Chapter 3Electronic Business (E-Business) Systems

TRUE/FALSE
1. E-Business is the application of electronic networks (including the Internet) to exchange information
and link business processes among organizations and/or individuals.
ANS: T

PTS: 1

2. Standing data is relatively permanent data stored in master data.

ANS: T

PTS: 1

3. Adding, deleting, or replacing standing data is called transaction processing.

ANS: F

PTS: 1

4. Master data are repositories of relatively permanent data maintained over an extended period of time.
ANS: T

PTS: 1

5. Data maintenance refers to the recording of business event data and transactions.
ANS: F

PTS: 1

6. Information processing includes data processing functions related to accounting events, internal
operations and financial statement preparation.
ANS: T

PTS: 1

7. Immediate mode is the data processing mode in which there is significant delay between two data
processing steps.
ANS: F

PTS: 1

8. Processes that include distribution, manufacturing, and accounting software operations are front office
processes.
ANS: F

PTS: 1

9. Periodic mode is the data processing mode in which there can be a significant delay between two data
processing steps.
ANS: T

PTS: 1

10. Batch processing is the aggregation of several business events over some period of time with the
subsequent processing of these data as a group by the information system.
ANS: T

PTS: 1

11.
A device that is not directly connected to the processing computer is referred to as an
online device.
ANS: F

PTS: 1

12. In an OLTE system, use of data entry devices allows business event data to be entered directly into the
information system at the time and place that the event occurs.
ANS: T

PTS: 1

13. A computer configuration in which certain equipment is directly connected to the computer is said to
be online.
ANS: T

PTS: 1

14. OLRT systems gather business event data at the time of occurrence, update the master data essentially
instantaneously, and provide the results arising from the event within a very short amount of time.
ANS: T

PTS: 1

15. Batch mode is the data processing mode in which there is little or no delay between any two data
processing steps.
ANS: F

PTS: 1

16. Client/server technology is the physical and logical division between user-oriented application
programs that are run at the user level and the shared data that must be available through a common
database.
ANS: T

PTS: 1

17. VANs are communication networks that link together several different local user machines with
printers, databases, and other shared devices.
ANS: F

PTS: 1

18. LANs are communication networks that link up distributed users and local networks into an integrated
communication network.
ANS: F

PTS: 1

19. The Internet is a massive interconnection of computer networks worldwide that enables
communication between dissimilar technology platforms.
ANS: T

PTS: 1

20. Web browsers are software programs designed specifically to allow users to view the various
documents and data sources available on the Internet.
ANS: T

PTS: 1

21.
A private data base service allows all subscribers to access and search external
databases, usually through the Internet or other network connection.
ANS: F

PTS: 1

22. SPAM is unsolicited non-document mail that has largely been eliminated.
ANS: F

PTS: 1

23. A type of intranet, which has been extended to limited external access, is referred to as an extranet.
ANS: T

PTS: 1

24. E-mail is the electronic transmission of nonstandardized messages between two individuals who are
linked via a communications network.
ANS: T

PTS: 1

25. EDI is the capture, storage, management, and control of electronic document images for the purpose of
supporting management decision making and facilitating business event processing.
ANS: F

PTS: 1

26. EDM is the computer-to-computer exchange of business data in structured formats that allow direct
processing of those electronic documents by the receiving computer system.
ANS: F

PTS: 1

27. VAN service acts as the EDI "postman."

ANS: T

PTS: 1

28. Internet commerce is computer-to-computer exchange of business event data in structured or semistructured formats via Internet communication that allows the initiation and consummation of business
events.
ANS: T

PTS: 1

29. The benefits of electronic document management include improved staff productivity, reduced cost of
handling and storing paper and faster processing.
ANS: T

PTS: 1

30. Applications such as ANSI (X12), and EDIFACT are referred to as transaction software.
ANS: F

PTS: 1

31. Network providers are companies that provide a link into the Internet by making their directly
connected networks available for access by fee-paying customers.
ANS: T

PTS: 1

32. Internet assurance is a service provided for a fee to vendors in order to provide a limited endorsement
to users of the vendor's web site that the site is in fact reliable and event data security is reasonable.
ANS: T

PTS: 1

33. The AICPA Internet assurance program that includes a certification and seal is called VeriSign.
ANS: F

PTS: 1

34. Electronic store fronts are Internet-located resources for displaying goods and services for sale and for
conducting related sales transactions.
ANS: T

PTS: 1

35. Extranet auction markets provide an Internet base for companies to place products up for bid or for
buyers to put proposed purchases up for bid.
ANS: F

