mind can absorb and information system process 2. _P Artificial b. Use of software and algorithms to find and solve problems and improve intelligence business performance 3. _Y Blockchain c. The benefit provided by information minus the cost of producing it 4. _D Business d. A set of activities and tasks that help accomplish a specific processes organizational goal 5. _R Data e. An agreement to exchange goods or services in exchange for cash 6. _B Data analytics f. Process of capturing, processing, and storing transaction data for later use and for producing information output 7. _U Data dashboard g. Frequent exchanges such as surrendering cash for inventory and paying employees for labor 8. _N Expenditure h. Activities associated with selling goods and services in exchange for cycle cash or a future promise of cash 9. _X General ledger i. Value chain activities that produce, market, and deliver products and reporting system to customers and provide post-delivery support 10. _G Give-get j. A system that collects, records, stores, and processes data to exchange produce information for decision makers 11. _Z_ Goal congruence k. Linking all the primary and support activities in a business 12. _T Information l. Activities such as firm infrastructure and technology that enable main activities to be performed efficiently and effectively 13. _O Machinem. An organization’s value chain as well as its vendors, distributors, and readable customers 14. _I Primary n. Activities associated with purchasing inventory for resale for cash or a activities promise to pay cash 15. _S_ Production cycle o. Data in a format that can be processed by a computer 16. _H Revenue cycle p. Computer systems that simulate human intelligence processes such as learning, reasoning, and self-improvement 17. _M Supply chain q. Procedures and routines that carry out specific activities, achieve objectives, or solve problems 18. _L Support r. Facts collected, recorded, stored, and processed by an information activities system 19. _Q System s. Activities associated with using labor, raw materials, and equipment to produce finished goods 20. _E Transaction t. Organized and processed data that provide meaning and improve decision making 21. _K Value chain u. Display of data points and performance indicators in easily understood charts, tables, or gauges 22. _C Value of v. Activities associated with hiring, compensating, promoting, and information terminating employees w. Major give-get exchanges that occur frequently in most companies x. Information-processing operations involved in preparing reports for internal and external parties y. Individual digital records linked using cryptography in a single list called a chain z. A subsystem achieves its goals while contributing to the overall goal

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CHAPTER 2 OVERVIEW OF TRANSACTION PROCESSING AND ENTERPRISE RESOURCE PLANNING SYSTEMS SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 2.1 Table 2-1 lists some of the documents used in the revenue, expenditure, and human resources cycle. What kinds of input or output documents or forms would you find in the production (also referred to as the conversion cycle)?

Students will not know the names of the documents, but they should be able to identify the tasks about which information needs to be gathered. Here are some of those tasks: • • • • • • • • • • • •

Requests for items to be produced Documents to plan production Schedule of items to be produced List of items produced, including quantity and quality Form to allocate costs to products Form to collect time spent on production jobs Form requesting raw materials for production process Documents showing how much raw materials are on hand Documents showing how much raw materials went into production List of production processes List of items needed to produce each product Documents to control movement of goods from one location to another

2.2 Give three examples each of the advantages and the disadvantages of an ERP system with a centralized database. How can you increase the chances of a successful ERP implementation?

An ERP system, with its centralized database, provides significant advantages: • • •

An ERP provides an integrated, enterprise-wide, single view of the organization’s data and financial situation. Storing all corporate information in a single database breaks down barriers between departments and streamlines the flow of information.

Data input is captured or keyed once, rather than multiple times, as it is entered into different systems. Downloading data from one system to another is no longer needed.

Management gains greater visibility into every area of the enterprise and greater monitoring capabilities. Employees are more productive and efficient because they can quickly gather data from both inside and outside their own department.

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ERP systems also have significant disadvantages: • •

•

Cost. ERP hardware, software, and consulting costs range from $50 to $500 million for a Fortune 500 company and upgrades can cost $50 million to $100 million. Midsized companies spend between $10 and $20 million.

Amount of time required. It can take years to select and fully implement an ERP system, depending on business size, number of modules to be implemented, degree of customization, the scope of the change, and how well the customer takes ownership of the project. As a result, ERP implementations have a very high risk of project failure.

Changes to business processes. Unless a company wants to spend time and money customizing modules, they must adapt to standardized business processes as opposed to adapting the ERP package to existing company processes. The failure to map current business processes to existing ERP software is a main cause of ERP project failures.

Reaping the potential benefits of ERP systems and mitigating their disadvantages requires conscious effort and involvement by top management. Top management’s commitment to and support for the necessary changes greatly increase the chances of success. Because ERP systems are complex and expensive, choosing one is not an easy task. In doing so, you must take great care to ensure that the ERP system has a module for every critical company process and that you are not paying for software modules that you do not need. One way to choose a suitable system is to select a package designed for your industry. Although cost is a huge concern, buying too cheaply can cost more in the long run if the system does not meet your needs, because modification costs can be quite high. You can minimize the risk of buying the wrong package by researching the best ERP vendors. There are many ERP vendors, the two largest being SAP and Oracle. Other leading vendors are The Sage Group, Microsoft, and Infor.

Because it is too difficult for most companies to implement ERP software by themselves, they often hire an ERP vendor or a consulting company to do it for them. These firms usually provide three types of services: consulting, customization, and support. For most midsized companies, implementation costs range from the list price of the ERP user licenses to twice that amount. Large companies with multiple sites often spend three to five times the cost of the user license.

Because many processes automatically trigger additional actions in other modules, proper configuration is essential. This requires a sound understanding of all major business processes and their interactions so they can be defined. Examples include setting up cost/profit centers, credit approval policies, and purchase approval rules. In the configuration process, companies balance the way they want the system to operate with the way it lets them operate. If the way an ERP module operates is unacceptable, the company can modify the module. Alternatively, it can use an existing system and build interfaces between it and the ERP system. Both options are time consuming, costly, and result in fewer system integration benefits. In addition, the more customized a system becomes, the more difficult it is to communicate with suppliers and customers. To make configuration easier, ERP vendors are developing built-in “configuration” tools to address most customers’ needs for system changes.

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The importance of sound internal controls in an ERP cannot be overstated. The integrated nature of ERP systems means that unless every data item is validated and checked for accuracy at the time of initial entry, errors will automatically propagate throughout the system.

Thus, data entry controls and access controls are essential. Most managers and employees see and have access to only a small portion of the system. This segregation of duties provides sound internal control. It is important to separate responsibility for custody of assets, authorization of activities that affect those assets, and recording information about activities and the status of organizational assets.

2.3 What is the purpose of turnaround documents? Give examples of how companies use turnaround documents.

Answers may vary.

Companies typically use turnaround documents to enable cheap, fast, accurate data input.

Turnaround documents also enable separation of duties, where a document is printed in one functional area and then used in another.

Examples of turnaround documents include picking tickets and packing slips. The picking ticket is printed in a separate area, and it includes all the items that need to be sent off to a customer (that is, what the customer has ordered). Ideally, the picking ticket should match the packing slip (what is actually sent off to the customer, which may or may not match the picking slip – in cases where products are not available or are on back order, the picking ticket and packing slip will be different).

2.4 Discuss the guidelines for a better coding system. Explain why these guidelines are important, and what would happen if they are not met.

The following guidelines result in a better coding system. The code should: • • • •

Be consistent with its intended use, which requires that the code designer determine desired system outputs prior to selecting the code.

Allow for growth. For example, don’t use a three-digit employee code for a fastgrowing company with 950 employees.

Be as simple as possible to minimize costs, facilitate memorization and interpretation, and ensure employee acceptance.

Be consistent with the company’s organizational structure and across the company’s divisions.

Importance of guidelines: • • • •

Efficiency in data processing, saving time and resources.

Accuracy of results resulting in enhanced reliability.

Flexibility and Scalability, the system can grow with the organization which is costeffective in the long term.

User-friendly system that is simple and intuitive and requires few resources in training.

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Consequences of non-compliance of guidelines: • • • • •

Increased errors due to inconsistent or complex coding system.

Reduced productivity due to excessive time taken to decipher codes or correct errors.

Higher Costs associated with training, data correction, and system adjustments.

Data integrity issues arising from inconsistent codes.

Inaccessibility due to complex codes, leading to lower utilization of the system.

2.5 Some accounting students believe that they do not need to study information systems to be good accountants. What are the disadvantages of this point of view? What are the advantages of accountants being involved in designing and preparing reports that measure more than just financial performance?

Disadvantages of accounting students dismissing information systems: • • • •

Lack of holistic understanding of the organization and its operations: Accountants lacking the knowledge of information systems may only focus on financial performance indicators, missing out on a comprehensive view of the organization's operations.

Inability to identify inefficiencies: Lack of understanding of information system may lead to overlooking potential improvements in the accounting processes, leading to inefficiencies.

Delay in informed decision-making: Without access to timely and information, managers will have to wait for periodic reports, resulting in delays in critical decisionmaking.

Inability to decipher emerging issues and manage risks: The inaccessibility to timely and reliable data and reports may prevent accountants from responding quickly and proactively to emerging situations in the organization and manage risks effectively.

Advantages of accountants being involved in designing information systems in an organization: • • • •

Maximized reliability and usefulness of the information provided by the information system.

Awareness of potential risks to data integrity and financial information and their mitigation: Strategic contribution by the accountants that go beyond financial data to include operational, customer, and other performance metrics.

Enhanced decision support to the senior management with the timely provision of reliable, and relevant data, improving the overall quality of decision-making.

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SUGGESTED ANSWERS TO THE PROBLEMS 2.1 The chart of accounts must be tailored to an organization’s specific needs. Discuss how the chart of accounts for the following organizations would differ from the one presented for S&S in Table 2-2.

Some of the changes in the chart of accounts for each type of entity include the following: a.

b.

c.

University •

No equity or summary drawing accounts. Instead, have a fund balances section for each type of fund.

•

Several types of funds, with a separate chart of accounts for each. The current fund is used for operating expenses, but not capital expenditures. Loan funds are used to account for scholarships and loans. Endowment funds are used to account for resources obtained from specific donors, generally with the objective that principal be preserved, and that income be used for a specific purpose. Plant funds are used for major capital expenditures. Most fund categories would be further divided into restricted and unrestricted categories.

