SOLUTIONS FOR CHAPTER 5

Accounting Information Systems, 7e 118Solutions for Chapter 5Accounting Information Systems, 9e1SOLUTIONS FOR CHAPTER 5Each end-of-chapter question in the Solutions Manual is tagged to correspond with AACSB, AICPA and CISA standards, allowing professors to more easily manage the task of reporting outcomes to these professional and accrediting bodies. Please see the corresponding spreadsheet file for the tagging information.Discussion QuestionsDQ 5-1What are the basic components of a database management system (DBMS)? Discuss the relationship between the components of DBMS and the functional model of information systems discussed in Chapter 1.ANS.The four basic components (or features or functions) of a DBMS are tables, queries, forms, and reports. A good illustration of this is the new Create tab in Access, which is divided into four sections (Tables, Forms, Reports, and Other, which includes queries and macros, i.e., application-type features for processing data). It is probably worthwhile to point out that even a relatively small and simple database like Access (at least, compared to the larger relational databases in SAP and Oracle, for example) is still a fully capable DBMS. Note that tables are the database per se and the other features are what make the software a DBMS.

It should also be noted that DBMSs almost always have security features, such as the ability to create passwords for access into the database and access authorization levels for the various tables and other database objects. For example, the DBA could restrict a specific user to access to the customer table only (and no other tables in the database) and to read only access to the customer table. In this case, the user would not be able to add, change, or delete data already in the table.The following table can be used for the discussion of the relationships between (1) the above components of DBMS and (2) the functional model of information systems discussed in Chapter 1:

Components of DBMSFunctional IS Model

FormsInput (also, output)

TablesStorage

QueriesProcessing

ReportsOutput

DQ 5-2How has the technological availability and implementation of DBMSs benefited decision makers in organizations?ANS.Database management systems have allowed access to cross-functional/cross-application data providing insight to decision makers. For example, in an integrated system, reports from inventory and billing may be available to identify problem products (customers refusing to pay, or slow payers). Decisions to sell to a customer on credit may be made instantaneously when unshipped orders, accounts receivable, credit line information, and payment information are contained in an integrated database.DQ 5-3What is data independence? Why is it important in a comparison of the application and centralized database approaches to storing data?ANS.Data independence means that the data is decoupled from the applications (programs) that use the data. In a file management system, data is subordinate to, or dependent upon, the application program that uses the data. For example, adding a field to a record in an application environment would require that the program that accesses the data also be changed. In a database system, such program changes are rarely needed.Also, in a database approach, the data become the focus of attention, the data can be shared by multiple system applications that support related business processes, and the data can be accessed through report generation interfaces and ad hoc query interfaces, which allow users to ask questions about the data in the database.DQ 5-4How is a DBMS different from a database?ANS. Database refers only to the tables that store data, while DBMS also includes the features or components delineated in DQ 5-1 (e.g., forms, queries, and reports). Also, the answer is that without a DBMS, data in a database are freely accessible and without internal controls for security.

DQ 5-5What are the differences between a logical view and a physical view of a database? Which would be more important for accountants who are involved in the design of a database that will store business event information?ANS.Relational database tables are logical views of data that are physically stored in the database. The logical database view is how the data appear to be stored when the user accesses the database; that is, it is the way the user sees the database. The logical view provides a structure that the user can use to extract data from the database. The physical view is a representation of the way in which the data are stored on the disk or other storage medium used by the database management system. The physical view of the data often has little relation to the logical view. Thus, accountants who use DBMSs do not need to worry about the details of the physical storage of the data. They do, however, need to understand the logical view of the data.DQ 5-6What is three-tier architecture? What are some of its advantages over two-tier architecture?ANS.A three-tier architecture divides an IS into three partsthe users interface or workstation, the applications (processing), and the database (input/storage). This is an advantage because it becomes much easier to make changes (e.g., updates and new software)on any one of these tiers without having to worry about affecting the other two. A good example of the ease of changing tiers is SAP changing from an Oracle database to a Microsoft Sequel database without being concerned about the impact of this change on its application modules. The older two-tier architecture usually combines the application and database levels, making it difficult to switch or change either tier without affecting the other (e.g., COBOL mixes processing code and data storage code in the same program). DQ 5-7What problems are solved by transforming a set of relational tables from second normal form (2NF) to third normal form (3NF)?ANS.Transforming a set of relational database tables from 2NF to 3NF eliminates any transitive dependencies that exist in the 2NF version of the tables. See the section Third Normal Form (3NF) in Chapter 5.

