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1st test chapter one material

distinguish data from information


Discuss the characteristics of useful information


Explain how to determine the value of information


Explain decisions an organization makes and the information needed to make them.


Identify the information that passes between internal and external parties and an AIS.


Describe major business processes present in most companies


Explain what AIS is and describe its basic function.


Discuss how an AIS can add value to an organization.


Explain how an AIS and corporate strategy affect each other.


Explain the role an AIS plays in a company's value chain.



A set of 2 or more interrelated components that interact to achieve a goal.

What do most systems have that support the larger system?


What is an example of a system and a subsystem?

University is a system and college is a subsystem

What does each subsystem do?

Helps achieve one or more organizational goals

Goal conflict

Occurs when a subsystem us inconsistent with the goals of another subsystem or with the system as a whole.

Goal congruence

Occurs when a subsystem achieves its goals while contributing to the organization as a whole.

The larger the organization, the (easier or more difficult) it is to achieve goal congruence.

More difficult


Facts that are collected, recorded, stored, and processed by an information system

What are three kinds of data businesses need to collect?

1. Activities that take place
2. Resources affected by these activities
3. People who participate in activities


Data that have been organized and processed to provide meaning and improve the decision making process.

As a rule, users make better decisions as the quantity and quality of information (increases or decreases).


Information overload

Occurs when those limits are passed, resulting in a decline in decision making quality and an increase in the cost of providing the information

Information technology

Helps decision makers more effectively filter and condense information.

What's an example of information technology?

Walmart has over 2,000 miles of bookshelves so they invest in information technology to effectively collect, store, analyze, and manage data to provide useful information.

Value of information

The benefit produced by the information minus the cost of producing it.

3 benefits of information

1. Reduced uncertainty
2. Improved decisions
3. Improved ability to plan and schedule activities

Cost of information

Time and resources spent to produce and distribute information

When is it difficult to determine the value of information?

Before it has been utilized

7 characteristics of useful information

1. Relevant
2. Reliable
3. Complete
4. Timely
5. Understandable
7. Accessible


Reduces uncertainty, improves decision making, or confirms or corrects prior expectations


Free from error or bias, accurately represents organization events or activities.


Does not omit important aspects of the event or activities it measures.


Provided in time for decision makers to make decisions


Presented in a useful and intelligible format


Two independent, knowledgeable people produce the same information


Available to users when they need it and in a format they can use.

All organizations need ______________ in order to make effective decisions.


Business process

A set of related, coordinated and structured activities and tasks that are performed by a person or by a computer or a machine, that accomplish a specific organizational goal.


An agreement between two entities to exchange goods or services or any other event that can be measured in economic terms by an organization.

3 examples of a transaction

1. Selling goods to customers
2. Buying inventory from suppliers
3. Paying employees

Transaction processing

The process that begins with capturing transaction data and ends with informational output (such as financial statements)

Give-get exchange

An event in which 2 entities exchange items, such as cash for goods or services.

How often does a get-give exchange occur in business?

A lot

Most organizations engage in a (small or large) number of get give relationships


10 examples of business processes

1. Acquire capital
2. Acquire building and equipment
3. Hire and train employees
4. Acquire inventory
5. Advertising and marketing
6. Sell merchandise
7. Collect payments from customers
8. Pay employees
9. Pay taxes
10. Pay vendors

5 Major business processes or transaction cycles

1. Revenue cycle
2. Expenditure cycle
3. Production or conversion cycle
4. Human resource/Payroll cycle
5. Financing cycle

Revenue cycle

Where goods and services are sold for cash or a future promise to receive cash

Expenditure cycle

Where companies purchase inventory for resale or raw materials to use in producing products in exchange for cash or a future promise to pay cash.

Production or conversion cycle

Where raw materials are transformed into finished goods

Human resources/payroll cycle

Where employees are hired, trained, compensated, evaluated, promoted and terminated

Financing cycle


What do you give and what do you get in all five cycles?

Financing; Give- cash get-cash
Human resources/payroll; Give-Cash Get-labor
Expenditure; Give-Cash Get-Goods/raw materials
Production cycle; Give- labor and raw materials Get-F.G.
Revenue cycle; Give- goods Get-cash

Which business process does financing not give to?


What does financing give to HR/Payroll and expenditures?


What do all 5 business processes give to general ledger and reporting system?


Which business cycle does HR/Payroll give to and what do they give?

Production cycle and they give labor

Which business cycle does Expenditures give to and what do they give?

Production cycle and raw materials

Which business cycle does production cycle give to and what do they give?

Revenue and it gives finished goods

Who does revenue give to and what does it give?

Financing and funds

General ledger and reporting system

Used to generate information for both management and external parties

Do all business cycles need to be implemented, and give an example.

No, retail stores don't have a production cycle

The nature of a given transaction or business cycle (differs or is similar) across different types of organizations.


What is TPS?

Toyota Production System which is a set of philosophies, principles, and business processes supported by IT.

It has been said that _______ is the language of business. If this is the case then ____________ is the intelligence.


AIS (Accounting information system)

A system that collects, records, stores, and processes data to produce information for decision makers.

What does AIS include?

People, procedures, and internal controls and security measures


A data identification, collection, and storage process as well as an information development, measurement, and communication process.

Is accounting an information system and why?

