Accounting Information Systems, 9e 1

SOLUTIONS FOR CHAPTER 4

Discussion Questions
DQ 4-1 “Data flow diagrams and systems flowcharts provide redundant pictures of an
information system (or business process). We don’t need both.” Discuss fully.
ANS. Logical data flow diagrams (DFDs) present only the logical elements of an
information system. By excluding the physical elements, the logical DFD allows
us to concentrate on what a system is doing without being distracted by how the
functions are being performed and by whom.
Physical DFDs present the physical elements of an information system. They
concentrate on who or what is acting on the data flowing through the system.
Physical DFDs allow us to concentrate on the entities involved in processing
information. We can also see how much work is done by an entity by observing
the flows into and out of an entity and whether those flows change names, which
is an indication that they have been transformed within the entity.
Finally, a systems flowchart presents the logical and the physical details of an
information system’s functions and related operations activities. It shows the
details of how a process is accomplished and also shows the organizational unit
that performs the process. As we will see in Chapter 9, these details are necessary
to permit evaluation of a system’s controls.
In conclusion, all of these diagrams are needed to get a complete picture of an
information systems (or business process). As noted previously, however, each
diagram has its function and, depending on our purpose, all may not be needed.
2 Solutions for Chapter 4

DQ 4-2 “It is easier to learn to prepare data flow diagrams, which use only a few
symbols, than it is to learn to prepare systems flowcharts, which use a number of
different symbols.” Discuss fully.
ANS. Compare the DFD symbols in Figure 4.1 to the flowcharting symbols in Figure
4.6 and you will probably conclude that it is easy to learn the DFD symbols.
Examine Figure 4.7 and see that there are several standard routines used in
flowcharts. We believe that constructing DFDs presents fewer problems in
determining layout and placement of symbols. But determining logical groupings
for a logical DFD might be difficult for you. We conclude, however, that DFDs
are easier to construct than are flowcharts. You might have a different opinion.
DQ 4-7 “If we document a system with a system flowchart and data flow diagrams, we
have overdocumented the system.” Discuss fully.
ANS. We don’t agree with this statement. Each tool depicts different aspects of a system
and is used for different purposes.
A systems flowchart depicts a system’s information and operations activities (i.e.,
a business process) and superimposes those activities onto the organization’s
structure. We use the flowchart to understand the system’s activities—both
information and operations—and to analyze the system’s controls.
Data flow diagrams concentrate on the data, the entities that act on the data, and
the information systems functions being performed by a system. We use the DFDs
to analyze each of these elements of a system. Also, we use the logical DFD
extensively in the development of new systems.
 Accounting Information Systems, 9e 3

Short Problems
SP 4-5 ANS.
a. 3 h. 8

b. 10 i. no match

c. 2 j. 4

d. no match k. 1

e. 5 l. 6

f. 7 m. 9

g. no match n. no match
4 Solutions for Chapter 4

Problems
Problems 4 through 7 Solutions for Good Buy, Inc.

P 4-4 ANS. a. Table of Entities and Activities for Good Buy, Inc.

Entities Para Activities

Customer 1 1. Log on to Web site.

Web server 1 2. Request current catalog.

ERP system 1 3. Send current catalog (assumes read and format catalog data).

Web server 1 4. Display catalog.

Customer 1 5. Select items and quantities.

Web server 1 6. Edit customer input (items and quantities) for accuracy.

1 7. Send requested items and quantities to ERP system.

ERP system 1 8. Allocate inventory.

1 9. Send allocated items and quantities to Web server.

Web server 1 10. Display allocated items and quantities on customer screen.

Customer 1 11. Verify that order is correct.

1 12. Enter shipping and credit card information.

Web server 1 13. Edit customer input (shipping and credit card information) for
accuracy.

1 14. Send credit card information and amount of sale to credit card
company.

Credit card company 1 15. Send verification number to Web server.

Web server 1 16. Display confirmation number on customer screen.

1 17. Notify ERP system that sales have been completed.

ERP system 1 18. Change inventory status from allocated to sold.

1 19. Print picking ticket/packing slip in warehouse.

1 20. Record sale and accounts receivable.

Warehouse
 Accounting Information Systems, 9e 5

FIGURE SM-4.5 Problem 4 part b solution—context diagram—for Good Buy, Inc.