PTS: 1

36. Internet market exchanges enable suppliers to put their products online, by feeding into electronic
catalogs that sort through alternatives from different suppliers and electronically place an order.
ANS: T

PTS: 1

MULTIPLE CHOICE
1. Back office functions include:
a. customer interface
b. supplier interface
c. purchasing
d. accounting
ANS: D

PTS: 1

2. A byproduct of e-business is
a. elimination of sales staff
b. increase in accounting staff
c. production of hard copy reports
d. increased errors
ANS: A

PTS: 1

3. Increased efficiency in the purchasing function from e-Business includes

a. the seller soliciting pricing
b. automatic price checking by the computer
c. decreased electronic based business events
d. none of the above
ANS: B

PTS: 1

a.
b.
c.
d.

4.
The vast majority of e-Business is
business to customer
customer to customer
business to business
none of the above

ANS: C

PTS: 1

5. By selling tickets over the Internet, airlines have

a. increased commissions paid to travel agents
b. been able to indirectly reach customers
c. been able to discontinue paying commissions to travel agents
d. none of the above
ANS: C

PTS: 1

6. Suggesting items to Internet customers based on their buying patterns

a. is from the collection and analysis of customer purchase data
b. is known as "shop at one location"
c. has increased inventory levels
d. none of the above
ANS: A

PTS: 1

7. Online catalogs can be viewed through a(n):

a. browser
b. compiler
c. plug-in
d. viewer
ANS: A

PTS: 1

8. According to the text, these represent the "book of original entry"

a. business event data
b. data maintenance
c. master data
d. standing data
ANS: A

PTS: 1

9. According to the text, these are repositories of relatively permanent data maintained over an extended
period of time
a. business event data
b. data maintenance
c. master data
d. standing data
ANS: C

PTS: 1

10. According to the text, these include relatively permanent portions of master data
a. business event data
b. maintenance data
c. master data
d. standing data
ANS: D

PTS: 1

11. According to the text, this includes functions related to accounting events, internal operations and
financial statement preparation
a. batch processing
b. information processing
c. periodic processing
d. data maintenance
ANS: B

PTS: 1

12. The processing mode in which there is a delay between the various data processing steps is referred to
as:
a. imperial mode
b. periodic mode
c. immediate mode
d. passive mode
ANS: B

PTS: 1

13. In batch processing, business event data are usually entered by using a(n):
a. imaging device
b. inline device
c. offline device
d. point of sale (POS) device
ANS: C

PTS: 1

14. A disadvantage of the periodic mode is:

a. completeness
b. accuracy
c. validity
d. timeliness
ANS: D

PTS: 1

15. The correct sequence of events for an automated equivalent to a manual system is
a. business event occurs, update master data, record business event data, generate output
b. business event occurs, generate output, update master data, record business event data
c. business event occurs, record business event data, update master data, generate output
d. none of the above
ANS: C

PTS: 1

16. A disadvantage of periodic mode systems is

a. online master data are only up to date right after the processing has been completed
b. users can require on-demand reports from the system that are updated in real time
c. query capability always exists to extract up to date data
d. data is updated after every transaction
ANS: A

PTS: 1

17.
In a ____ system, use of data entry devices allows business event data to be entered
directly into the information system at the time and place the business event occurs
a. OLTE
b. OLTD
c. periodic
d. RFID
ANS: A

PTS: 1

18. An online transaction entry (OLTE) system merges the traditional subprocesses of:
a. business event occurs and record business event data
b. business event occurs and update master data
c. business event occurs and generate outputs
d. record business event data and update master data
ANS: A

PTS: 1

19. Systems that gather business event data at the time of occurrence, update the master data essentially
instantaneously, and provide the results arising from the business event within a very short amount of
time are referred to as:
a. OLTE
b. OLRT
c. ORLT
d. OLTP
ANS: B

PTS: 1

20. The processing mode in which there is no or little delay between the various data processing steps is
referred to as:
a. imperial mode
b. periodic mode
c. immediate mode
d. passive mode
ANS: C

PTS: 1

21. A system that supports constantly up to date reporting of data is

a. OLTE
b. OLRT
c. ORLT
d. OLTP
ANS: B

PTS: 1

22. Digital image processing systems are capable of performing all of the following except:
a. capture of data
b. storage of data
c. retrieval of data
d. creation of data
ANS: D

PTS: 1

23.
The system that enables users of an ERP system to view source documents from any
location is:
a. electronic data interchange
b. local area network
c. digital image processing
d. electronic commerce
ANS: C