Yes, because an AIS collects, records, stores, and processes accounting and other data to produce information for decision makers.

Which of the following is an example of an AIS?
1. Paper and pencil manual system
2. Complex system using latest in IS
3. Something in between

All of them

Regardless of the approach you take (regarding AIS), the process is _______.

The same

What are paper and pencil or computer hardware and software when talking about AIS?

Tools to produce information

True or false: AIS should be organizations primary information system?


6 components of an AIS

1. People- who use the system
2. Procedures and instructions- used to collect process and store data
3. Data- about organization and its business activities
4. Software- Used to process data
5. IT infrastructure- Including computers, peripheral devices, and network communications devices used in the AIS
6. Internal controls and security measures- Safeguard AIS data

The 6 components of an AIS enable it to fulfill what 3 important business functions?

1. Collect and store data about organizational activities, resources and personnel
2. Transform data into information so management can plan, execute, control, and evaluate activities, resources, and personnel.
3. Provide adequate controls to safeguard the organizations assets and data.

6 ways a well developed AIS can add value to an organization

1. Improving quality and reducing the costs of products or services
2. Improving efficiency
3. Sharing knowledge
4. Improving the efficiency and effectiveness of its supply chain
5. Improving internal control structure
6. Improving decision making

What is a CITP?

An IT specialty designation for CPAs

5 steps in decision making

1. Identify problem
2. Collect and interpret information
3. Evaluate ways to solve problems
4. Select a solution methodology
5. Implement solution

Which phases of decision making can AIS help?

All 3

What 5 ways can an AIS help improve decisions?

1. Identify situations requiring management action
2. Reduce uncertainty
3. Store information about results of precious decisions, which provides feedback.
4. Provides accurate information in a timely manner
5. Analyzes sales data to discover items that are purchased together.

How has UPS become more efficient and better serves customers?

Information Technology

When asked to identify the three most important skill sets for a CIO, over 75% said what?

Strategic thinking and planning

3 factors that influence the design of AIS

1. Developments in IT
2. Business strategy
3. Organizational culture

An AIS that makes information easily accessible and widely available is likely to increase pressures for more what?

Decentralization and autonomy

How has internet helped companies?

Cut costs

How could internet hurt companies?

If everyone uses it, it could lead to price intense competition leading to less profits

Can internet be considered a long term competitive advantage?

No, because everyone has access to it

Predictive analysis

Uses data warehouses and complex algorithms to forecast future events, based on historical trends and calculated probabilities.

_______ provides an educated guess of what one may expect to see in the near future.

Predictive analysis

5 primary activities that directly provide value to customers

1. Inbound logistics
2. Operations
3. Outbound logistics
4. Marketing and sales
5. Service

Inbound logistics

Consists of receiving, storing, and distributing the materials an organization uses to create the services and products it sells


Activities that transform inputs into final products or services

Outbound logistics

Activities that distribute finished products or services to customers.

Marketing and sales

Activities that help customers buy the organizations products or services


activities that provide post-sale support to customers

4 categories of support activities

1. Firm infrastructure
2. HR
3. Technology
4. Purchasing

Firm infrastructure

Accounting, finance, legal and general administration activities that allow an organization to function

What is part of a firms infrastructure?



Recruiting, hiring, training, and compensating employees


Activities that improve a product or service like research and development, investments in IT, and product design


Activities that procure raw materials, supplies, machinery, and the buildings used to carry out these activities.

An organizations value chain is part of a larger system called __________.

Supply chain

Supply chain

An extended system that includes an organizations value chain as well as its suppliers, distributors, and customers

The supply chain picture

Raw materials supplier>Manufacturer>distributor>retailer>consumer

What was the problem with Limited?

Did not have a consistent supply chain process so 400 trucks came one day to a parking lot that only fit 150 trucks. No one knew where the stuff was supposed to go.

Data differs from information in which way?
A. Data are output and information is input
B. Information is output and data is input
C. Data are meaningful bits of information
D. No difference

B. Information is output and data is input

Which of the following is NOT a characteristic that makes information useful?
A. It is reliable
B. It is timely
C. It is inexpensive
D. It is relevant

C. It is inexpensive

Which of the following is a primary activity in the value chain?
A. Purchasing
B. Accounting
C. Post-Sales Service
D. Human Resources Management

C. Post-sales service

Which transaction cycle includes interactions between an organization and its suppliers?
A. Revenue
B. Expenditure
C. HR/Payroll
D. General ledger and reporting system


In the value chain concept, upgrading IT is considered to be what kind of activity?
A. Primary
B. Support
C. Service
D. Structured

B. Support activity

In which cycle does a company ship goods to customers?
A. Production
B. Financing
C. Revenue
D. Expenditure


Which of the following is a function of an AIS?
A. Reducing the need to identify a strategy and strategic position
B. Transforming data into useful information
C. Allocating organizational resources
D. Automating all decision making

B. Transforming data into useful information

A firm, its suppliers, and its customers collectively form which of the following
A. Supply Chain
B. Value Chain
C. ERP Sysytem

A. Supply Chain

A report telling how well all approved vendors have performed in the prior 12 months is information that is MOST needed in which business activity?
A. Paying vendors
B. Acquiring inventory
C. Selling merchandise
D. Paying employees

B. Acquiring inventory

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