FIGURE SM-4.6 Problem 5 solution—physical DFD—for Good Buy, Inc.

6 Solutions for Chapter 4

P 4-6 ANS. a. Annotated Table of Entities and Activities for Good Buy, Inc.

Entities Para Activities Process

Customer 1 1. Log on to Web site.

Web server 1 2. Request current catalog.

ERP System 1 3. Send current catalog (assumes read and

format catalog data).

Web server 1 4. Display catalog.

Customer 1 5. Select items and quantities. 1.0 Enter order.

Web server 1 6. Edit customer input (items and quantities)

for accuracy.

ERP System 1 8. Allocate inventory.

Web server 1 10. Display allocated items and quantities on

customer screen

Customer 1 11. Verify that order is correct.

2.0 Verify order and
1 12. Enter shipping and credit card customer credit.
information.

Web server 1 13. Edit customer input (shipping and credit

card information) for accuracy.

ERP System 1 18. Change inventory status from allocated to

3.0 Complete sale.
sold.

1 20. Record sale and accounts receivable.

 Accounting Information Systems, 9e 7

FIGURE SM-4.7 Problem 6 part b solution—logical DFD—for Good Buy, Inc.

8 Solutions for Chapter 4

FIGURE SM-4.8 Problem 7 solution—systems flowchart—for Good Buy, Inc.

 Accounting Information Systems, 9e 9

Problems 4 through 7 Solutions for Millennium Insurance Company

P 4-4 ANS. a. Table of Entities and Activities for Millennium Insurance

Entities Para Activities

Customer 1 1. Send request for auto insurance.

Sales office (sales clerks) 1 2. Prepare policy request form.

1 3. File policy request form (copy 2).

1 4. Forward completed policy request form (copy 1) to input

preparation section.

Data preparation section 1 5. Key policy request forms.

(data entry clerks)
1 6. Key-verify policy request data.

Computer operations 2 7. Retrieve policy request data from the network.

(computer)
2 8. Edit policy request data.

2 9. Sort policy request data.

3 10. Print a summary report listing edited request data.

3 11. Send summary report to sales office.

Sales office (sales clerks) 3 12. Compare summary report to file copy of policy request forms.

3 13. Notify computer operations to go ahead with processing (if

everything checks out).

Computer operations 3 14. When notified, process policy request data against the policyholder
(computer) master data to create a new policy record.

3 15. Create disk for printing.

3 16. Print premium notices.

3 17. Send notices to customer.

10 Solutions for Chapter 4

FIGURE SM-4.9 Problem 4 part b solution—context diagram—for Millennium Insurance

FIGURE SM-4.10 Problem 5 solution—physical DFD—for Millennium Insurance

 Accounting Information Systems, 9e 11

P 4-6 ANS. a. Annotated Table of Entities and Activities for Millennium Insurance

Entities Para Activities Process

Sales office (sales clerks) 1 2. Prepare policy request forms.

3 3. File policy request form (copy 2). 1.0 Capture Policy

Requests.

Input preparation section 1 5. Key policy request forms.

(data entry clerks)
1 6. Key-verify policy request data.

Computer operations 2 8. Edit policy request data.

(computer
2 9. Sort policy request data.

3 10. Print a summary report listing edited

2.0 Edit Policy Requests.
policy request data.

Sales office (sales clerks) 3 12. Compare summary report to copy 2 of

policy request forms.

3 13. Notify computer operations to go ahead

with processing (if everything checks
out).

Computer operations 3 14. When notified, process policy request

3.0 Record Policy
(computer) data against the policyholder master data
Requests.
to create a new policy record.

3 15. Create disk for printing.

