ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
The value chain classifies all business activities into two categories: primary activities and support
activities. The five primary activities are: inbound logistics, operations, outbound logistics, sales &
marketing, and service. The four support activities are: firm infrastructure, human resources
management, technology, and purchasing.
The inbound logistics function at S&S includes all processes involved in receiving merchandise and
storing it. S&S does not manufacture any goods, thus its operations activities consist of the
processes involved in displaying various merchandise for sale. The outbound logistics activity at
S&S includes delivering the products to the customer. The sales & marketing activity includes
advertising and the actual processing of sales transactions. The service activity includes all post-
sales services offered to customers, such as repairs and periodic maintenance.
The firm infrastructure at S&S includes the accounting function. Its human resource management
activity includes all the processes involved in recruiting, hiring, training, evaluating, and dismissing
employees. The technology support activity includes all investments in computer technology and
various input/output devices, such as point-of-sale scanners. The purchasing support activity
includes all processes involved in identifying and selecting vendors from whom S&S will acquire
goods and negotiating the best prices, terms, and support from those suppliers.
Usually, most organizations will only produce information if its value exceeds its cost. There are
two basic situations, however, in which information may be produced even if its costs exceed its
value. First, it is often difficult to accurately estimate the value of information and, sometimes, the
cost of producing it. Therefore, organizations may produce information that they expect will
produce benefits in excess of its costs, only to be disappointed after the fact. The second reason is
that production of the information may be mandated by either a government agency or a private
organization. Examples include the tax reports required by the IRS and disclosure requirements for
financial reporting established by the Financial Accounting Standards Board.
Well-designed controls should not be viewed as “red tape” because they can actually improve both
efficiency and effectiveness. Consider a control procedure mandating weekly backup of critical
files. Regular performance of this control prevents the need to spend a huge amount of time and
money recreating files lost when the system crashes, if it is even possible to recreate the files at all.
Similarly, control procedures that require workers to design structured spreadsheets can help ensure