•

Unlikely to have Notes Receivable but may have Accounts Receivable for students who pay tuition in installment payments.

•

Tuition and fees would be one source of revenue. Others include gifts, investment income, sales of services, and, for public universities, state appropriations.

•

Student loans are an asset; student deposits are a liability.

Bank •

Loans to customers would be an asset, some current others noncurrent, depending upon the length of the loan.

•

No inventory

•

Customer accounts would be liabilities.

•

Classification of revenue would be among loans, investments, service charges, etc.

•

No cost of goods sold.

Government Unit •

No equity or summary drawing accounts. Instead, have fund balances.

•

Balance sheet shows two major categories: (1) assets and (2) liabilities and fund equity.

•

Separate chart of accounts for each fund (general fund, special revenue fund, capital projects fund, and debt service fund).

•

Revenue and expenditure accounts would be grouped by purpose (e.g., police, highways, sanitation, education, etc.).

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d.

e.

•

Encumbrance accounts

•

Revenues would include taxes, licenses and permits, fines, and charges for specific services.

•

Taxes receivable as a separate category due to importance.

•

No cost of goods sold.

Manufacturing Company •

Several types of inventory accounts (raw materials, work-in-process, and finished goods).

•

Additional digits to code revenues and expenses by products and to code assets/liabilities by divisions.

Expansion of S&S •

Additional digits to code: − Revenues and expenses by products and by stores − Assets/liabilities by stores.

2.2 This chapter discusses APIs as a method of exchanging data across disparate systems.

Research the use of APIs in business. Try to find examples of APIs that use the XML and JSON approaches to structuring data for those exchanges. Write a 3–4 page report about what you found including examples of each data structure.

Students should be able to find numerous examples of APIs. They will likely find the three principle API protocols (REST, SOAP, and RPC).

A fun set of examples to explore is hosted by the National Highway Traffic Safety Administration. (https://vpic.nhtsa.dot.gov/api/) There you can extract data in XML, JSON or CSV using an API with the POST method of HTML. For example, click the link https://vpic.nhtsa.dot.gov/api/vehicles/GetMakeForManufacturer/honda?format=json and you will see all of the car companies for which Honda manufactures cars. Change “honda” in the url to “isuzu” and you will see the same for Isuzu. JSON is not very readable in this context. However, you can copy and paste the data from the API into https://jsonformatter.org/json-parser to read it more clearly. More importantly, you can place the connection string in Excel to create an dynamic table of this web data (“Data”, “From Web”, paste url into dialogue, “OK”, PowerQuery will open, “To Table”). You can do this similarly in Alteryx.

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The objective is to get the students to do the research necessary to learn more about APIs, API formats and current real world uses of APIs. 2.3 The purpose of an audit trail is to be able to trace a transaction from its origin through source documents to the final output or backwards from the final output to the original source documents to prove the accuracy and validity of ledger postings.

Describe in detail the audit trail for the following in a manufacturing business: a. Shipping an order to a customer b. Customer returns defective goods c. Employee payroll for employee wages (using time cards or time sheets) The purpose of an audit trail is to be able to trace a transaction from its origin on source documents to the final output or backwards from the final output to the original source documents to prove the accuracy and validity of ledger postings. Describe in detail the audit trail for the followingw in a manufacturing business: a. The audit trail for shipping an order to a customer needs to link the sales order to the picking ticket (to identify the products and the quantity of each product). Ordered inventory should correspond to what is documented on the picking ticket and documentation signed off by both the warehouse (from where the inventory was released) and the shipping department (from where the items will be sent to the customer) should correspond in terms of the number and identities of customers that placed the order, items, and quantities.

The sales order should be linked to the waybill and the packing slip at the shipping department to be able to track that billing and accounts receivable have the correct amount due by the customer. The waybill and packing slip should be linked to the courier company responsible for the delivery of the appropriate goods to the customer as indicated on the sales order. Inventory needs to be reduced by the quantities as indicated on the picking ticket (not the sales order, as there may be items on back order). b. he audit trail for customers who return defective goods needs to link the sales order to the goods received note at the receiving department to verify that the goods that were returned were actually purchased by the specific customer, and that the goods were actually returned. A credit memo is then linked to the customer’s account (accounts receivable) to adjust the customer balance with the amount indicated on the credit memo. c. The audit trail for the employee payroll for employee wages where employees need to complete time cards or time sheets links the records of all employee activities that are recorded on time cards or time sheets to the checks or electronic payments related to each employee.

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2.4 This chapter discusses SaaS. Research the prevalence of SaaS ERP solutions for small and medium size businesses. Write a 3–4 page report that describes one or more companies that use a SaaS approach to their accounting system. Include how SaaS works as well as its advantages and disadvantages.

Students should be able to find numerous examples of companies offering cloud and SaaS ERP software. They should find products like NetSuite ERP, Acumatica, Sage Intacct, SAP Business ByDesign, Dynamics GP, as well as other smaller players like GeniusERP and TallyPrime . Students may be frustrated as it is not easy to identify the platform on which the software in implemented. Most of these products can be implemented on-premise, cloud, or SaaS. Further, many do not distinguish between their cloud and SaaS offerings externally as they appear the same to the user. That distinction will not be made until a potential customers use case is established.

Regardless of this difficulty, they will be able to find advantages and disadvantages to cloud/SaaS vs on-premise.

The objective is to get the students to do the research to see the numerous offerings on the market and to see that many offerings target specify industries (such as construction, or production).

2.5 Match the following terms with their definitions: i c t y d u z j e r k f h a s l v o x b p w q m n g

1. attribute 2. audit trail 3. batch processing 4. block code 5. chart of accounts 6. coding 7. control account 8. data processing cycle 9. data value 10. database 11. entity 12. field 13. general journal 14. general ledger 15. group code 16. master file 17. mnemonic code 18. real-time processing 19. record 20. sequence code 21. source data automation 22. source documents 23. specialized journal 24. subsidiary ledger 25. transaction file 26. turnaround documents

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2.6 Identify which data processing method (batch or real-time) would be required for the following scenarios: a. b. c. d. e. f. g. h.

Prepare weekly payroll checks Purchase goods from an online (e-commerce) store Prepare daily bank deposits Prepare municipality bills for water and electricity Make a cash withdrawal at an ATM Purchase bus tickets online Transfer money to your mother via money transfer at the local grocery store Purchase clothing from your favorite retail outlet at the local mall

a. b. c. d. e. f. g. h.

Batch Online, real-time Batch Batch Online, real-time Online, real-time Online, real-time Batch

2.7 On their websites, you will find several online demonstrations for the SAP, Oracle, and Dynamics ERP systems. Visit these websites and explore their content by doing the following: Search the SAP, Oracle, and Dynamics sites for corporate videos, and watch two of them. Explore the industries, services, solutions, and platforms that they offer. Read several of the articles, such as the ones about customer successes.

After viewing the Web sites, and based on your reading of the chapter, write a twopage paper that describes current ERP offerings and how an ERP can connect and integrate the revenue, expenditure, human resources/payroll, and financing cycles of a business.

Student solutions will vary depending on the demonstrations they observe. However, the demonstrations should give the students a more concrete and visual understanding of what an ERP system is and does. Student solutions should at least discuss how an ERP could integrate all of the various cycle activities of a business into one integrated system.

2.8 Which of the following actions update a master file and which would be stored as a record in a transaction file? a. b. c. d. e. f. g. h. i.

Add a new customer Record purchases of raw materials Change the tax percentage on taxable goods Update supplier payment terms Record sales Record employee commission on sales Update accounts receivable balance Update unit prices of selected stock items Record cash receipts Peg m a rasilo.cnomEducation Ltd. Downloaded by: c© h ue2m0o2rr5is@ Distribution of this document is illegal

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j. Update customer balance k. Update customer contact details l. Record payroll checks a. b. c. d. e. f. g. h. i. j. k. l.

Master file Transaction file Master file Master file Transaction file Transaction file Master file Master file Transaction file Master file Master file Transaction file

2.9 You were hired to assist Ashton Fleming in designing an accounting system for S&S. Ashton has developed a list of the journals, ledgers, reports, and documents that he thinks S&S needs (see Table 2-4). He asks you to complete the following tasks: a. Specify what data you think should be collected on each of the following four documents: sales invoice, purchase order, receiving report, employee time card b. Design a report to manage inventory. c. Design a report to assist in managing credit sales and cash collections. d. Visit a local office supply store and identify what types of journals, ledgers, and blank forms for various documents (sales invoices, purchase orders, etc.) are available. Describe how easily they could be adapted to meet S&S’s needs.

No single answer exists with this case. Indeed, solutions will vary depending upon student ingenuity and creativity. Student answers can be compared to examples of these documents found in chapters 10 and 11.

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a.

A sample invoice is presented in the Revenue Cycle chapter. A sample purchase order is presented in the Expenditure Cycle chapter. A sample receiving report also appears in the Expenditure Cycle chapter. Although student designs will vary, each document should contain the following data items: Sales Invoice Customer name and address Customer account number Customer order number Salesperson code Shipping Address Shipper and date shipped Terms of sale Total Amount due Purchase Order Ship to address Bill to address Purchasing agent number Quantity of parts ordered Prices of parts ordered Taxes, if any

Product code or number Product description Quantity ordered Quantity shipped Unit price Extended price Taxes, if applicable

Item numbers ordered Payment terms Shipping instructions Supplier name or number Date of purchase Total amount of purchase

Receiving Report Vendor name Vendor address Shipper Quantity received Description/quality remarks Inspected by

Vendor number Date received Receiving clerk number Part number received Purchase order number

Employee Time Card Employee name Employee number Pay period Department number Employee signature

Total regular hours Time in/ Time out Total overtime hours Approved by

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b.

The report to manage inventory should contain the following information: • • • • • • • • •

c.

The report to manage credit sales and cash collections should include: • • • • •

d.