DQ 5-8What are the different logical database models (or structures)?

ANS.The text discusses the following four: Hierarchical databases Child records may only have one parent record Cannot sustain complex data structures Network databases Overcame problems of hierarchical Child record can have more than one parent Eclipsed by relational databases Relational databases Data logically organized into two dimensional tables Vast improvement over hierarchical or network database models Able to handle complex queries Allows only text and numerical data to be stored Does not allow the inclusion of complex object types such as graphics, audio, video, or geographic information Object oriented databases Overcomes the limitations of relational databases Allows the storage of complex objects, e.g., video clips An object can store attributes and instructions for actions that can be performed on the object or its attributesDQ 5-9The centralized database approach to data management is a good alternative to using enterprise systems such as ERP and CRM. Do you agree? Discuss fully.ANS.Students should not agree with the statement. ERP and CRM systems are built on databases; they do not replace them. The effectiveness of ERP and CRM systems depends on how well they interact with the databases into which they are integrated. Some ERP and CRM systems include their own databases, but most are designed to work with existing databases provided by other vendors.DQ 5-10Why have object-oriented databases not replaced relational databases in business information system applications?ANS.Although many researchers have argued that object-oriented DBMSs are superior to relational DBMSs, most organizations still use relational DBMSs. These organizations have large amounts of money invested in their existing relational DBMSs, related software, hardware, and training of personnel. The main advantage of an object-oriented model is the storage of complex data types. However, many relational DBMSs (sometimes called object-relational DBMSs) have added the capability to store and manipulate these complex data types. Although software developers continue to refine object-oriented DBMSs, most companies today seem to be satisfied with relational or object-relational DBMSs and do not see a sufficient advantage in their replacement.DQ 5-11Demonstrate 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 holders 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: The first two digits, 02, identifies Blank Banks Federal Reserve district; 01 might stand for New England, 02 for New York, and so on. The third digit identifies the Federal Reserve Office (head office or branch) or a special collection arrangement. The fourth digit shows Blank Banks state or a special collection arrangement.The next four digits, 0226, represent the banks 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 numbers accuracy in computer processing.The account number (lets 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 5-12What 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 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 banks 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.

Short ProblemsSP 5-1 ANS. Allowing for some variation among students, the solution should look like the following E-R diagram:

Some students may show the relationship table (consisting of two 1:N relationships) for the N:M relationship between INVENTORY and SHIPMENT:

SP 5-2 ANS.The two entity-relationship pairs might be described as follows: 1.Shipments are made to customers. A customer may receive many (N) shipments, but each shipment is for only one (1) customer.2.Inventory is included in shipments. A shipment may contain many (N) inventory items, and inventory items (by type) may be included in many (M) shipments, an N to M relationship.SP 5-3 ANS.The solutions provided by your students will vary depending on which database software package they use and their ability in using that package. The solutions should include a CUSTOMERS table, a SHIPMENTS table, an INVENTORY table, and a relationship table linking SHIPMENTS and INVENTORY. The relationship table is needed because SHIPMENTS and INVENTORY are in an N:M relationship, as noted in the solutions to SP 5-1 and SP 5-2. Attributes in the table will vary greatly among students. See Figure 10.10 in the textbook for examples of these tables and their attributes. Be sure that the students have linked the tables together in their solutions. SP5-4 ANS.The solutions provided by your students will vary depending on which database software package they use and their ability in using that package. A common error is to design the query with only the INVENTORY and CUSTOMERS tables. This will result in a random combination of customer names and inventory descriptions. It is necessary to have all four tables, with the tables linked, in the query design for correct results to be produced. Check the query design printout to ensure that all four tables and links are included.