Computer operations 3 16. Print premium notices. 4.0 Prepare Premium

(computer) Notices.
12 Solutions for Chapter 4

FIGURE SM-4.11 Problem 6 part b solution—logical DFD—for Millennium Insurance

 Accounting Information Systems, 9e 13

FIGURE SM-4.12 Problem 7 solution—systems flowchart—for Millennium Insurance

14 Solutions for Chapter 4

SOLUTIONS FOR CHAPTER 5

Discussion Questions
DQ 5-11 Demonstrate your understanding of some of the coding schemes discussed in
Technology Summary 5.2 by indicating which type of code is represented by each
of the following. You should be prepared to explain and defend your answers.
ANS. The following coding schemes apply:
a. The student ID codes used at your college: This answer, of course, will vary
from institution to institution. For example, the student IDs at Bentley College
are assigned in straight sequential order.
We know of some universities that use social security numbers as the student
ID. A social security number (SSN) is an example of a block code, comprising
the following groups of digits:

The first three digits are an area code. Currently, these three digits indicate
the state in which the holder lived when applying for the SSN. The state is
derived from the holder’s postal ZIP code. Formerly, these three digits
indicated the specific social security field office that issued the card.
The middle two digits are a group number that has no geographic or data
significance. Rather, this block breaks the SSNs into conveniently sized
blocks for use in internal operations and order of issuance.
The last four digits are a sequential serial number that is assigned in
straight numerical sequence from 0001 to 9999 within each group.

b. MICR codes used by the banking industry: MICR codes that are imprinted on
bank checks and deposit slips evidence aspects of several different coding
schemes: significant digit, self-checking digit, and sequential.
For instance, bank checks typically have a nine-digit significant digit code,
located in the lower-left corner of the check, which is used for routing and
sorting the check. Assuming that these nine digits are 021302268, you could
analyze this code as follows:

The first four digits, 0213, are assigned as follows:

o The first two digits, 02, identifies Blank Bank’s Federal Reserve
district; 01 might stand for New England, 02 for New York, and so on.
o The third digit identifies the Federal Reserve Office (head office or
branch) or a special collection arrangement.
 Accounting Information Systems, 9e 15

o The fourth digit shows Blank Bank’s state or a special collection

arrangement.

The next four digits, 0226, represent the bank’s unique institutional
identifier.
The ninth digit, 5, is a self-checking digit (or check digit), which,
combined with the first eight digits, verifies the routing number’s accuracy
in computer processing.

The account number (let’s assume number 123407889 for our example) would
typically be another significant digit code, where the first two digits, 12, show
the account type and the next seven digits, 3407889, represent the specific
account.
Finally, the check number is an example of a sequential code.
c. The customer codes used in Figure 5.3: These codes, consisting entirely of
alphabetic characters, are examples of a mnemonic coding method. The code
ETC stands for Bikes Et Cetera, and so forth. In this example, the alpha
characters are taken in some way from the full names of the customers, a
device that certainly aids a human operator in quickly identifying the
customer, but one that is practical only where the number of different
customers is reasonably small.

DQ 5-12 What are the comparative advantages of the various data coding types discussed
in Technology Summary 5.2 when applied to each of the following? Discuss fully.
Note: In the following answer, we do not separate the discussion of employee,
vendor, and customer ID numbers because the factors that one would consider in
designing a coding scheme for each would be similar. Only when a particular
consideration would apply to one of the three and not to the others will we
mention it.
ANS. Some of the key points (in no order of importance) that students might have
included in their answers are the following:

Computers manipulate numeric data more efficiently than they handle alpha
characters. On the other hand, humans usually find alphabetic codes easier to
remember. This point is a factor to discuss in connection with the relative
advantages of mnemonic coding.
Another design consideration is the size of the database. For instance, a
mnemonic coding scheme might have some merit where the number of
customers (or vendors or employees) is small but probably is impractical for
large databases.
Sequential, block, and mnemonic coding methods provide limited ability to
classify objects in the database according to common attributes. A principal
16 Solutions for Chapter 4

advantage of significant digit and hierarchical codes is that they facilitate the
classification of data.
The general ledger chart of accounts is an application for which a hierarchical
coding scheme is especially germane.
A check digit is often used in practice in the case of customer codes. The main
purpose of the self-checking digit code is to ensure that the ID number is
keyed in accurately. When the customer is doing the keying (e.g., through a
bank’s ATM terminal), the check digit is advantageous. Check digits are
particularly helpful when the master data is not available for comparison to
the input code. If the master data is available, the master record that matches
the code can be retrieved from the master data table and presented to the data
entry clerk for comparison to the input source data. This should ensure that the
correct code has been entered. When master data is available, the importance
of controls such as check digit is diminished.