Preferred vendor Product number Description Reorder point Quantity on Hand Quantity Available Vendor performance history Quantity on order Lead time

Credit sales per period Cash collections per period Aging of accounts receivable Customers by geographic region Uncollectible accounts per period

The answers to this will vary depending upon the types of documents carried in the office supplies stores visited by the students.

A fruitful topic for class discussion, or a possible additional case assignment, is to compare the design of paper documents to the data entry screen layouts used in various popular accounting packages.

2.10 Correct answers bolded 1. Which of the following statements is (are) true? a. Well-designed documents and screens improve accuracy and completeness by providing instructions or prompts about what data to collect b. Online batch processing is where transaction data are entered, edited, and processed as they occur. c. ERP implementation costs are likely less for a SaaS implementation than an on-premise implementation. d. In an ERP system, data entry controls such as validating data item and checking them for accuracy at the time of initial entry are not needed. e. Data in ledgers is organized logically using coding techniques that assign numbers or letters to items to classify and organize them.

2. Which of the following statements is (are) true? a. With sequence codes, items are numbered consecutively to account for all items, and missing items cause a gap in the numerical sequence. b. The data capture or input process is usually triggered by a top management decision.

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c. Updating done periodically, such as daily or weekly, is referred to as batch processing. d. Cumulative accounting information is stored in general and subsidiary journals. e. Computers store data in a field; the fields containing data about entity attributes constitute a record.

3. Which of the following statements is (are) true? a. A chart of accounts facilitates preparing financial statements because data stored in individual accounts can easily be summed for presentation. b. Repetitive and frequently used database queries are usually developed by users; one-time queries are usually developed by information systems specialists. c. A database query can provide the information needed to deal with problems and questions that need rapid action or answers. d. A journal entry shows the accounts and amounts to be debited and credited. e. Transaction files are permanent and must be maintained for several years for backup purposes.

4. Which of the following statements is (are) true? a. A group code is derived from the description of the item and is usually easy to memorize. b. Using source data automation or well-designed turnaround documents and data entry screens helps ensure captured data are accurate and complete c. It is usually best to let a user determine what data to input rather than have data input screens list the data the user needs to enter d. If the sum of all subsidiary ledger account balances does not equal its general ledger control account balance, a recording error has occurred. e. Real-time processing updates transactions as they occur, helping ensure stored information is current and useful in making decision.

5. Which of the following statements is (are) true? a. With mnemonic codes, blocks of numbers are reserved for specific categories of data. b. Input controls are improved by using pre-numbered source documents or by the system automatically assigning a sequential number to each transaction. c. In an integrated ERP system, undetected data entry errors can automatically propagate throughout the system. d. As ERP modules do not automatically trigger additional actions in other modules, it is less important to understand business processes and their interactions. e. A purchase to pay ERP module facilitates production scheduling, work-inprocess, quality control, cost management, and manufacturing processes.

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6. Which of the following statements is (are) true? a. Data are one of a company’s most important resources but to function properly most organizations do not have to have the data readily and easily accessible. b. Turnaround documents are company output sent to an external party and returned as an input document. c. Each type of entity possesses the same set of attributes or characteristics of interest that are stored, but the specific data values for those attributes will differ depending on the entity. d. Reaping the potential benefits of ERP systems and mitigating their disadvantages requires conscious effort and involvement by top management. e. Real-time data processing is almost always cheaper and more efficient than batch processing.

7. Which of the following statements is (are) true? a. Source data automation devices capture transaction data in paper form at the time and place of their origin. b. Master files are permanent and exist across fiscal periods; individual master file records may change frequently. c. General ledgers are often used for accounts receivable, inventory, fixed assets, and accounts payable. d. If an ERP system does not meet your needs, it can almost always be inexpensively modified to meet your unique needs e. When choosing an ERP system, make sure it has a module for every critical company process and you are not paying for modules you do not need.

8. Which of the following statements is (are) true? a. Documents are records of transaction or other company data that can be printed out or stored as electronic images in a computer b. Transaction data are almost always recorded in a ledger before they are entered into a journal c. Since batch processing data are current and accurate only immediately after processing, it is used for applications that do not need frequent updating. d. ERP systems are not effective in integrating non-financial company operations with a traditional accounting system. e. Well-designed screens improve accuracy and completeness by using checkoff boxes or pull-down menus to present the available options 9. Which of the following statements is (are) true? a. A transaction file contains records of individual business transactions and is similar to a general ledger in a manual AIS. b. To ensure credit sales policies are followed, the system can be programmed to check a customer’s credit limit and payment history.

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c. Use of pre-numbered documents makes it harder to verify that all transactions have been recorded and that none has been misplaced. d. An ERP system uses a centralized database to share information across business processes and coordinate activities. e. It is difficult for an ERP system to provide management with the up-to-date information needed to plan, control, and evaluate an organization’s business.

10. Which of the following statements is (are) true? a. The need for reports should be periodically assessed because they are often prepared long after they are needed---wasting time, money, and resources. b. An audit trail is a transaction path through a data processing system from point of origin to final output, but not backward from final output to point of origin. c. Accountants and systems developers do not need to understand how data are captured, organized, stored, processed, or accessed. d. An AIS has traditionally been referred to as a transaction processing system because its only concern was financial data and accounting transactions. e. A master file, like a ledger in a manual AIS, stores cumulative information about an organization.

SUGGESTED ANSWERS TO THE CASES 2.1 Bar Harbor Blueberry Farm Data from Case Date March 7 March 11 March 14 March 21 March 21 March 24

Supplier Invoice AJ34 14568 893V 14699 10102 10145

Supplier Name Bud’s Soil Prep Osto Farmers Supply Whalers Fertilizer Osto Farmers Supply IFM Wholesale IFM Wholesale

Supplier Address PO Box 34 45 Main Route 34 45 Main 587 Longview 587 Longview

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Amount $2,067.85 $ 67.50 $5,000.00 $3,450.37 $4,005.00 $ 267.88

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Purchases Journal Page 1 Date

Supplier

March 7 March 11 March 14 March 21 March 21 March 24

Bud’s Soil Prep Osto Farmers Supply Whalers Fertilizer Osto Farmers Supply IFM Wholesale IFM Wholesale

March 31

TOTAL

Supplier Invoice AJ34 14568 893V 14699 10102 10145

Account Number 23 24 36 24 38 38

Post Ref √ √ √ √ √ √

Amount $2,067.85 $ 67.50 $5,000.00 $3,450.37 $4,005.00 $ 267.88 14,858.60

General Ledger Accounts Payable Date March 1

Account Number: 300

Description Balance Forward

March 31

Post Ref

Debit

√

Purchases Date March 1 March 31

Credit

Balance $18,735.55

14,858.60

33,594.15

Account Number: 605 Description Balance Forward

Post Ref

Debit

√

14,858.60

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Credit

Balance $54,688.49 69,547.09

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Account Payable Subsidiary Ledger Account No: 23 Date March 1 March 7

Description Balance Forward Supplier invoice AJ34

Account No: 24 Date March 1 Mar 11 Mar 21

Whalers Fertilizer

Description Balance Forward Supplier invoice 893V

Account No: 38 Date March 1 Mar 21 Mar 24

Osto Farmers Supply

Description Balance Forward Supplier invoice 14568 Supplier invoice 14699

Account No: 36 Date March 1 March 14

Bud’s Soil Prep

IFM Wholesale

Description Balance Forward Supplier invoice 10102 Supplier invoice 10145

PO Box 34 Debit

45 Main Debit

Route 34 Debit

587 Longview Debit

Terms: 2/10, Net 30 Credit Balance 0.00 2,067.85 2,067.85

Terms: 2/10, Net 30 Credit Balance 0.00 67.50 67.50 3,450.37 3,517,87

Terms: 2/10, Net 30 Credit Balance 0.00 5,000.00 5,000.00

Terms: 2/10, Net 30 Credit Balance 0.00 4,005.00 4,005.00 267.88 4,272.88

2.2 SDC Corp. - Chart of Accounts Design Design a chart of accounts for SDC. Explain how you structured the chart of accounts to meet the company’s needs and operating characteristics. Keep total account code length to a minimum, while still satisfying all of Mace’s desires.

(Adapted from the CMA Exam) A six-digit code (represented by letters ABCDEF) is enough to meet SDC’s needs: A This digit identifies the 4 divisions plus the corporate office B This digit represents major account types (asset, liability, equity, revenue, expense).

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C This digit represents the major classification within account type: • For balance sheet accounts, this represents specific sub-categories (current assets, plant and equipment, etc.), as only six categories are needed.

• For expense and revenue accounts, this digit represents the product group, as again there are only five products plus general costs.

D This digit represents specific accounts or cost centers: • For balance sheet accounts, this is the control account; one digit is adequate because the problem says no more than 10 categories.

• For expense accounts, this is the cost center; one digit is adequate because the problem indicates no more than 6 cost centers.

EF These two digits represent the subsidiary accounts and natural expense categories: • For expense accounts, these represent the 56 natural expense categories and variances for each cost center.

• For the balance sheet, these two digits accommodate up to 100 subsidiary accounts.

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CHAPTER 3 SYSTEMS DOCUMENTATION TECHNIQUES SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

3.1

Identify the DFD elements from the following narrative: Henk buys a new bicycle at a local shop and pays with his debit card. The sales clerk enters the transaction in the cash register. At the time of closing, the sales clerk gives the register tape and copy of cash record/receipt to his manager.

Data Flows: merchandise, payment, cash and register tape Data Source: customer Processes: capture sales and payment data and collect payment, give cash and register tape to manager Storage: sales file (register tape), cash register

3.2

Do you agree with the following statement: “Any one of the systems documentation procedures can be used to adequately document a given system”? Explain.

It is usually not sufficient to use just one documentation tool. Every tool documents a uniquely important aspect of a given information system. For example: • System flowcharts are employed to understand physical system activities including inputs, outputs, and processing.

• Data flow diagrams provide a graphic picture of the logical flow of data within an organization.