PTS: 1

24. The technology that is the physical and logical division between user-oriented application programs
that are run at the client level and the shared data that must be available through a separate computer
that handles centrally shared activities is:
a. online real-time technology
b. client server technology
c. online transaction processing technology
d. online transaction entry
ANS: B

PTS: 1

25. ____ is (are) communication networks that link several different local user machines with printers,
databases, and other shared devices.
a. WANs
b. client server technology
c. LANs
d. The Internet
ANS: C

PTS: 1

26. Benefits of electronic data management (EDM) include all of the following except
a. reduced cost of handling and storing paper
b. improved staff productivity
c. faster processing
d. less disk storage
ANS: D

PTS: 1

27. Which of the following is not a cost of EDI?

a. buying or leasing of hardware and software
b. training employees
c. responsiveness to customers' needs
d. reengineering applications
ANS: C

PTS: 1

28. Electronic document management (EDM) includes all of the following except:
a. capturing document images
b. controlling document images
c. storing document images
d. all of the above are included in EDM
ANS: B

PTS: 1

a.
b.
c.
d.

29.
The benefits of electronic document management include all of the following except:
improved staff productivity
reduced computer processing requirements
reduced cost of handling and storing paper
faster processing

ANS: B

PTS: 1

30. Which of the following is not a benefit of electronic data interchange (EDI)?
a. enables continued business with certain business partners
b. improved responsiveness to customers' needs
c. providing timely and accurate data
d. training employees
ANS: D

PTS: 1

31. Which of the following is not a cost of electronic data interchange (EDI)?
a. entering data only once
b. training employees
c. buying and leasing hardware and software
d. reengineering affected applications
ANS: A

PTS: 1

32. Which of the following are the two primary categories of E-Business over the web?
a. Client and server relationships
b. Networks and network providers
c. Assurance providers and vendors
d. B2B & B2C
ANS: D

PTS: 1

33. To implement a secure EDI system between two or more companies, they might use a(n):
a. OLTE
b. VAN
c. OLTP
d. OLRT
ANS: B

PTS: 1

34. In EDI, the software that includes the purchasing system at the origin and the order entry system at the
destination is known as
a. OLTE
b. VAN
c. the communications network
d. application software
ANS: D

PTS: 1

35. The fastest-growing segment of electronic commerce is:

a. electronic mail
b. electronic document management
c. electronic data interchange
d. Internet commerce
ANS: D
PTS: 1
36. Which of the following is not a benefit of Internet commerce?

a.
b.
c.
d.

maintaining security of the Internet site

improved responsiveness to customers' needs
survival in a competitive industry
global penetration

ANS: A

PTS: 1

37. The risks to a business of Internet commerce include all of the following except:
a. technological advances quickly antiquate hardware installations
b. hackers may attempt to access sensitive information
c. individuals or organizations may attempt to overload the system, preventing legitimate
customers from accessing the site
d. business partners have access to sensitive information
ANS: A

PTS: 1

38. WebTrust is a(n):

a. e-mail program
b. Internet provider
c. Internet assurance service
d. electronic document management program
ANS: C

PTS: 1

39. Which of the following Internet applications would not be categorized as a customer relationship
management system?
a. A customer can check their outstanding balance.
b. A customer can design the product.
c. A customer can download a software upgrade.
d. A customer can determine the status or location of a product shipment.
ANS: B

PTS: 1

COMPLETION
1. The involvement of two or more individuals and/or organizations in the completion of electronic-based
business events is referred to as ____________________.
ANS:
electronic business
e-commerce
PTS: 1
2. Processes that include distribution, manufacturing, and accounting software operations are
____________________ processes.
ANS: back office
PTS: 1

3.
____________________ represent the books of original entry used for recording most
business events.
ANS: Business event data
PTS: 1
4. ____________________ are repositories of relatively permanent data maintained over an extended
period of time.
ANS: Master data
PTS: 1
5. ____________________ includes activities related to adding, deleting, or replacing the standard data
portions of master data.
ANS: Data maintenance
PTS: 1
6. ____________________ includes data processing functions related to economic events such as
accounting events, internal operations and financial statement preparation.
ANS: Information processing
PTS: 1
7. ____________________ include relatively permanent portions of master data, such as a customer's
address.
ANS: Standing data
PTS: 1
8. ____________________ is the data processing mode in which there can be a significant delay between
two data processing steps.
ANS: Periodic mode
PTS: 1
9. ____________________ is the aggregation of several business events over some period of time with
the subsequent processing of these data as a group by the information system.
ANS: Batch processing
PTS: 1
10. A device that is not directly connected to the processing computer is referred to as a(n)
____________________ device.
ANS: offline