ProblemsP 5-1 ANS.The solutions provided by your students will vary depending on which database software package they use and their ability in using that package. In any case, the solutions should include a CUSTOMERS table, a data entry screen (for example, a form in Microsoft Access) that allows data entry into the table, and a printout of the number of records you instructed students to include in the table.P 5-2 ANS.The solutions provided by your students will vary depending on which database software package they use and their ability in using that package. The solutions should include a customer report (for example, a report in Microsoft Access) that includes the column headings and subtotals required by the problem.P 5-3 ANS.The solutions provided by your students will vary depending on which database software package they use and their ability in using that package. The solutions should include a customer data entry form with the indicated controls (implemented, for example, using the Validation Rule property in Microsoft Access or a trigger in Oracle). This problem makes a good team assignment with a short in-class presentation of the solution by the team.P 5-4 ANS.The solutions provided by your students will vary depending on which database software package they use and their ability in using that package. The solutions will include the same elements as the solutions to P 5-1 through P 5-3 but with a different data set, which can be useful if team assignments with in-class presentations are used (as discussed in the solution to P 5-3).P 5-5 ANS.The solutions provided by your students will vary depending on which database software package they use and their ability in using that package. The solutions should include four queries (called views in some database software). Some students may document the queries by creating reports based on those queries, but that is not required.P 5-6 ANS.The solutions provided by your students will vary depending on which database software package they use and their ability in using that package. The following figure shows one possible implementation in Microsoft Access. Other correct solutions are possible; for example, the implementation shown in the figure assumes that any partner can make a contact and that category descriptions are stored in a separate (lookup type) table. Note that the City, State, and ZIP values are stored in a separate table. Including these fields in the CLIENTS table would create two transitive dependencies and thus violate 3NF.

P 5-7 ANS.a.Students should classify the entities in this situation into the following categories:ResourcesEventsAgents

INVENTORYPURCHASE ORDERS VENDORS

SHIPMENTSPURCHASE CLERKS

b.The six entity-relationship pairs might be described as follows:1.Purchase clerks process or generate purchase orders. Each purchase order is processed by only one purchase clerk (1), but a purchase clerk can process many purchase orders (N), a 1 to N relationship.2.Purchase orders are sent to vendors. A vendor may receive many (N) orders, but each purchase order is for only one (1) vendor, an N to 1 relationship.3.Purchase orders are for inventory items. Each purchase order may contain many items (M), and inventory items may be included on many purchase orders (N), an M to N relationship.4.Purchase orders are filled by shipments. Each shipment is for one purchase order (1), but many shipments (N) may be required to fill an order, a 1 to N relationship.5.Inventory items are received in shipments. Inventory items (M) may be included in many shipments, and each shipment (N) may contain many inventory items, an M to N relationship.6.Shipments are made by vendors. Many shipments (N) are made from a vendor, but each shipment is made from only one vendor (1), an N to 1 relationship.P5-8 ANS.The papers developed by students in response to this problem will vary widely. Some articles that might be useful to your students include the following:Scott, Robert W. (2006, April). How smart is business intelligence? Accounting Technology 22(3): 5.Rosner, Rebecca L., Christie L. Comunale, and Thomas R. Sexton. (2006, June). Assessing Materiality. CPA Journal 76(6): 2628.Bensic, M., Natasa Sarlija, and Marijana Zekic-Susac. (2005). Modeling small-business credit scoring by using logistic regression, neural networks and decision trees. Intelligent Systems in Accounting, Finance & Management 13(3): 133150.Dirsmith, Mark W., Michael J. Fischer, and Sajay Samuel. (2005). The socio-political constitution of expert systems and global knowledge expertise within Big 5(4) public accounting firms. International Journal of Technology, Policy & Management 5(4).Reber, Beat, Bob Berry, and Steve Toms. (2005). Predicting mispricing of initial public offerings. Intelligent Systems in Accounting, Finance & Management 13(1): 4159.Koh, Hian Chye. (2004). Going concern prediction using data mining techniques. Managerial Auditing Journal 19(3): 462-476.Wie Zhang, Arun, Cao Qing, and Marc J. Schniederjans. (2004, Spring). Neural network earnings per share forecasting models: A comparative analysis of alternative methods. Decision Sciences 35(2): 205237.DeVries, Peter, Elizabeth V. Mulig, and Kristie A. Lowery. (2004). A useful tool for data scanning in executive information systems: schematic faces. Industrial Management & Data Systems 104(8): 644649.Arnold, V., P. Collier, S. Leech, and S. Sutton (2004, March). Impact of intelligent decision aids on expert and novice decision-makers judgments. Accounting & Finance 44(1): 125.Hwang, S.-S., T. Shin, and I. Han (2004, February). CRAS-CBR: Internal control risk assessment system using case-based reasoning. Expert Systems, 21(1): 2233.OLeary, D. (2003, December). Auditor environmental assessments. International Journal of Accounting Information Systems, 4(4): 275294.Mauldin, E. (2003, Spring). An experimental examination of information technology and compensation structure complementarities in an expert system context. Journal of Information Systems, 17(1): 1941.Wheeler, P., and D. Jones (2003, Spring). The effects of exclusive user choice of decision aid features on decision making. Journal of Information Systems 17(1): 6383.Lenard, M. (2003, Spring). Knowledge acquisition and memory effects involving an expert system designed as a learning tool for internal control assessment. Decision Sciences Journal of Innovative Education 1(1): 2340.Hrisak, D. (2001, October). How can expert systems benefit your company? Managing the General Ledger 1(10): 1011.Herz, P., and J. Schultz (1999). The role of procedural and declarative knowledge in performing accounting tasks. Behavioral Research in Accounting 11: 125.Qureshi, A., J. Shim, and J. Siegel (1998, September). Artificial intelligence in accounting and business, National Public Accountant 43(7): 1318.Davis, J., A. Massey, and R. Lovell (1997, December). Supporting a complex audit judgment task: An expert network approach. European Journal of Operational Research 103(2): 350372.Foltin, C., and L. Garceau (1996). Beyond expert systems: Neural networks in accounting. National Public Accountant 41(6): 2632.Davis, J., and S. Hicks (1995, January). Decision support software for tax. Tax Adviser 26(1): 5457.McDuffie, R., and D. Oden (1994, January). Tax expert systems and future development. CPA Journal 64(1): 7375.Depending on the experience of your students in creating research papers, you might want to provide them with some of this list or the entire list of articles to get them started.P 5-9 ANS.The table includes two transitive dependencies: COMPID is transitively dependent on TAGNUMB, and EMPNAME is transitively dependent on EMPNUM. Transforming this table into a set of relational tables that are in 3NF requires the creation of three separate tables. A good way to accomplish this is to move through first, second, and then third normal form transformations as follows:The first step is to put the table into first normal form (1NF).SOFTWARE