• Business process diagrams show the activities a company engages in to do business and the diagrams can be used to evaluate internal controls strengths and weaknesses.

Each alternative is appropriate for a given aspect of the system. As a result, they work together to fully document the nature and function of the information system.

3.3

Compare the guidelines for preparing flowcharts, BPDs, and DFDs. What general design principles and limitations are common to all 3 documentation techniques?

Similar design concepts include the following: • All three methods require an initial understanding of the system before actual documentation begins. This insures that the system is properly represented by the diagram.

•

All three methods require the designer to identify the elements of the system and to identify the names and relations associated with the elements.

•

All three methods encourage the designer to show only the regular flows of information and not to be concerned with unique situations.

•

All three require more than one “pass” to capture the essence of the system accurately.

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The product of all three methods is a model documenting the flow of information, processes, and/or documents in an information system. All three documentation methods are limited by the nature of the models they employ, as well as by the talents and abilities of the designer to represent reality.

3.4

Explain the difference between a system flowchart and a program flowchart. What is the relationship between the two?

A system flowchart graphically represents the relationships among system inputs, processing, storage, and output. It is used to describe the data flows and procedures within an accounting information system. A system flowchart typically provides an overview of how each business process works. A program flowchart, on the other hand, illustrates the sequence of logical operations performed by a computer in executing a single program (as opposed to an entire system as in the case of a system flowchart).

The relationship between a system flowchart and a program flowchart is that a program flowchart describes the specific steps and logic used to execute a process depicted on a system flowchart.

3.5

Describe how process mining visualizations differ from flowcharts, BPDs, and DFDs. Why should a company consider using a process mining visualization when these other documentation techniques exist?

Process mining visualizations are created from data that the company has created and stored in a database. Thus, a process mining visualization shows what actually happens in a company and not what should happen. In contrast, the other documentation techniques are not created based on actual data, rather on what is designed to happen. Process mining visualizations are also created automatically from an event log. The other documentation techniques are created from narratives or interviewing employees. Thus, the process mining visualization is less subject to errors based on interpretations or poor memory.

A company should consider using process mining visualizations to help them understand what is actually happening in the company. Process mining can help reveal internal control problems and inefficiencies in an organization. It is a tool that can be used to help manage the overall organization on a day-to-day basis.

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SUGGESTED ANSWERS TO THE PROBLEMS

3.1 Prepare flowcharting segments for each of the following operations: a. Backing up historical source documents by converting them to a magnetic tape using a computer-based optical character reader (OCR)

Documents to Tape by OCR

b. Updating an airline reservation using your home computer View reservation data

c. Preparing an accounts receivable aging report on paper from the accounts receivable master file and the cash receipts master file, both of which are stored electronically

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Source documents

Database

d. Using the company tablet to remotely enter transactions that were recorded on paper-based source documents during a power failure

Update database Company tablet

e. An automatic update of the payroll transaction file and the cumulative payroll data in the payroll master file, with employees’ working hours from a biometrical database

f. Using a mobile phone to access the company’s inventory database to check stock levels

Inventory database

Display query and response

Mobile phone

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3.1 (continued) Assorted Flowcharting Segments

g. Manually backing up the customer database to magnetic tape

h. Having your supplier database automatically backed up from a magnetic tape to the hard disk after a hardware malfunction

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3.1 (continued)

Assorted Flowcharting Segments

i. Using a laptop to access sales orders for the last month, hard copies of which are printed and filed in descending order of date of the sales orders

3.2

At the Barsus steel factory, employees have to enter their working hours on data input terminals and the job code for each project they work on. They enter the starting time and the time they stop working on each project. The international head office of Barsus receives the job-time data electronically every day. Not all the divisions of Barsus are equipped with the electronic system; some of them still work with paper job-time tickets. These tickets are mailed weekly and scanned at the head office, where the data is stored digitally. The payroll database is updated weekly based on the job-time tickets. All employees are paid electronically and therefore no checks are printed. Instead, the payroll system deposits an employee’s net pay in the employee’s bank account. Payments are made to government tax bodies. All disbursements are accompanied by a report summarizing the disbursement. The system also produces © 2025 Pearson Education Ltd. Downloaded by: chuemorris@gmail.com Distribution of this document is illegal

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pay stub data that is stored in a payroll transaction file that is accessible to employees over the internet. An electronic summary payroll report is created and sent to the payroll supervisor.

REQUIRED a. Prepare a system flowchart for the Barsus steel factory payroll processing.

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3.2 b. Prepare a BPD for the Barsus steel factory payroll processing.

Employee

Activities Performed

Job Sites

Weekly Enter jobtime tickets

Data Processing

Process jobtime tickets weekly

Express mail paper jobtime tickets

Update payroll database, work in process database, payroll transaction file

Remote locations Enter jobtime tickets daily

Disburse funds to employees, government company

Payroll Supervisor

Employees

Create and send summary payroll report

Review summary payroll report

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3.3

Prepare a document flowchart to reflect how ANGIC Insurance Company processes its casualty claims.

a.

CLAIMS DEPARTMENT

ADJUSTER From claimant

Notice of Loss

START

1 2

Proof of LoPsrsooFfoorfm Loss

Prepare proof of loss form, claim record

From Claimant

3 4

DATA PROCESSING

1 2

Proof of LoPsrsoof of

3

Loss

4

Adjuster’s Report

1

Loss

2

Authorize Claim Payment

2

Loss

4

Claim Record

Proof of Loss

N

2

1

Proof of LoPssroof of

3

Claim Record

Adjuster’s Report

To Claimant

Proof of LoPsrsoof of

Notice of Loss

2

Prepare Separate Report

Assist claimant with form

Notice of Loss

Proof of Loss

Prepare Check & Disbursement List

Disbursement List

1

Proof of Loss

N

Adjuster’s Report

To claimant

A

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Check

Accounting

To Claimant

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3.3

b.

Employee Claims Department

Prepare a BPD to reflect how ANGIC Insurance Company processes its casualty claims.

Activities Performed From Claimant Receive notice of loss

Prepare proof of loss form, send to claimant

Data Processing Department

Adjustor

Claims Department

Initiate record of claim

Receive notice of loss & record of claim Help claimant complete proofof-loss, agree on loss amount

Receive authorized proof-ofloss

Prepare & disburse payment check

Prepare cash disbursements list

Prepare adjuster report

Receive proofof-loss, adjustor

Authorize payment to

report

claimant

Accounting Review cash disbursement list

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3.4

Prepare a BPD that documents Beccan’s business processes.

Employee Retail Store

Activities Performed Weekly & rush orders

Review inventory, place order Shipping Clerk

Warehouse Inventory Control Clerk

Accounts Payable

Count inventory and reconcile to corporate database

Receive goods

Fill orders, authorize delivery, ship goods System generates purchase requisition

Purchasing Department

Warehouse Receiving Clerk

Quarterly

Adjust & approve purchase requisition

Send PO to vendor

Finalize & approve system generated PO Receive system prepared receiving report

Maintain & update perpetual inventory system

Receive goods, complete receiving report: date and quantity From vendor Get receiving report & PO

Receive vendor invoice

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Reconcile P.O., receiving report, invoice

Disburse funds to vendors

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3.5

As the internal auditor for No-Wear Products, you have been asked to document the company’s payroll processing system. Based on your documentation, No-Wear hopes to develop a plan for revising the current system to eliminate unnecessary delays in paycheck processing. The head payroll clerk explained the system: The payroll processing system at No-Wear Products is fairly simple. Time data are recorded in each department using timecards and clocks. It is annoying, however, when people forget to punch out at night, and we have to record their time by hand. At the end of the period, our payroll clerks enter the timecard data into a payroll file for processing. Our clerks are pretty good—though I’ve had to make my share of corrections when they mess up the data entry.

Before the payroll file is processed for the current period, human resources sends us personnel changes, such as increases in pay rates and new employees. Our clerks enter this data into the payroll file. Usually, when mistakes get back to us, it’s because human resources is recording the wrong pay rate or an employee has left and the department forgets to remove the record.

The data are processed and individual employee paychecks are generated. Several reports are generated for management—though I don’t know what they do with them. In addition, the government requires regular federal and state withholding reports for tax purposes.

Currently, the system generates these reports automatically, which is nice. a.

Prepare a context diagram to document the payroll processing system at NoWear Products.

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Internal

Department Withholding Reports

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3.5

a. (continued.)

Level 0 Data Flow Diagram for the payroll processing system at No-Wear Products.

Operating

Time Card Data

Human Resources Department

Personnel Changes 1.0 Process Employee

2.0 Update Payroll File

Payroll File

4.0

3.0 Generate Paycheck

Payroll Reports Reports

Employee

Reports

Pay check Management

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Agencies

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3.5

b. Prepare a document flowchart to document the payroll processing system at No-

Wear Products.

No-Wear Products-Payroll Employees in Functional Department

Payroll

Time Card

Record Time Data

Record Time

Completed Time Card

Enter Time Data

Process Payroll Changes

Completed Time Card

Enter Payroll Changes

Payroll File

From Human Resource Dept

Payroll Changes

N

Process Payroll, Prepare Checks and Reports

Paycheck

N

Employee

Management Report

Management

Federal Tax Report

Stat Tax Report

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Goverrnment

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3.5

c. Prepare a BPD to document the payroll processing system at No-Wear Products.

Employee

Activities Performed

Departments Record time data

Payroll Enter time data and personnel changes into payroll system

Process payroll. Prepare employee paychecks.

Prepare payroll reports for management and for federal and state withholdings tax

Disburse employee paychecks.

Send reports to management and governmental agencies

Human Resources Personnel changes

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3.6

Ashton Fleming has decided to document and analyze the accounts payable process at S&S so the transition to a computerized system will be easier. He also hopes to improve any weaknesses he discovers in the system. In the following narrative, Ashton explains what happens at S&S: Before S&S pays a vendor invoice, the invoice must be matched against the purchase order used to request the goods and the receiving report that the receiving department prepares.