PTS: 1
11. In a(n) ____________________ system, use of data entry devices allows business event data to be
entered directly into the information system at the time and place that the event occurs.
ANS:
online transaction entry
OLTE
PTS: 1
12. A computer configuration in which certain equipment is directly connected to the computer is said to
be ____________________.
ANS: online
PTS: 1
13. ____________________ systems gather business event data at the time of occurrence, update the
master data essentially instantaneously, and provide the results arising from the event within a very
short amount of time.
ANS:
Online real-time
OLRT
PTS: 1
14. ____________________ is the data processing mode in which there is little or no delay between any
two data processing steps.
ANS: Immediate mode
PTS: 1
15. ____________________ is the data processing mode in which master files are updated immediately,
each time an event is recorded.
ANS: Immediate mode
PTS: 1
16. Computer-based systems that capture, store, retrieve, and present images of real or simulated objects
are called ____________________.
ANS:
digital image processing systems
EDM
PTS: 1

17. ____________________ is the physical and logical division between user-oriented application
programs that are run at the user level and the shared data that must be available through a separate
computer that handles centrally shared activities-such as databases and printing queues-between
multiple users.
ANS: Client server technology
PTS: 1
18. ____________________ are communication networks that link together several different local user
machines with printers, databases, and other shared devices.
ANS:
Local area networks
LANs
PTS: 1
19. ____________________ are communication networks that link up distributed users and local networks
into an integrated communication network.
ANS:
Wide area networks
WANs
PTS: 1
20. The ____________________ is a massive interconnection of computer networks worldwide that
enables communication between dissimilar technology platforms.
ANS: Internet
PTS: 1
21. ____________________ are software programs designed specifically to allow users to view the
various documents and data sources available on the Internet.
ANS: Web browsers
PTS: 1
22. A(n) ____________________ is unsolicited non-document mail.
ANS: spam
PTS: 1
23. A smaller version of Internet technologies that is used to link an organization's internal documents and
databases into a system that is accessible through web browsers or internally developed software
designed to maximize the benefits from utilization of organization information resources is called a(n)
____________________.
ANS: intranet
PTS: 1
24. ____________________ is the electronic transmission of nonstandardized messages between two
individuals who are linked via a communications network.

ANS:
Electronic mail
e-mail
PTS: 1
25. ____________________ is the capture, storage, management, and control of electronic document
images for the purpose of supporting management decision making and facilitating business event
processing.
ANS:
Electronic document management
EDM
Digital image processing systems
PTS: 1
26. ____________________ is the computer-to-computer exchange of business data in structured formats
that allow direct processing of those electronic documents by the receiving computer system.
ANS:
Electronic data interchange
EDI
PTS: 1
27. A(n) ____________________ service acts as the EDI "postman."
ANS:
value-added network
VAN
PTS: 1
28. ____________________ is computer-to-computer exchange of business event data in structured or
semi-structured formats via Internet communication that allows the initiation and consummation of
business events.
ANS: Internet commerce
PTS: 1
29. Applications such as ANSI (X12), and EDIFACT are referred to as ____________________.
ANS: translation software
PTS: 1
30. ____________________ are companies that provide a link into the Internet by making their directly
connected networks available for access by fee-paying customers.

ANS:
Network providers
Internet service providers
PTS: 1
31. ____________________ is a service provided for a fee to vendors in order to provide a limited
endorsement to users of the vendor's web site that the site is in fact reliable and event data security is
reasonable.
ANS: Internet assurance
PTS: 1
32. The AICPA Internet assurance program that includes a certification and seal is called
____________________.
ANS: Web Trust
PTS: 1
33. ____________________ provide an Internet base for companies to place products up for bid or for
buyers to put proposed purchases up for bid.
ANS: Internet auction markets
PTS: 1
34. ____________________ enable suppliers to put their products online, generally feeding into electronic
catalogs that allow the buyer(s) to sort through alternatives from different suppliers and electronically
place an order.
ANS: Internet market exchanges
PTS: 1

