4 Making choices and exercising judgment As you read in the

4. Making choices and exercising judgment. As you read in the chapter, AIS is all about making choices and evaluating their costs and benefits. These questions and exercises are designed to help you develop those skills. When I give exercises like these to my own students, they frequently say. \"So does this mean there\'s no right or wrong answer?\" You may be thinking the same thing, so I\'ll tell you what I tell them: The point isn\'t whether your answer is \"righ\" or \"wrong,\" or even if such answers exist. The point here is for you to make choices and create answers you can defend in the face of other alternatives a. RKH Company is a small consulting service based just outside Los Angeles. It has two partners, Sebastian and Viola, and average monthly sales revenue of $25,000. At any one time, Sebastian and Viola have up to three consulting engagements running simultaneously. Monthly expenses include office rent, supplies, utilities, professional magazine subscriptions, and automobile expenses. What form(s) of information technology, if any, should Sebastian and Viola use in their accounting information system? Explain the costs and benefits of your recommendation.

Solution

Since Sebastian and Voila are indulged in consulting activities, they would need systems which shall record expenses incurred in real time. In consulting engagements, fees are generally recieved in parts, some as upfront advance and remaining after the completion of project. Since it is given that there is not much consulting engagements going on at one time, so they may not require AIS which records sales also on real time. However, costs are incurred continuosuly which should be processed as incurred. Thus, AIS like Quickbooks shall be appropriate for them as it can record expenses in real time and also fees recieved in batches. It can also update on the status of the project and fees due.

Quickbooks is not a very costly AIS to install and operate. One full time accountant shall suffice for managing accounts on Quickbook so its running cost also wont be much. However it will reap many benifits to the firm because of managed operations through it.