Because all three of these documents enter the accounts payable department at different times, a separate alphabetical file is kept for each type of document. The purchase orders that are forwarded from purchasing are stored in a purchase order file. The receiving reports are stored in a receiving report file. When vendor invoices are received, the accounts payable clerk records the amount due in the accounts payable file and files the invoices in the vendor invoice file.

S&S pays all accounts within 10 days to take advantage of early-payment discounts. When it is time to pay a bill, the accounts payable clerk retrieves the vendor invoice, attaches the purchase order and the receiving report, and forwards the matched documents to Ashton Fleming. Ashton reviews the documents to ensure they are complete, prepares a two-part check, forwards all the documents to Susan, and records the check in the cash disbursements journal.

Susan reviews the documents to ensure that they are valid payables and signs the checks. She forwards the check to the vendor and returns the documents and the check copy to the accounts payable clerk. The clerk files the documents alphabetically in a paid invoice file. At the end of every month, the accounts payable clerk uses the accounts payable ledger to prepare an accounts payable report that is forwarded to Susan. After she is finished with the report, Susan files it chronologically. a.

Prepare a context diagram to document accounts payable processing at S&S.

Purchasing

Receiving Purchase Order Receiving Report

S&S Accounts Payable Invoice

Vendor

Payment & Remittance Advice

Accounts Payable Report

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Management

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3.6

a. (continued.) Prepare a level 0 Data Flow Diagram of S&S Accounts Payable

Vendor

Purchasing

Receiving

Invoice Purchase Order

1.0 Record Payable

2.0 Collect & Store Purchase Orders & Receiving Reports

Receiving Report

Purchase Orders Accounts Payable

Vendor Invoices

Receiving Reports

Cash Disbursements Journal

3.0 Make Payment

Accounts Payable Report

4.0 Prepare Management Reports

Payment & Remittance Advice

Paid Invoices

Management

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Vendor

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3.6 b. Prepare a document flowchart to document accounts payable processing at S&S.

S&S Accounts Payable Accounts Payable From Purchasing

From Receiving

A

A

Vendor Invoice

Receiving Report

Record Accounts Payable

Prepare Vendor Checks

Prepare Monthly Accounts Payable

A Accounts Payable Report

Check 1

Vendor Invoice

Accts Payable Ledger

Vendor Invoice

Match Pur Ord, Receiving Report, Invoice

D

Order

Vendor Invoice

A

Review and Sign Checks

Cash Disbursement

To Vendor

Journal

Purchase Order

Purchase

Receiving Report

Check 2

Check 1

C

Purchase Order

Purchase Order Receiving Report

Purchase Order

Vendor Invoice

Owner/Manager B

A

From Vendor

Receiving Report

Purchase Order

Controller

Receiving Report

Purchase Order

Vendor Invoice

Receiving Report

Check 2

Vendor Invoice

Rec.Reprt

Vendor Invoice

C

Check 1

Check 2

A

Check 2

Accounts Payable Report

Review Acc Payable Report

D

D

B

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3.6 c. Prepare a BPD to document accounts payable processing at S&S.

Employee

Activities Performed

Purchasing Purchase Order (PO

Receiving Receiving Report (RR) Accounts payable

Ashton Fleming

FROM VENDOR

Enter Vendor Invoice (VI) in A/P file

End of Month

Attach PO & RR to VI

Review VI, PO, RR; Prepare 2-part check

Make payments within 10 days to take advantage of discount

Record check in Cash Disbursements Journal

Susan Review VI, PO, RR; Sign checks

Prepare A/P report;

Send checks to vendors

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Send VI, PO, RR, copy of check to A/P

Prepare A/P report; Send to Susan

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3.7 Ashton Fleming has asked you to document the cash receipts system at S&S. Ashton’s narrative of the system follows: Customer payments include cash received at the time of purchase and payments received in the mail. At day’s end, the treasurer endorses all checks and prepares a deposit slip for the checks and the cash. A clerk deposits the checks, cash, and deposit slip at the local bank each day.

When checks are received as payment for accounts due, a remittance slip is included with the payment. The Treasurer sends this to accounts receivable. Data from the remittance slips are entered into the computer, and the accounts receivable database is updated. The remittance slips are stored in a file drawer by date.

Every week, accounts receivable generates a cash receipts report and an aged trial balance using the accounts receivable ledger. The cash receipts report is sent to Scott and Susan and one of them reviews it. A copy of the aged trial balance is sent to the credit and collections department, where it is reviewed. a. Develop a context diagram for the cash receipts system at S&S.

Deposit

Payment at

Receipts Report

Management

on Account

Aged Trial Balance

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3.7 a. (continued) Develop a level 0 Data Flow Diagram of the Cash Receipts System at S&S:

Remittance Payments at Remittances on Account Remittance

1.0 Payments

2.0 Customer

3.0 Aged Trial

Receipts Report

Management

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Credit and

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3.7

b.

Prepare a document flowchart to document the cash receipts system at S&S.

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3.7

c.

Employee Treasurer

Prepare a business process diagram for the cash receipts system at S&S Activities Performed From customer Receive cash and remittance advices, endorse checks, and prepare deposit slip

Clerk Deposit cash in bank Accounts Receivable

Management: Scott & Susan

Weekly

Receive remittance advice, update accounts receivable

Generate cash receipt report & aged trial balance using A/R ledger

Review cash receipts report

Credit and Collections

Review aged trail balance

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3.8

Computer Warehouse is a wholesale firm that supplies computer hardware to large companies. Accepting orders is subject to the customer meeting agreed-upon terms of payment. Details of rejected orders are recorded in the customer data file as part of customers’ credit history. Customers can pay for their orders either via electronic funds transfers or direct deposits into the firm’s bank account. In the interest of safety, Computer Warehouse does not accept cash payments. For each order that is verified and accepted, an invoice is generated and a pick list is sent to the warehouse.

The orders are processed once their payments are received. Each order is handled by a specific sales representative, who earns a commission on each sale. The firm has six basic data files, which contain customer information, warehouse information, product information, accounts receivable, sales information, and payments information, respectively. Over the next few years, the company expects to become a multimilliondollar operation. Recognizing the need to computerize their in-store operations, the company has begun the process by calling you to assist them with documenting the ordering system.

REQUIRED Create a context diagram and a Level 0 diagram for the order system at Computer Context diagram of Computer Warehouse order system:

Rejected order

Order System

Completed order Sales commission

Bank deposit

representative

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Level 0 diagram of Computer Warehouse sales order:

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Warehouse. Also create a Level 1 diagram for filling an order at Computer Warehouse.

Level 1 – Fill Order at Computer Warehouse:

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3 .9

Prepare a program flowchart to help Melanie program this process.

Start

Input Weight (W), Height (H)

Body Mass Index (BMI) = W/H^2

BMI <

WS = Normal

BMI > 25

Weight Status (WS) = Underweight

WS = Overweight

Print W, H, BMI, WS

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3.10

Prepare a context diagram and a Level 0 DFD for each of the following scenarios. a. Collect time and attendance reports from different departments to calculate weekly wages. This data is validated before payroll is prepared.

Time and attendance data

Level 0

Departments

Time and attendance data

1.0 Validate time and attendance data

Validated time and attendance data

2.0 Prepare Payroll

b. A customer order is approved and filled. The inventory data is then updated.

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c. A customer cancels her mail order. The cancellation is processed and a confirmation is sent to the customer.

Context

Customers

Order cancellation

Mail order system

Cancellation acknowledgement

Level 0 Cancellation acknowledgement

Customers

Order cancellation

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1.0 Process Order

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d. A customer makes a partial payment on her outstanding balance with a check and submits a remittance advice. Accounts receivable is updated to reflect the customer credit balance, and the remittance advice is filed manually.

Context Remittance on account

Level 0 Remittance file

Remittance on account

Remittance advice

Customer

Accounts receivable

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e. A vendor invoice is received and subsequently paid. Accounts payable is then updated and the report is submitted for review to the management.

Context

Disburs Accounts ement Payable System

Accounts payable report

Level 0

Accounts

Vendor Invoice

Vendor payment Payment Management Accounts payable report

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f. Pay the value added tax (VAT) collected on sales made in the past month to the revenue service using the e-filing option on their website.

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3.11 A small business in Tokyo, Japan, is experiencing a slump in sales and decides to engage in a sales promotion tactic. Customers who use the store credit card and spend at least ¥25,000 per invoice are offered a 15% discount. Customers who spend more than ¥25,000 but do not use the store credit card are offered a 3% discount. The company decides to prepare a flowchart to help them properly design a computer program to enter sales prices, apply the discount, and print the invoice.

REQUIRED Prepare a flowchart to help the company program this process.

Start

Enter invoice total

Yes

Used store credit card?

Yes

Give 15% discount

No

No

Give 3% discount

Print Invoice

End

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3.12

S&R Bikes sells bikes and related products to bike stores. They use process mining and have made a dashboard of the last 100 transactions, which is available at https://academicdavidwood-byu-edu.eu-2.celonis.cloud/process-mining/public/4ec1cda6-20c1-4e2e-a6811cfa02523685/#/frontend/documents/4ec1cda6-20c1-4e2e-a681-1cfa02523685/view.

Required Create a table that lists each different process variant that occurs. For each process variant you identify, list how many transactions follow that set of activities. Describe whether the process variant represents a business process you would expect to find in a company or whether it appears unusual. If it appears unusual, describe what risks concern you The process mining visualization has 5 different variants. These are listed based on which had the most transactions for each variant: 1. This variant occurs for 49 transactions. The variant has the following order of activities: create digital sales order, credit approved, create picking ticket, record piking of inventory, create shipping documents, review and approve sales invoice, email sales invoice to customer, receive payment, print bank deposit slips, and match deposit slip and bank receipt.

This is a normal business process and there are no additional risks associated with this process.

2. This variant occurs for 21 transactions. The variant has the following order of activities: create digital sales order, create picking ticket, record picking of inventory, create shipping documents, review and approve sales invoice, and email sales invoices to customer.

This process lacks the credit approval process, which may introduce risk of selling to a customer who cannot pay for his or her order. This may be normal operating procedure if the order was not very large. Also, the customer has received an invoice and not yet paid for it. This could be problematic if the orders are old, but may not be a problem is the orders are all recent.

