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Chapter 1
Chapter 1 Terms and Other Info from Accounting Information Systems Romney & Steinbart
57
Accounting
Undergraduate 3
02/18/2012

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Term
System
Definition
Set of two more more interrelated components that interact to achieve a goal
Term
Systems Concept
Definition
changes in subsystems cannot be made without considering the effect on other subsystems and the system as a whole
Term
Goal conflict
Definition
Occurs when a decision or action of a subsystem is inconsistent with the goals of another subsystem or the system as a whole
Term
Goal congruence
Definition
achieved when a subsystem achieves its goals while contributing to the organization's overall goal
Term
Integration
Definition
eliminates duplicate recording, storage, reporting and other processing activities in an organization.
Term
Data
Definition
facts that are collected, recorded, stored, and processed by an information system
Term
REA system
Definition
Resources affected by the activities, Events that take place, and Agents that participate in the event
Term
Information
Definition
data that have been organized and processed to provide meaning to a user
Term
Information overload
Definition
occurs when limits to the amount of information the human brain can effectively absorb and process are passed
Term
Value of Information
Definition
The benefit produced by the information minus the cost of producing it
Term
Major benefits of information:
Definition
reduction of uncertainty, improved decisions, better ability to plan
Term
Costs of information
Definition
time and resources spent collecting, processing, and storing data, as well as distributing the information to decision makers
Term
Information provided to external users
Definition
mandatory info required by governmental entities or essential info required to conduct business with external parties
Term
Internal information
Definition
Discretionary information - helps make choices about what information should be made available, to whom, and how frequently
Term
Primary consideration in producing mandatory and essential information
Definition
to minimize costs while meeting minimum standards of reliability and usefulness and meeting regulatory requirements
Term
Primary consideration in producing discretionary information
Definition
benefits exceed its costs
Term
Accounting information system
Definition
collects, records, stores, and processes data to produce information for decision makers
Term
1. People who operate the system and perform various functions
2. Procedures and instructions, both manual and automated, involved in collecting, processing, and storing data about the organization's activities
3. Data about the organization and its business processes
4. Software used to process the organization's data
5. Information technology infrastructure, including computers, peripheral devices, and network communications devices used to collect, store, process, and transmit data and information
Definition
Six components of and AIS
Term
1. Collect and store data about organizational activities, resources, and personnel
2. Transform data into information that is useful for making decisions
3. Provide adequate controls to safeguard the organization's assets
Definition
Three important business functions fulfilled by an AIS
Term
Relevant
Definition
reduces uncertainty, improves decision maker's ability to make predictions, or confirms/corrects their prior expectations
Term
Reliable
Definition
Free from error or bias and accurately represents the events or activities of the organization
Term
Complete
Definition
does not omit important aspects of the underlying events or activities that it measures
Term
Understandable
Definition
presented in a useful and intelligible format
Term
Verifiable
Definition
Two knowledgeable people acting independently would produce the same information
Term
Accessible
Definition
available to users when they need it and in a format they can use
Term
Inbound logistics
Definition
consists of receiving, storing, and distributing the materials an organization uses to create the services and products it sells.

Ex. receiving, handling, and storing steel, glass, and rubber are some of the inbound logistics activities of an automobile manufacturer
Term
Operations
Definition
transform inputs into final products and services

Ex. assembly-line activities convert raw materials into a finished car
Term
Outbound logistics
Definition
activities distribute finished products or services to customers

Ex. shipping cars to dealers
Term
Marketing and Sales
Definition
help customers buy the organization's products or services
Term
Service
Definition
provide post-sale support to customers
Term
1. Inbound logistics
2. Operations
3. Outbound logistics
4. Marketing and sales
5. Service
Definition
Five primary activities of value chain
Term
Support activities:
1. Firm infrastructure
2. Human resources
3. Technology
4. Purchasing
Definition
Allow the five primary activities to be performed efficiently and effectively

(and what are the four categories?)
Term
Firm infrastructure
Definition
the accounting, finance, legal, and general administration activities that allow an organization to function (also includes AIS)
Term
Human resources
Definition
include recruiting, hiring, training, and providing employee benefits and compensation
Term
Technology
Definition
Improve a product or service.

Ex. R&D, investments in new IT, Web site development, product design
Term
Purchasing
Definition
procure raw materials, supplies, machinery, and the buildings used to carry out the primary activities
Term
primary and support
Definition
The _______ and ______ are subsystems of the value chain system
Term
Structured decisions
Definition
repetitive, routine, and understood well enough that they can be delegated to lower- level employees in the organization

Can often be automated

Ex. extending credit to customers - only need to know credit limit and current balance
Term
Semistructured Decisions
Definition
characterized by incomplete decision making rules and the need for subjective assessments and judgments to supplement formal data analysis

Cannot be fully automated but often supported by computer based decision aids

Ex. setting a marketing budget for a new project
Term
Unstructured decisions
Definition
nonrecurring and nonroutine. No framework or model exists. Require considerable judgment and intuition.

Can be supported by computer-based decision aids that facilitate gathering information from diverse sources

Ex. Choosing a magazine cover, hiring senior management, selecting basic research projects to undertake
Term
Operational control
Definition
relates to the effective and efficient performance of specific tasks

Ex. decisions related to inventory management and extending credit
Term
Management control
Definition
relates to the effective and efficient use of resources for accomplishing organizational objectives

Ex. decisions related to budgeting, developing human resource practices, deciding on research practices and product improvements
Term
Strategic planning
Definition
relates to establishing organizational objectives and policies for accomplishing those objectives

Ex. decisions relating to setting financial and accounting policies, developing new product lines, and acquiring new businesses
Term
Product differentiation strategy
Definition
entails adding features or services not provided by competitors to a product so you can charge customers a premium price
Term
Low-cost strategy
Definition
entails striving to be the most efficient producer of a product or service
Term
Variety-based strategic position
Definition
involves producing or providing a subset of the industry's products or services

Ex. Jiffy lube only does oil changes
Term
needs based strategic position
Definition
involves trying to serve most or all of the needs of a particular group of customers in a target market

Ex. AARP focuses on retirees
Term
Access-based strategic position
Definition
involves serving a subset of customers who deffer from other customers in terms of factors such as geographic location or size, which creates different requirements for serving those customers

Ex. Edward Jones
Term
Synergy
Definition
where the entire system of organizational activities is greater than the sum of each individual part
Term
Predictive analysis
Definition
uses data warehouses and complex algorithms to forecast future events, based on historical trends and calculated probabilities
Term
1. Pressures
2. Opportunities
3. Rationalizations
Definition
Three conditions present when fraud occurs (the fraud triangle)
Term
Pressure
Definition
A person's incentive or motivation for committing fraud
Term
Opportunities
Definition
the conditions or situations that allow a person or organization to:
1. Commit the fraud
2. Conceal the fraud
3. Convert the theft or misrepresentation to personal gain
Term
Charge the stolen item to an expense account
Definition
A common and effective way to hide a theft
Term
Lapping scheme
Definition
perpetrator steals the cash or check that customer A mails in to pay its accounts receivable. Funds received at a later date are used to pay off customer A's balance. Funds from customer C are used to pay off customer B, etc.
Term
Kiting
Definition
perpetrator creates cash by taking advantage of the timing lag between depositing a check and the check clearing the bank.
Term
Rationalization

justification, attitude, lack of personal integrity
Definition
allows perpetrators to justify their illegal behaviors
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