PACKIDTAGNUMCOMPIDINSTDATESOFT COSTEMPNUMEMPNAMELOCATION

AC0132808M7599/13/06754.95611Dinh, MelissaAccounting

DB3232808M75912/13/06380.00611Dinh, MelissaAccounting

DB3237691B12106/15/06380.00124Alvarez, RamonSales

DB3357772C00705/27/06412.77567Feinstein, BettyInfo Systems

WP0837691B12106/15/06227.50124Alvarez, RamonSales

WP0857772C00705/27/06170.24567Feinstein, BettyInfo Systems

WP0959836B22110/30/0635.00124Alvarez, RamonHome

WP0977740M75905/27/0635.00567Feinstein, BettyHome

The following tables are in second normal form (2NF). Without any attributes such as package name, there is no need for a relation with the key PACKID.COMPUTER

TAGNUMCOMPIDEMPNUMEMPNAMELOCATION

32808M759611Dinh, MelissaAccounting

37691B121124Alvarez, RamonSales

57772C007567Feinstein, BettyInfo Systems

59836B221124Alvarez, RamonHome

77740M759567Feinstein, BettyHome

SOFTWARE

PACKIDTAGNUMINSTDATESOFTCOST

AC01328089/13/06754.95

DB323280812/13/06380.00

DB323769106/15/06380.00

DB335777205/27/06412.77

WP083769106/15/06227.50

WP085777205/27/06170.24

WP095983610/30/0635.00

WP097774005/27/0635.00

The following tables are in third normal form (3NF).SOFTWARE

PACKIDTAGNUMINSTDATESOFTCOST

AC01328089/13/06754.95

DB323280812/13/06380.00

DB323769106/15/06380.00

DB335777205/27/06412.77

WP083769106/15/06227.50

WP085777205/27/06170.24

WP095983610/30/0635.00

WP097774005/27/0635.00

COMPUTER

TAGNUMCOMPIDEMPNUMLOCATION

32808M759611Accounting

37691B121124Sales

57772C007567Info Systems

59836B221124Home

77740M759567Home

EMPLOYEE

EMPNUMEMPNAME

611Dinh, Melissa

124Alvarez, Ramon

67Feinstein, Betty

P 5-10 ANS.Part a.Shaded Attribute(s) = Primary Key

First Normal Form (1NF)