3. This variant occurs for 16 transactions. The variant has the following order of activities: create digital sales order, create picking ticket, record picking of inventory, create shipping documents, review and approve sales invoice, email sales invoices to customer, receive payment, print bank deposit slip, and match deposit slip and bank receipt.

This process lacks the credit approval process, which may introduce risk of selling to a customer who cannot pay for his or her order. This may be normal operating procedure if the order was not very large. The rest of this process is a normal business process and there are no additional risks associated with this process.

4. This variant occurs for 13 transactions. The variant has the following order of activities: create digital sales order and credit denied.

This process shows that some customers are denied credit and the process stops. This is a normal business process if these customers have high credit risk.

5. This variant occurs for 1 transaction. The variant has the following order of activities: create digital sales order, credit denied, create picking ticket, record picking of inventory, create shipping documents, review and approved sales invoice, email sales invoices to customer, receive payment, print bank deposit slip, match deposit slip and bank receipt.

This process has a significant risk. The customer is denied credit and yet still the goods are shipped to the customer. Someone should follow up and examine how this happened.

This risk is somewhat mitigated in that the customer ultimately paid for their transaction.

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An image of all process variants is included below:

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3.13

Manually create an event log and process mining diagram for the process of purchasing supplies for your company. Select from the following activities: (1) create a purchase requisition for supplies, (2) approve purchase requisition, (3) order inventory, and (4) receive inventory from supplier. The process mining diagram should have at least 3 different variants of the above activities. The event log should have data for at least 5 unique transactions (a variant may have more than one transaction). For each process variant you create, describe whether the variant represents a business process you would expect to find in a company or whether it appears unusual. If it appears unusual, describe what risks concern you.

Student answers can vary for this problem. The following diagram is one example of an event log and a process mining diagram for the event log. This process mining diagram was prepared using Celonis software, but a student could manually make a diagram in Excel, PowerPoint, Word, or other program. Event logs must have three columns: a unique identifier, a description of the activity, and a date/time stamp (students can sort the event log in any way they want, the answer sorts by unique identifiers and then date/time stamp to make it easier to understand). The process mining diagram should match the order of activities listed in the event log. The following shows what an event log may look like and the process mining diagram that would accompany this event log (you can see this online at https://academic-davidwood-byu-edu.eu-2.celonis.cloud/processmining/public/b4a64109-a4d6-4860-9806-b416b1a49a6d/#/frontend/documents/b4a64109-a4d64860-9806-b416b1a49a6d/view). For this event log the following variants exist: 1. This variant occurs for 2 transactions. The variant has the following order of activities: create a purchase requisition for suppliers, approve purchase requisition, order inventory, and receive inventory from supplier.

This is a normal purchasing pattern. There are no additional risks for this variant.

2. This variant occurs for 2 transactions. The variant has the following order of activities: create a purchase requisition for suppliers, order inventory, and receive inventory from supplier.

This is a normal purchasing pattern except the purchase was not approved. This may be problematic if the purchase was large or otherwise unusual. Some companies allow employees to make small purchases without having approval.

3. This variant occurs for 1 transaction. The variant has the following order of activities: create a purchase requisition for suppliers, approve purchase requisition, and order inventory, This is a normal purchasing pattern except the inventory has not yet arrived. If it has been an abnormally long amount of time, you would do additional checks to see if there was a problem. Otherwise, this is normal.

4. This variant occurs for 1 transaction. The variant has the following order of activities: receive inventory from supplier, create a purchase requisition for suppliers, and approve purchase requisition.

This is an unusual activity. The company received unordered inventory and then created a purchase requisition for the inventory, which was approved. This seems like a company shipped something to your organization and you decided you liked it and then had it approved. This should be checked to make sure the approver knew that the inventory had already been received and to inquire why the inventory was received without ordering it.

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SUGGESTED ANSWERS TO THE CASES 3-1

You are the systems analyst for the Wee Willie Williams Widget Works (also known as Dub 5, which is a shortened version of 5 Ws). Dub 5 produces computer keyboard components.

It has been producing keyboards for more than 20 years and has recently signed an exclusive 10-year contract to provide the keyboards for all Dell personal computers. As the systems analyst, you have been assigned the task of developing a level 0 DFD for Dub 5’s order processing system. You have finished gathering all the information you need to develop the first-pass DFD and now want to complete the diagram.

Level 0 DFD for Dub 5: 1.0

Credit file

Order Rejection

2.0 customer Inventory

3.0

4.0 Invoice Copy

Invoice

Invoice

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3-1 Level 1 DFD for Dub 5:

1.1

1.2

1.3

Note: The Order Rejection notice shown on the context level diagram and the level 0 diagram can take two forms: The Over Credit Limit Notice or the Credit Application. These two items are shown on the level 1 DFD.

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Case 3-1 Dub 5 Business Processing Diagram Employee Order Processing Clerk

Activities Performed

From Customer

Customer not

Receive Customer Order

apprvd for credit: OR order > credit limit

No

Yes

Credit Debt

No Customer Approved for Credit?

Enter Customer Order; Update Customer File

Sufficient Inv

No

Notify customer of insufficient inventory

Yes

Prepare Packing Slip

File Invoice

Send customer credit application, notify order shipped when credit approved

Yes Notify customer: order shipped when payment received

Warehouse

Ship goods to customer

Billing

Prepare customer invoices; send copies to customer, order processing, accounting

Place notice in file: customer invoice sent

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CHAPTER 4 RELATIONAL DATABASES SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 4.1

Contrast the logical and the physical views of data, and discuss why separate views are necessary in database applications. Describe which perspective is most useful for each of the following employees: a programmer, a manager, and an internal auditor. How will understanding logical data structures assist you when designing and using database systems?

Databases are possible because of their database management system (DBMS). As shown in Figure 4.1, the DBMS is a software program that sits between the actual data stored in the system and the application programs that use the data. As shown in Figure 4.4, this allows users to separate the way they view the data (called the logical view) from the way the data is actually stored (the physical view). The DBMS interprets the users' requests and retrieves, manipulates, or stores the data as needed. The logical views separate the applications from physical information storage concerns. This in turn provides increased flexibility in applications, improved data security, and ease of use.

In a database system, the db programmer may need to interact with the physical view as well as the logical views. An application programmer would be unlikely to interact with the physical view as most application programs are given a logical view to perform their functions. A manager will rarely need to understand or be familiar with the physical view of the data. Nor, in most instances, will the internal auditor need to understand the physical view as most everything they do involves the logical view of the data.

If accountants understand logical data structures and the logical view of the data, they are better able to manage, use, and audit a database and its data. This implies that we trust DBMS implementations to appropriately deliver the logical views from the physical representation of the database. Accountants will often view and evaluate the rights associated with logical views in order to determine internal control risks associated with each logical view.

4.2

The relational data model represents data as being stored in tables. Spreadsheets are another tool that accountants use to employ a tabular representation of data. What are some similarities and differences in the way these tools use tables? How might an accountant’s familiarity with the tabular representation of spreadsheets facilitate or hinder learning how to use a relational DBMS?

Spreadsheets and databases differ on many dimensions.

• Capacity: Database tables can store many more records that spreadsheet tables.

• Analysis: Spreadsheets can more quickly perform ad-hoc analysis of a table’s data.

• Knowledge needed: Databases require more knowledge and time to perform ad-hoc analysis.

• Repeatability: Analysis performed in spreadsheets is often difficult to repeat as steps performed in the analysis are lost once performed. Analysis performed in databases are

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•

usually created and stored as steps in a process. Thus, one can reperform the analysis on current data.

Integrity: Data entry, storage and manipulation in a spreadsheet is not protected by constraints imposed by the data structure of a database. Therefore, data integrity is usually higher for database data.

In sum, spreadsheets are best used for ad-hoc analysis, modeling, planning and in nontransaction settings. Databases are best used for storing and processing large data sets in repeated operations where data integrity is important. Databases can readily export data to a spreadsheet for ad-hoc analysis.

Accountants’ familiarity with spreadsheets sometimes leads them to use a spreadsheet for a task that is better suited for a database. Spreadsheet familiarity reduces the likelihood that an accountant will invest time to increase their database skills. Over the years, the Journal of Accountancy has published a number of very good articles on how to use databases and when to use databases and when to use spreadsheets. These articles can be found on the Journal’s website: http://www.journalofaccountancy.com/ 4.3

Some people believe database technology may eliminate the need for double-entry accounting. This creates three possibilities: (1) the double-entry model will be abandoned; (2) the double-entry model will not be used directly, but an external-level schema based on the double-entry model will be defined for accountants’ use; or (3) the double-entry model will be retained in database systems. Which alternative do you think is most likely to occur? Why?

No single answer exists with this question; indeed, solutions will vary depending upon student ingenuity and creativity. Reports should be graded in terms of how well each possibility was addressed and in terms of writing quality. Good answers should address the following: •

• •

4.4

Database technology does permit abandonment of double entry but abandoning double entry style storage of transactions does not mean that we cannot query the data and produce double entry style reports. Thus, the concept and control provided by reproducing double entry accounting reports can be maintained in a database system.

The use of a schema for accountants is plausible and has been implemented in many systems. It does eliminate the redundancy of double entry from the database system, yet it still provides a framework familiar and useful to accountants and financial analysts.

There is a good possibility that double entry will remain as an input form, even in databases, due to inertia. Indeed, many modern AIS, such as ERP systems, use databases but also retain the principles of double entry.

What is the purpose of a database and a database management system? How do the two relate to a database system?

The purpose of a database is to combine records (rows of data) that are usually stored in separate files into a consolidated, common “pool” which can then be accessed by authorized users and appropriate application programs. The purpose of a database management system (DBMS) is to manage and control the data and the interfaces between the data and the application programs that use the data.

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Thus, the database stores the data and the DBMS manages and controls this data (as well as the interface between the data and the application programs). The combination consisting of the database, the DBMS, and the application programs that access the database through the DBMS is collectively referred to as the database system.

