Solution Manual
Accounting Information Systems: A Practitioner Emphasis
By Cynthia D. Heagy, Constance M. Lehmann
7th Edition
,Table of content
1. Significance of accounting information systems and the accountant’s role.
2. Accounting systems documentation.
3. Essential elements and basic activities of accounting systems.
4. Data flows, activities, and structure of accounting systems.
5. Reporting principles, coding methods, and audit trails.
6. Internal control and risk assessment.
7. Control activities and monitoring.
8. The financial process.
9. The revenue process.
10. The purchasing process.
11. The inventory process.
12. Database structure of accounting systems.
13. Developing a relational database for an accounting information system.
14. Electronic business.
15. Ais selection and implementation.
,Solutions Manual For Accounting Information Systems A Practitioner
Emphasis, 7e Cynthiaheagy Constance Lehmann
Chapter 1
Significance Of Accounting Information Systems And The
Accountant’s Role
Introductory scenario: suggested solutions to questions
1. Employee overtime hours, customer information (e.g., age groups), inventory levels, reorder points,
eoq calculation, volume/quantity discount analysis, square footage in use v. Storage, customer
flow data, spoilage
2. How much is client willing to pay? System that is easy for servers to use with proper controls. Bob’s
hourly rate would be a concern for client. Will bob be around “after the sale” (i.e., tech support)?
What types of pre-packaged systems are available?
3. Information to help with software division (e.g., total sales dollars, complexity of accounting system).
How many computers needed? Any expansion planned? What types of employees do they have (e.g.,
waiters would want quick touch screens)?
4 the owner of the restaurant wants a new accounting system because he needs up-to-date
information on how the business is doing. Waiting until the end of the year, or even the quarter, does
not give marshall the information he needs to make those day-to-day decisions that will ensure the
success of his restaurant.
Chapter vignettes: suggested responses to questions
Vignette 1.1
1. Closer relationships with remaining suppliers, the ability to carry less inventory (reducing
carrying costs and risks of theft or loss of inventory), sharing of planning information with
suppliers, easier to monitor vendor performance. Might lose volume discounts if trying to
minimize inventory on hand by having smaller shipments from vendors shipped more often.
2. Reduction in paperwork, reduction in input errors, ordering and cash receipt processes more
efficient, increases in efficiency in meeting changes in demand. One disadvantage would relate to
problems with settling disputed orders or payments with loss of “paper trail” that includes
authorized signatures.
Vignette 1.2
1. Managers would probably find information in units to be most useful for planning decisions because
this information would represent things over which he/she has control. While the manager might
not have control over salaries, he/she does have control over the amount of overtime and the
approval of vacation of the employees.
2. Managers would probably want information related to production numbers (to determine
seasonality; during slow times, more employees could be on vacation), the number of vacation hours
per employee, the number of overtime hours per employee, backorder information, and
information to help the manager match staffing levels with production.
Vignette 1.3
1. The privacy of information is a major consideration, as the customer might not want their spending
pattern information shared with other parties. Loss of confidential information can be disastrous to
a company’s reputation and lead to significant financial losses (lost sales, fines, etc.) Information
about customers must be protected from information leakage to other third parties who gain
authorized (or unauthorized) access
, To information. At the very least, confidential information about the customers should be encrypted
and have limited access.
2. Inventory management (e.g., turnover, obsolescence, supply/demand, reorder levels), potential
markets or product lines for expansion, frequent buyer programs.
Vignette 1.4
1. The situation could have been avoided if employees had been part of the decision-making and
testing early in the project. Employee buy-in is essential to the success of any new system
implementation. It is key that the system provide managers with information that they need for
decision-making. It is also important to have a maintenance contract in place, with better reporting
to management and regular follow-up. It appears that this decision was not made by executive
management, so its success was questionable since the “tone at the top” with regard to the project
was “ignorance”. Since executive management did not monitor the project, they could not respond
to kluger’s complaints, nor could they provide “strong encouragement” for continuation of the
project originally started by lehmann. In fact, it appears that executive management was not
involved in the decision to take on the new system. Kluger was not given the opportunity to learn
the new system, nor was there motivation to learn the new system. The company also had
inadequate backup so that the project could continue in the absence of a key employee.
2. .here are some suggested “next steps”
• Improve the governance process and the “tone at the top” to get executive management
involvement and oversight of system projects—this includes aligning any system projects with the
strategy of the company
• Determine that any system chosen by management will provide quality information useful for
decision- making at all levels
• Reinstate the maintenance contract and set up a training contract if it is determined more cost-
effective and in line with the company business plan to use the new system
• Provide training and employee involvement in developing the system
• Provide better oversight of the controller function
Vignette 1.5
1. The redesign process can be improved using the following suggestions:
• Set up end-user groups to get input regarding output needs, data collection needs, screen, and form layouts
• Develop a schedule of tests to be conducted with representative end users for pilot testing
• Allow end user input for changes and improvements to system
• Set up training for all affected employees
• Get management and programmer buy-in for essential controls and audit trails at the front
end of development
• Emphasize the importance of controls, protection of information assets, and
protection of confidential/private information
Solutions to discussion questions and problems
1. The project that finkelstein and associates is considering is a capital investment that requires
information on the estimated initial investment and the estimated future return. The future return
would be measured by net incremental cash flows to the mall (incremental cash inflows less
incremental cash outflows).
