Practice Essay Questions

1. Describe how AIS adds value to an organization by providing accurate and

timely information.
A well-designed AIS can do this through the following:

Improving the quality and reducing the costs of products and services
Improving efficiency
Sharing knowledge
Improving the efficiency and effectiveness of the supply chain
Improving the internal control structure
Improving decision making

2. Describe the six components of an Accounting Information System (AIS).

 The people who operate the system and perform various functions
 The procedures and instructions, both manual and automated, involved in
collecting, processing and storing data
 The data about the organization and its business processes
 The software used to process the organization's data
 The information technology infrastructure, including computers, peripheral
devices and network communications devices used to collect, store, process
and transmit data and information.
 The internal controls and security measures that safeguard the data in the
AIS

3. Within the value chain of an organization there are five primary activities
and four support activities. Describe how an accounting information system
fits into the value chain of an organization. Where does it add value?

While some might pigeon-hole the accounting information system as a simple support activity,
its influence on the value of each primary and support activity is large. The accounting
information system adds value to each activity by improving the quality and reducing the costs
of each activity, improving efficiency, improving decision making, improving the sharing of
knowledge. All of this is accomplished by collecting the proper data, summarizing it
appropriately for each particular user, and delivering the information at the appropriate time.

4. Transaction data is initially entered through two alternative internal accounting

records.

A journal entry is made for each transaction showing the accounts and amounts to be debited and
credited. A "general journal" is used to record infrequent and nonrecurring transactions. A "specialized
journal" is used to simplify the process of recording large numbers of repetitive transactions.
Examples of specialized journals include sales journals.

5. Identify and explain the purpose of these records of original entry.

Identify the types of data processing.

 Creating or adding new data records, such as adding a new employee to the payroll
master file or database after they have been hired.
 Reading, retrieving or viewing existing data.
  Updating data previously stored about the activity, the resources affected by the
activity, or the people who performed the activity.
 Deleting data, such as purging the vendor master file of all vendors that the
company no longer does business with.

6. In order to identify the information needs of a company, an information

systems specialist first identifies business activities and then key decisions within
each activity. Once the key decisions have been identified, the specialist
determines what information is needed for each decision. For the "pay vendors"
business activity determine the key decisions that need to be made and the
information needs of each decision.
Whom to pay Accounts payable subsidiary ledgers
When to pay Vendor invoices
How much to pay Cash budget

7. What is the function of system flowcharts?

System flowcharts depict the relationships among the input, processing, and output of an accounting
information system (AIS). A system flowchart begins by indentifying the inputs that enter the system
and their origins. The input can be new data entering the system, data stored for future use or both.
The input is followed by the processing portion of the flowchart. The logic the computer uses to
perform the processing task is shown on a program flowchart.

8. What is the function of a program flowchart?

A program flowchart illustrates the sequence of logical operations performed by a computer in

executing a program. A program flowchart describes the specific logic to perform a process shown on
a system flowchart.

9. Why are document flowcharts sometimes referred to as internal control

flowcharts?

Document flowcharts are particularly useful in analyzing the adequacy of control procedures in a
system, such as internal checks and segregation of functions. Document flowcharts can reveal
weaknesses or inefficiencies in a system, such as inadequate communication flows, unnecessary
complexity in document flows, or procedures responsible for causing wasteful delays.

10. Describe the key elements of database normalization

Database normalization basically takes an unormalized table (a table that is not in 3rd normal form)
and divides the table into smaller tables in order to eliminate data element redundancy. This is done
by selecting a field that uniquely identifies each row in the new tables. Selects attributes for the new
tables that relate to the entire primary key (incase the primary key is comprised of more than one
field). Selects attributes that are fully described by the primary key and not some other field or
attribute. The resulting table will then be in 3rd normal form and free of the insert, update, and delete
anomalies.

11. What are the basic requirements of a relational database?

1. Every column in a row must be single valued.

 2. Primary keys cannot be null.
3. Foreign keys, if not null, must have values that correspond to the value of a primary
key in another table.
4. All non-key attributes in a table should describe a characteristic about the object
identified by the primary key.

12. Identify the three levels of schema and define each level.

The conceptual level schema defines the entire database. It consists of all data elements and the
relationships between them. The external level schema consists of a subset of the entire database
customized to the needs of a particular user. For example, a payroll clerk would have an external
schema that would provide access to all of the payroll data necessary to accomplish his/her task. The
internal level schema describes how the data are stored and accessed. This would include information
about record lengths, field types, access methods, indexing, pointers, etc.