4.5

Why is good data important, and what are some real-world consequences of bad or corrupt data? Please support your answer with appropriate examples.

Good data is critical for numerous reasons: − Informed Decision Making: Good data provides a solid foundation for making informed decisions, which may have a lasting impact on individuals and organizations.

For example, in healthcare, accurate patient data is necessary for doctors to make the correct diagnosis and suggest a viable treatment plan. − Enhanced Efficiency: Good data enables automation and reduces the need for manual intervention, resulting in operational efficiency. For example, in logistics, provision of accurate data about routes, delivery times, and cargo can optimize supply chain management. − Superior Customer Experience: Accurate data plays a key role in understanding customer needs and preferences, leading to better customer service. Such data may help the retailers to personalize shopping experiences. − Better Compliance and Security: Good data helps organizations to comply with regulations and protect sensitive information. For example, financial institutions, must maintain accurate records for regulatory compliance and to prevent fraud. − Innovation: Good data can provide insights that drive product and process related innovation. It also enables companies to identify and bridge gaps in their processes in order for them to serve their customers better. − Better Reputation: Effective utilization of data earns better reputation for the companies and improves customer perceptions about the company.

Real-world consequences of bad or corrupt data include: − Misguided Decisions: Inaccurate data can lead to poor decision-making. For example, decisions based on flawed customer data may lead to targeting the wrong audience, leading to failed marketing campaigns. − Financial Loss: Bad data can result in financial losses due to mistakes in transactions and inefficient processes. For example, banks may incur losses if they issue loans based on incorrect credit ratings due to corrupt data, leading to increased defaults. − Legal Consequences: Companies may face litigations, fines, and a bad reputation if they fail to comply with data protection regulations due to poor data quality. − Security Breaches: Corrupt data may lead to security breach resulting in data loss and compromise of sensitive customer information.

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Examples: Equifax (https://www.ftc.gov/enforcement/refunds/equifax-data-breach-settlement) In 2017, credit bureau Equifax experienced a data breach where hackers accessed the personal information of 147 million people. Bad security practices, such as failure to patch a known vulnerability, were the main cause. The consequence was a loss of trust, litigation, and a significant financial loss.

NHS (https://www.technologyreview.com/2020/06/19/1004190/uk-covid-contact-tracingapp-fiasco/) The UK government's COVID-19 contact tracing program faced challenges in 2020 due to bad data. Errors in the way test data was collected and reported led to underestimating the number of COVID-19 cases, which affected the public health response to the pandemic.

Valparaiso (https://tucson.com/news/national/computer-systems-400-million-house-is-ataxing-disaster/article_88b72530-890a-55cc-9051-b6ca43761942.html) Valparaiso, Indiana used the county database to develop its tax rates. After mailing the tax notices, it was discovered that a $121,900 home was valued at $400 million. Due to the $3.1 million property tax revenue shortfall, the city, the school district, and governmental agencies had to make severe budget cuts.

4.6

Explain the advantages of database systems for accountants.

Virtually all mainframes and servers use database technology, and database use in personal computers is growing rapidly. Most accountants are involved with databases through data entry, data processing, querying, or auditing. They also develop, manage, or evaluate the controls needed to ensure database integrity. The advatages of database to accountants are as follows: • •

• • •

Data integration. Master files are combined into large “pools” of data that many application programs access. An example is an employee database that consolidates payroll, personnel, and job skills master files.

Data sharing. Integrated data are more easily shared with authorized users. Databases are easily browsed to research a problem or obtain detailed information underlying a report. The FBI, which does a good job of collecting data but a poor job of sharing it, is spending 8 years and $400 million to integrate data from their different systems.

Minimal data redundancy and data inconsistencies. Because data items are usually stored only once, data redundancy and data inconsistencies are minimized.

Data independence. Because data and the programs that use them are independent of each other, each can be changed without changing the other. This facilitates programming and simplifies data management.

Cross-functional analysis. In a database system, relationships, such as the association between selling costs and promotional campaigns, can be explicitly defined and used in the preparation of management reports.

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4.7

What is a tuple in a database? What does it consist of and what function does it have in a database?

A tuple is a row in a table that contains data about a specific item in a database table. Each column contains data about an attribute of that entity. Each row in a Customer table contains data about a specific customer, and each column contains data about customer attributes, such as name and address.

Tuples have following functions: − Data Representation and organization: Each attribute or column in the tuple can store data like a customer's name, address, or order number. Tuples also help organizing data into a structured format, so that each tuple can be readily accessed, modified, retrieved, or deleted using various database operations. − Data Relationships: Tuples can be related to tuples in other tables through foreign keys, enabling representation of complex relationships between different entities. − Integrity of Database: Tuples are critical in maintaining the integrity of the database.

Constraints such as primary keys ensure that each tuple is unique, and foreign keys maintain the referential integrity between tables. − Execution of Queries: Tuples facilitate execution of queries, whereby the set of tuples that match the query criteria are returned as the result.

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SUGGESTED ANSWERS TO THE PROBLEMS

4.1 The following data elements comprise the conceptual-level schema for a database: product code product description product cost quantity on hand minimum stock level quantity purchased invoice number supplier code supplier name supplier terms REQUIRED a. Identify three potential users and design a subschema for each. Justify your design by explaining why each user needs access to the subschema data elements.

•

To complete a purchase order, the purchase order clerk needs access to the following data: − product code − product description − product cost − quantity on hand − minimum stock level − supplier code

•

To manage stock (inventory), the inventory control department needs access to the following data stored in the database: − product code − product description − quantity on hand

•

To pay suppliers for inventory purchase, the accounts payable clerk needs access to the following data stored in the database: − supplier code − supplier name − supplier terms

b. Use Microsoft Access or another relational database software to create the schema tables. Specify the primary key(s), foreign key(s), and any other data that might be required for each table. Test your model by entering sample data in each table.

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Table Name

Primary Key

Foreign Keys

Other Attributes

Products (Inventory)

Product code

**

Purchase

Invoice number

Supplier Code

Product Purchase

Product Code* Invoice number*

Product Code* Invoice number*

Supplier

Supplier code

Product description Product cost Quantity on hand Minimum stock level Date of purchase (additional data) Quantity sold Product price (actual purchase cost) Supplier name Supplier terms

* The invoice number and product code in product invoice are both primary keys and foreign keys; they are primary keys, as both are needed to uniquely identify a purchase; and they are both foreign keys, as they are primary keys in the related tables. ** Students could opt to add the supplier code as the foreign key in the product, if the argument is that a product is always supplied by a single supplier.

4.2

Most DBMS packages contain data definition (DDL), data manipulation (DML), and data query languages (DQL). For each of the following, indicate which language would be used and why.

REQUIRED a) The hourly rate of employees, paid biweekly, is updated.

The DML – this changes content of the database. b) A new table is added to the database to record employees’ dependent or beneficiary data.

The DDL – this changes the structure of the database. c) A column is added to this table and is populated with employee codes to indicate the employees who have listed a dependent.

The DDL and the DML – the former to add the new column; the latter to add the employee number. d) A request is made to print a list of the names of all employees who have included dependents in their medical aid fund contributions.

The DQL – this list can be produced by a query.

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e) The credit controller is granted temporary access to select data in the customer table.

The DCL – this is used to set security constraints by granting and revoking access. f) Sales transactions of the day are added to the sales table.

The DML – this is used to add data to the database/process transactions.

4.3 Ashton wants to store the following data about S&S’s purchases of inventory: item number date of purchase vendor number vendor address vendor name purchase price quantity purchased employee number employee name purchase order number description quantity on hand extended amount total amount of purchase REQUIRED a. Design a set of relational tables to store this data. Name each table and field in accordance with good database design. Do all the data items need to be stored in a table? If not, which ones do not need to be stored, and why do they not need to be stored? b. Identify the primary key for each table. c. Identify the foreign keys needed in the tables to implement referential integrity.

Table Name Inventory

Primary Key ItemID

Foreign Keys

Purchases

PurchaseOrderID

Purchases_Inventory

ItemID PurchaseOrderID

VendorID EmployeeID (Purchasing Agent) ItemID PurchaseOrderID

Vendor

VendorID

Employee

EmployeeID

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Other Attributes Description QuantityOnHand PurchaseDate PurchaseOrderTotal QuantityPurchased PurchasePrice (actual) ExtendedAmount VendorName VendorAddress EmployeeName

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NOTE TO INSTRUCTOR: ExtendedAmount and PurchaseOrderTotal do not have to be stored in the database as they can be calculated from other values. ExtendedAmount is QuantityPurchased x PurchasePrice. PurchaseOrderTotal is the sum of all the ExtendedAmounts for all items on a particular purchase order. d. Implement your tables using any relational database product to which you have access. e. Test your specification by entering sample data in each table. f. Create a few queries to retrieve or analyze the data you stored.

There is no solution to parts d through f as students will select different software packages and come up with different queries.

4.4

Retrieve the Chapter 4 Relational Database (in Microsoft Access format) from http://www.pearsonhighered.com/romney or create the tables in Table 4-5 in a relational DBMS product.

REQUIRED Write queries to answer the following questions. Your instructor may specify the method of acquiring the database noted above and whether to use Design view or SQL view. a.

List Customers that live in the city of Winslow. Provide CustomerID, CustomerName and Street.

Solution Output: Obtaining the solution using SQL: SELECT Customer.CustomerID, Customer.CustomerName, Customer.Street FROM Customer WHERE Customer.City = "Winslow"; Obtaining the solution using QBE:

b.

List all sales for which SalesPerson “B. Green” was responsible. Provide SalesInvoiceID, SaleDate, CustomerID and CustomerName.

Solution Output:

Solution SQL:

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SELECT Sales.SalesInvoiceID, Sales.SaleDate, Sales.CustomerID, Customer.CustomerName FROM Sales INNER JOIN Customer ON Sales.CustomerID = Customer.CustomerID WHERE Sales.SalesPerson = “B. Green”; Obtaining the solution using QBE:

c.