ESSAY
1. Compare and contrast manual and automated accounting information systems.
ANS:
In a manual system, the first activity in the manual accounting process is to journalize the business
event (i.e., accounting transaction) in a book of original entry (i.e., a special or general journal). The
second activity is to post the business event from the journal to a subsidiary ledger. The third activity is
to post the total from the journal to the general ledger. The fourth activity is to summarize the business
events by preparing a trial balance.
In an automated accounting information system, business event data are stored in a transaction file,
which automates the general and special journals of the manual system. Master data, repositories of
relatively permanent data maintained over an extended period of time, are updated (analogous to
posting). Two types of updates can be made to master data: information processing and data
maintenance. Information processing includes data processing functions related to economic events
such as accounting events, internal operations such as manufacturing, and financial statement
preparation such as adjusting entries. Data maintenance includes activities related to adding, deleting,
or replacing the standing data portions of master data. Standing data include relatively permanent
portions of master data, such as the credit limit on customer master data and the selling price and
warehouse location on inventory master data. The business event data is summarized by retrieving the
general ledger master data from storage and prints (or preparing on screen) the trial balance.
A computerized AIS automates the manual accounting process with which you are already quite
familiar and will often do so in such a way as to make the automated process roughly equivalent to the
manual process. That is, when we computerize an AIS, we may merely change how the data are
processed; we often won't change what tasks are performed.
PTS: 1

2.
Discuss the advantages and disadvantages of the different modes of processing (i.e., OLTE and
OLRT).
ANS:
Advantages
OLTE
OLRT
Data entered directly into the information
Data entered directly into the information
system at the time and place the transaction
system at the time and place the transaction
occurs.
occurs.
Eliminates the need to have one person enter
Transactions are processed individually and
business event data on a source document and master files are updated instantaneously.
then have a second person perform the data
entry.
Use of bar code readers and scanners aid in
Allows reports and support queries to be
accuracy of inputs
accessed at any time.
Can be used with the periodic mode of
transaction processing.
Disadvantages
OLTE
OLRT
May require using expensive software and
Requires expensive software, hardware, and
hardware.
communication systems.
Master files may be out-of-date except after
Transactions cannot be aggregated on a local
updating.
computer to be transferred later to a data
processing center.
PTS: 1
3. Discuss the alternative methods (E-mail, EDI, and Internet) of conducting electronic commerce.
ANS:
E-mail is the electronic transmission of nonstandardized messages between two individuals who are
linked via a communications network. Businesses can use e-mail to target market potential buyers.
This method of contacting customers is less expensive and more efficient than U.S. mail. However, the
unstructured nature of e-mail makes data capturing more difficult. This can be overcome by including
an electronic order form with the e-mail transmission. The use of e-mail may require some transaction
keying by data entry personnel. In addition, the consumer may be hesitant to provide certain
information via e-mail, since it is not a secured transmission vehicle.
Electronic data interchange (EDI) is the computer-to-computer exchange of business data (i.e.,
documents) in structured formats that allow direct processing of those electronic documents by the
receiving computer system. The benefits of EDI include: survival, improved responsiveness,
elimination of reentering data at the receiving organization, reduction of mailroom and other document
preparation and handling costs, increased timeliness and accuracy of data, the opportunity to redesign
processes and controls. Costs include: modifying trading relationship and renegotiating contracts,
buying or leasing hardware and software, establishing relationships with VANs and negotiating
contracts, training employees, reengineering affected applications, and implementing security, audit,
and control procedures. Control considerations include: ensuring proper authorization, having
preventive rather than detective controls, and increased need for program change controls and physical
security.

Internet commerce is the computer-to-computer exchange of transaction data in structured or semistructured formats via Internet communication that allows the initiation and consummation of business
events. In many cases, the goods (software or music) or services (airline reservations) that are
contracted for through the Internet are immediately forwarded back to the consumer via the Internet as
well. Benefits of Internet commerce include: survival, improved responsiveness, global penetration,
elimination of reentering data at the receiving organization, reduction of mailroom and other document
preparation and handling costs, increased timeliness and accuracy of data, the opportunity to redesign
processes and controls. Costs include: organizational change, buying or leasing equipment and
maintaining connection to the Internet, establishing new customers' connections, staffing and training
of employees, and maintaining security of the Internet site.
PTS: 1
4. Explain how the Internet and personal computers could be used in a college course such as AIS to
eliminate all paper exchanged between the students and the professor. What technologies (hardware,
software) you would need to carry out your plan. Be as specific as possible.
ANS:
The answers will vary by student but should include items such as:
Email for electronic communication and for exchange of files such as word processing files,
spreadsheet files, and other files.
Course website
Internet based exams and or quizzes
Chatrooms and/or Threaded discussion
Digital drop box for students to submit file to the instructor
Links to other documents
Word processing files, files with presentation slides, spreadsheets, or other files should be made
available through either the website, CD, emailed, or otherwise made available to the students
Server technology so all have access to common materials, database access (with limits for student
access)
Technologies needed include computers, for communication, hard drives, CD Burner or other disks,
Internet access, browser software, word processing software, spreadsheet software, presentation slide
software, and other software as needed.
PTS: 1