Gift

DateDonor NameDonor NumberReceipt NumberFund IDFund NameAmount

12/5/2009A. Eddy109120110Academic Excellence$100

12/5/2009A. Eddy109120140Athletic Scholarships$100

12/17/2009B. Lester116131799Unrestricted Gift$500

12/17/2009B. Green102131840Athletic Scholarships$50

12/17/2009B. Green102131860Department of Accounting$100

12/17/2009B. Green102131810Academic Excellence$100

12/19/2009R. Curtis210141110Academic Excellence$500

12/19/2009R. Curtis210141160Department of Accounting$500

12/31/2009G. Smith221157360Department of Accounting$1,000

12/31/2009G. Smith221157340Athletic Scholarships$25

Second Normal Form (2NF)Receipt

Receipt NumberDateDonor NameDonor Number

120112/5/2009A. Eddy109

131712/17/2009B. Lester116

131812/17/2009B. Green102

141112/19/2009R. Curtis210

157312/31/2009G. Smith221

Fund

Fund IDFund Name

10Academic Excellence

40Athletic Scholarships

60Department of Accounting

99Unrestricted Gift

Gift

Receipt NumberFund IDAmount

120110$100

120140$100

131799$500

131840$50

131860$100

131810$100

141110$500

141160$500

157360$1,000

157340$25

Third Normal Form (3NF)Receipt

Receipt NumberDateDonor Number

120112/5/2009109

131712/17/2009116

131812/17/2009102

141112/19/2009210

157312/31/2009221

Gift

Receipt NumberFund IDAmount

120110$100

120140$100

131799$500

131840$50

131860$100

131810$100

141110$500

141160$500

157360$1,000

157340$25

Donor

Donor NumberDonor Name

109A. Eddy

116B. Lester

102B. Green

210R. Curtis

221G. Smith

Fund

Fund IDFund Name

10Academic Excellence

40Athletic Scholarships

60Department of Accounting

99Unrestricted Gift

Part b. Based on the focus of your course, your requirements of the students may be at any level of implementation desired, ranging from creating tables only, through a complete system with user interfaces and standard reports.P 5-11 ANS.The papers developed by students in response to this problem will vary widely. The URL for SAP is http://www.sap.com, and the URL for Siebel is http://www.oracle.com/siebel.P 5-12 ANS.The following student coding schemes illustrate the coding types described in Technology Summary 5.2. The strengths and weaknesses of each coding scheme will vary with the specifics of the codes created. However, see Technology Summary 5.2 which provides some of the main strengths and weaknesses for each coding type.a.Sequential (serial) coding:001 = First student002 = Second student.etc.b.Block Coding:00011000 = Undergraduate students10012000 = Graduate studentsc.Significant digit coding:1 0 3 5481= Undergraduate/graduate classification0= Academic college identifier3= Academic major548= Sequentially assigned unique customer identifierd.Hierarchical coding:17 43 54817= Country of origin43= Section of country548= Sequentially assigned unique student identifiere.Mnemonic coding:SSMITH = Stan SmithMHAMMER = Mike HammerP 5-13 ANS.The solutions developed by students in response to this problem will vary widely. An example answer would be infoRouters knowledge management system at http://www.inforouter.com/Knowledge_Management.asp. The list of how infoRouter helps achieve knowledge management might be: Promotes sharing and collaboration of organizational knowledge and intellectual assets Easy access to new content Automatic notifications and alerts of new and edited documents Robust tools to search and retrieve existing information and knowledge so that these items can be reused without having to be regenerated Classification of information for efficient access and retrieval Meta Data definitions so that documents and information can be accessed easily and based on consistent criteria Templates to create information so that all information is in accordance with organizational standards Knowledge Management Portals to distribute content in a timely manner A notification system that produces an informed community of users A communication and collaboration environment that supports and allows the community of users to contribute information and knowledge(Alternatively, as a longer problem, you can have each student find two knowledge management systems and compare and contrast the features of the two systems.)P 5-14 ANS.The simplest decision model would be to assign all twelve factors equal decision weights, either 1 if the factor is positive (e.g., apartments come with washers and dryers) or 0 if negative (e.g., apartments do not have washers and dryers). If this model is used, then all of the apartments have the same resulting decision value (= 6), since each apartment has 6 positive and 6 negative factors. Of course, it is unlikely that the students will value all twelve factors equally, or that they will agree among themselves about the relative decision weights of the twelve factors. Some interesting discussion (and hopefully insight) should result when the students realize how subjective such models are. Embedding a decision model in a spreadsheet does not make the result any less subjective than running the model in a decision makers own wetware.