List all inventory items sold to “Lola Doyle”. Provide SaleDate, ItemID, Description and Quantity.

Solution Output:

Obtaining the solution using SQL: NOTE TO INSTRUCTOR: This SQL solution uses aliases of tables so as to abbreviate the statement. For example, the Sales table uses the alias ‘s’. Everywhere you see ‘s.’ would have had ‘Sales.’ if the alias had not been used. A table alias is created by placing the alias immediately after the table name in the FROM statement. “Customer c” below aliases the Customer table as c. Sometimes you will see “Customer AS c” to create the alias in SQL. The AS statement is optional in table aliasing. The AS statement is required in field aliasing.

SELECT s.SaleDate, i.ItemID, i.Description, si.Quantity FROM ((Customer c INNER JOIN Sales s ON c.CustomerID = s.CustomerID) INNER JOIN Sales_Inventory si ON s.SalesInvoiceID = si.SalesInvoiceID) INNER JOIN Inventory i ON si.ItemID = i.ItemID WHERE c.CustomerName = “Lola Doyle”; Obtaining the solution using QBE:

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Queries with Aggregate functions d.

How many different kinds of inventory items does S&S sell? Use NumOfItems as the name of the output column.

Solution Output:

Obtaining the solution using SQL: SELECT COUNT(Inventory.ItemID) AS NumOfItems FROM Inventory; Obtaining the solution using QBE:

e.

How many sales were made during October? Use NumOfSales as the name of your output column.

Solution Output: Obtaining the solution using SQL: SELECT COUNT(Sales.SalesInvoiceID) AS NumOfSales FROM Sales WHERE Sales.SaleDate Between #10/1/2021# AND #10/31/2021# Obtaining the solution using QBE:

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f.

How many sales were made to each customer? List CustomerID, CustomerName and NumOfSales. Sort the list by NumOfSales in descending order.

Solution Output:

Obtaining the solution using SQL: SELECT Customer.CustomerID, Customer.CustomerName, COUNT(Sales.SalesInvoiceID) AS NumOfSales FROM Customer INNER JOIN Sales ON Customer.CustomerID = Sales.CustomerID GROUP BY Customer.CustomerName ORDER BY COUNT(Sales.SalesInvoiceID) DESC; Obtaining the solution using QBE:

g.

How many units of each product were sold? Provide ItemID, Description, Color and SumOfQuantity, Sort the list by ItemID in ascending order.

Solution Output:

Obtaining the solution using SQL: SELECT Inventory.ItemID, Inventory.Description, Inventory.Color,

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SUM(Sales_Inventory.Quantity) AS SumOfQuantity FROM Inventory INNER JOIN Sales_Inventory ON Inventory.ItemID = Sales_Inventory.ItemID GROUP BY Inventory.ItemID, Inventory.Description, Inventory.Color ORDER BY Inventory.ItemID Obtaining the solution using QBE:

h.

List the total of each invoice. Computed this by summing Quantity times SoldPrice for all the items on each invoice. Name the total InvoiceTotal. Provide SalesInvoiceID, SaleDate, SalesPerson, InvoiceTotal. Sort the list by InvoiceTotal in descending order.

Solution Output:

Obtaining the solution using SQL: SELECT Sales.SalesInvoiceID, Sales.SaleDate, Sales.SalesPerson, SUM(Sales_Inventory.Quantity*Sales_Inventory.SoldPrice) AS InvoiceTotal FROM Sales INNER JOIN Sales_Inventory ON Sales.SalesInvoiceID = Sales_Inventory.SalesInvoiceID GROUP BY Sales.SalesInvoiceID, Sales.SaleDate, Sales.SalesPerson ORDER BY SUM(Sales_Inventory.Quantity*Sales_Inventory.SoldPrice) DESC; Obtaining the solution using QBE:

* Advanced queries that may require nesting or reference to earlier queries.

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i.

What were total sales in October? Provide TotalSales. You may reuse your query from question h.

Solution Output:

NOTE TO INSTRUCTOR: We present two solutions to this query. OPTION 1 solution relies on a prior query. It calls this prior query in the FROM statement. OPTION 2 solution does not rely on a prior query. Rather in performs the query as an inner query, before the outer query is performed. Note that the difference between OPTION 1 and OPTION 2 is only in the FROM statement. OPTION 1 references a saved query.

OPTION 2 incorporates the SQL from question h in the FROM statement. Most power users prefer to nest there queries as in OPTION 2. Doing so allows the query to stand alone. It also eliminates the risk that someone may have modified the prior query, which would cause this query to be incorrect.

Obtaining the solution using SQL: OPTION 1: SELECT SUM(InvoiceTotal) AS TotalSales FROM p_4_4_h WHERE SaleDate BETWEEN #10/1/2021# AND #10/31/2021# OPTION 2: SELECT SUM(InvoiceTotal) AS TotalSales FROM ( SELECT Sales.SalesInvoiceID, Sales.SaleDate, Sales.SalesPerson, SUM(Sales_Inventory.Quantity*Sales_Inventory.SoldPrice) AS InvoiceTotal FROM Sales INNER JOIN Sales_Inventory ON Sales.SalesInvoiceID = Sales_Inventory.SalesInvoiceID GROUP BY Sales.SalesInvoiceID, Sales.SaleDate, Sales.SalesPerson ) WHERE SaleDate BETWEEN #10/1/2021# AND #10/31/2021# Obtaining the solution using QBE: OPTION 1:

OPTION 2: If you choose Option 2, it must be done in the SQL view since QBE only invites a user to specify an existing table or query.

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j.

What was the average amount of a sales transaction? Provide AvgSales. You may reuse your query from question h.

Solution Output: NOTE TO INSTRUCTOR: Refer to the note on question i.

Obtaining the solution using SQL: OPTION 1: SELECT AVG(InvoiceTotal) AS AvgSales FROM p_4_4_h OPTION 2: SELECT AVG(InvoiceTotal) AS AvgSales FROM ( SELECT Sales.SalesInvoiceID, Sales.SaleDate, Sales.SalesPerson, SUM(Sales_Inventory.Quantity*Sales_Inventory.SoldPrice) AS InvoiceTotal FROM Sales INNER JOIN Sales_Inventory ON Sales.SalesInvoiceID = Sales_Inventory.SalesInvoiceID GROUP BY Sales.SalesInvoiceID, Sales.SaleDate, Sales.SalesPerson ); Obtaining the solution using QBE: OPTION 1:

OPTION 2: If you choose Option 2, it must be done in the SQL view since QBE only invites a user to specify an existing table or query. k.

Which product sold the most units? Provide ItemID, Description, Color and SumOfQuantity. You may reuse your query from question g.

Solution Output: NOTE TO INSTRUCTOR: We present three solutions to this query.

OPTION 1 solution relies on a prior query. It also uses the “TOP 1” statement in the SELECT. This typically returns one row of data. Since there is an ORDER BY, it returns the largest row of

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all rows returned. One might think that there is a flaw in this solution as returning one row would be incorrect if there was a tie. That is, if the two best selling products both sold 15 units, this query would seem to only show one of the best-selling products. However, Access has incorporated the recognition of ties for its TOP statement. This is problematic if you really only wanted one row.

OPTION 2 solution relies on a prior query twice; once in the FROM statement and again in the WHERE clause. The WHERE clause is particularly interesting in that SumOfQuantity is compared to the output of a query, in this case a MAX query. It is important to note that the MAX query only SELECTS one column and the MAX only returns one row. Therefore, the output of the MAX query is a single value. That value is compared against SumOfQuantity. The structure of this query allows the response to present ties. If the two best selling products both sold 15 units, this query would show both of those products.

OPTION 3 is identical to OPTION 2, except that the p_4_4_g query is no longer referenced.

Rather the SQL from p_4_4_g is put in place of the p_4_4_g reference. Doing so allows the query to stand alone. It also eliminates the risk that someone may have modified the prior query, which would cause this query to be incorrect Obtaining the solution using SQL: OPTION 1: SELECT TOP 1 ItemID, Description, Color, SumOfQuantity FROM p_4_4_g ORDER BY SumOfQuantity DESC OPTION 2: SELECT ItemID, Description, Color, SumOfQuantity FROM p_4_4_g WHERE SumOfQuantity = (SELECT MAX(SumOfQuantity) FROM p_4_4_g); OPTION 3: SELECT ItemID, Description, Color, SumOfQuantity FROM ( SELECT Inventory.ItemID, Inventory.Description, Inventory.Color, SUM(Sales_Inventory.Quantity) AS SumOfQuantity FROM Inventory INNER JOIN Sales_Inventory ON Inventory.ItemID = Sales_Inventory.ItemID GROUP BY Inventory.ItemID, Inventory.Description, Inventory.Color ) WHERE SumOfQuantity = (SELECT MAX(SumOfQuantity) FROM ( SELECT Inventory.ItemID, Inventory.Description, Inventory.Color, SUM(Sales_Inventory.Quantity) AS SumOfQuantity FROM Inventory INNER JOIN Sales_Inventory ON Inventory.ItemID = Sales_Inventory.ItemID GROUP BY Inventory.ItemID, Inventory.Description, Inventory.Color )); Obtaining the solution using QBE: OPTION 1:

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OPTION 2: Note that an entire SQL query is placed in the Criteria box

OPTION 3: If you choose Option 3, it must be done in the SQL view since QBE only invites a user to specify an existing table or query.

l.

Which salesperson made the largest sale? Provide the SalesPersons name and the amount of the sale. You may reuse your query from question h.

NOTE TO INSTRUCTOR: Refer to the note on question k as the structure for the three OPTIONs is the same.

Solution Output: Obtaining the solution using SQL: OPTION 1: SELECT TOP 1 SalesPerson, InvoiceTotal FROM p_4_4_h ORDER BY InvoiceTotal DESC; OPTION 2: SELECT SalesPerson, InvoiceTotal FROM p_4_4_h WHERE InvoiceTotal = (SELECT MAX(InvoiceTotal) FROM p_4_4_h); OPTION 3: SELECT SalesPerson, InvoiceTotal

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