Estimated initial investment would include:
• Architects fees
• Renovation of existing facilities
• Construction of new facilities and food court
• Cost of disruption of trade during project
Accounting Information Systems: A Practitioner Emphasis
By Cynthia D. Heagy, Constance M. Lehmann
7th Edition
,Table of content
1. Significance of accounting information systems and the accountant’s role.
2. Accounting systems documentation.
3. Essential elements and basic activities of accounting systems.
4. Data flows, activities, and structure of accounting systems.
5. Reporting principles, coding methods, and audit trails.
6. Internal control and risk assessment.
7. Control activities and monitoring.
8. The financial process.
9. The revenue process.
10. The purchasing process.
11. The inventory process.
12. Database structure of accounting systems.
13. Developing a relational database for an accounting information system.
14. Electronic business.
15. Ais selection and implementation.
,Solutions Manual For Accounting Information Systems A Practitioner
Emphasis, 7e Cynthiaheagy Constance Lehmann
Chapter 1
Significance Of Accounting Information Systems And The
Accountant’s Role
Introductory scenario: suggested solutions to questions
1. Employee overtime hours, customer information (e.g., age groups), inventory levels, reorder points,
eoq calculation, volume/quantity discount analysis, square footage in use v. Storage, customer
flow data, spoilage
2. How much is client willing to pay? System that is easy for servers to use with proper controls. Bob’s
hourly rate would be a concern for client. Will bob be around “after the sale” (i.e., tech support)?
What types of pre-packaged systems are available?
3. Information to help with software division (e.g., total sales dollars, complexity of accounting system).
How many computers needed? Any expansion planned? What types of employees do they have (e.g.,
waiters would want quick touch screens)?
4 the owner of the restaurant wants a new accounting system because he needs up-to-date
information on how the business is doing. Waiting until the end of the year, or even the quarter, does
not give marshall the information he needs to make those day-to-day decisions that will ensure the
success of his restaurant.
Chapter vignettes: suggested responses to questions
Vignette 1.1
1. Closer relationships with remaining suppliers, the ability to carry less inventory (reducing
carrying costs and risks of theft or loss of inventory), sharing of planning information with
suppliers, easier to monitor vendor performance. Might lose volume discounts if trying to
minimize inventory on hand by having smaller shipments from vendors shipped more often.
2. Reduction in paperwork, reduction in input errors, ordering and cash receipt processes more
efficient, increases in efficiency in meeting changes in demand. One disadvantage would relate to
problems with settling disputed orders or payments with loss of “paper trail” that includes
authorized signatures.
Vignette 1.2
1. Managers would probably find information in units to be most useful for planning decisions because
this information would represent things over which he/she has control. While the manager might
not have control over salaries, he/she does have control over the amount of overtime and the
approval of vacation of the employees.
2. Managers would probably want information related to production numbers (to determine
seasonality; during slow times, more employees could be on vacation), the number of vacation hours
per employee, the number of overtime hours per employee, backorder information, and
information to help the manager match staffing levels with production.
Vignette 1.3
1. The privacy of information is a major consideration, as the customer might not want their spending
pattern information shared with other parties. Loss of confidential information can be disastrous to
a company’s reputation and lead to significant financial losses (lost sales, fines, etc.) Information
about customers must be protected from information leakage to other third parties who gain
authorized (or unauthorized) access
, To information. At the very least, confidential information about the customers should be encrypted
and have limited access.
2. Inventory management (e.g., turnover, obsolescence, supply/demand, reorder levels), potential
markets or product lines for expansion, frequent buyer programs.
Vignette 1.4
1. The situation could have been avoided if employees had been part of the decision-making and
testing early in the project. Employee buy-in is essential to the success of any new system
implementation. It is key that the system provide managers with information that they need for
decision-making. It is also important to have a maintenance contract in place, with better reporting
to management and regular follow-up. It appears that this decision was not made by executive
management, so its success was questionable since the “tone at the top” with regard to the project
was “ignorance”. Since executive management did not monitor the project, they could not respond
to kluger’s complaints, nor could they provide “strong encouragement” for continuation of the
project originally started by lehmann. In fact, it appears that executive management was not
involved in the decision to take on the new system. Kluger was not given the opportunity to learn
the new system, nor was there motivation to learn the new system. The company also had
inadequate backup so that the project could continue in the absence of a key employee.
2. .here are some suggested “next steps”
• Improve the governance process and the “tone at the top” to get executive management
involvement and oversight of system projects—this includes aligning any system projects with the
strategy of the company
• Determine that any system chosen by management will provide quality information useful for
decision- making at all levels
• Reinstate the maintenance contract and set up a training contract if it is determined more cost-
effective and in line with the company business plan to use the new system
• Provide training and employee involvement in developing the system
• Provide better oversight of the controller function
Vignette 1.5
1. The redesign process can be improved using the following suggestions:
• Set up end-user groups to get input regarding output needs, data collection needs, screen, and form layouts
• Develop a schedule of tests to be conducted with representative end users for pilot testing
• Allow end user input for changes and improvements to system
• Set up training for all affected employees
• Get management and programmer buy-in for essential controls and audit trails at the front
end of development
• Emphasize the importance of controls, protection of information assets, and
protection of confidential/private information
Solutions to discussion questions and problems
1. The project that finkelstein and associates is considering is a capital investment that requires
information on the estimated initial investment and the estimated future return. The future return
would be measured by net incremental cash flows to the mall (incremental cash inflows less
incremental cash outflows).
Estimated initial investment would include:
• Architects fees
• Renovation of existing facilities
• Construction of new facilities and food court
• Cost of disruption of trade during project
