CHAPTER 4

RELATIONAL DATABASES

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

4.1 Contrast the logical and the physical view of data and discuss why separate views are
necessary in database applications. Describe which perspective is most useful for each of the
following employees: a programmer, a manager, and an internal auditor. How will
understanding logical data structures assist you when designing and using database systems?

Databases are possible because of their database management system (DBMS). As shown in Figure
4.2, the DBMS is a software program that sits between the actual data stored in the system and the
application programs that use the data. As shown in Figure 4.4, this allows users to separate the
way they view the data (called the logical view) from the way the data is actually stored (the
physical view). The DBMS interprets the users' requests and retrieves, manipulates, or stores the
data as needed. The two distinct views separate the applications from the physical information,
providing increased flexibility in applications, improved data security, and ease of use.

In a database system, the manager will rarely need to understand or be familiar with the physical
view of the data. Nor, in most instances, will the internal auditor and the programmer as most
everything they do involves the logical view of the data.

If accountants understand logical data structures and the logical view of the data, they are better
able to manage, use, and audit a database and its data.

4.2 The relational data model represents data as being stored in tables. Spreadsheets are another
tool that accountants use to employ a tabular representation of data. What are some
similarities and differences in the way these tools use tables? How might an accountant’s
familiarity with the tabular representation of spreadsheets facilitate or hinder learning how
to use a relational DBMS?

A major difference between spreadsheets and databases is that spreadsheets are designed primarily
to handle numeric data, whereas databases can handle both text and numbers. Consequently, the
query and sorting capabilities of spreadsheets are much more limited than what can be
accomplished with a DBMS that has a good query language.

Accountants’ familiarity with spreadsheets might hinder their ability to design and use relational
DBMS because many links in spreadsheets are preprogrammed and designed in, whereas a well-
designed relational database is designed to facilitate ad-hoc queries.

Accountants’ familiarity with spreadsheets sometimes leads them to use a spreadsheet for a task
that a database could handle much better. Over the years, the Journal of Accountancy has
published a number of very good articles on how to use databases and when to use databases and
when to use spreadsheets. These articles can be found on the Journal’s website:
http://www.journalofaccountancy.com/
 Accounting Information Systems

4.3 Some people believe database technology may eliminate the need for double-entry accounting.
This creates three possibilities: (1) the double-entry model will be abandoned; (2) the double-
entry model will not be used directly, but an external-level schema based on the double-entry
model will be defined for accountants’ use; or (3) the double-entry model will be retained in
database systems. Which alternative do you think is most likely to occur? Why?

There is no correct answer to this question because it is asking the student to express his opinion on
what will happen in the future. Therefore, the quality of his answer depends on the justifications
provided. Good answers should address the following:

 Database technology does permit abandonment of double entry, but there will likely be great
resistance to such a radical change. Thus, students choosing this option need to present
reasons why they think such a radical change would succeed.

 The use of a schema for accountants seems quite plausible. It does eliminate the redundancy
of double entry from the database system, yet it still provides a framework familiar and useful
to accountants and financial analysts.

 There is a good possibility that double entry will remain, even in databases, due to inertia.
Indeed, many modern AIS, such as ERP systems, use databases but also retain the principles
of double entry.

4.4 Relational DBMS query languages provide easy access to information about the
organization’s activities. Does this mean that online, real-time processing should be used for
all transactions? Does an organization need real-time financial reports? Why or why not?

On-line real-time processing is not necessary for every business transaction. For example, batch
processing is adequate for payroll: there is little need for the data to be current except on payday.
Real-time financial statements are useful for planning and provide management with better ability
to react to changes in the environment. Nevertheless, real-time financial statements may present
distorted pictures of reality if accruals have been ignored or not properly recognized.

4.5 Why is it so important to have good data?

Bad data costs businesses over $600 billion a year. Some people estimate that over 25% of
business data is inaccurate or incomplete. In addition, incorrect database data can lead to bad
decisions, embarrassment, and angry users. The text illustrated this with the following
examples:
 For quite some time, a company sent half its catalogs to incorrect addresses. A manager
finally investigated the large volume of returns and customer complaints and corrected the
customer addresses in the database. He saved the company $12 million a year.
 Valparaiso, Indiana used the county database to develop its tax rates. After mailing the tax
notices, it was discovered that a $121,900 home was valued at $400 million. Due to the
$3.1 million property tax revenue shortfall, the city, the school district, and governmental
agencies had to make severe budget cuts.

Managing data is not going to get any easier as the quantity of data generated and stored
doubles every 18 months.

4-2
 Accounting Information Systems

4.6 What is a data dictionary, what does it contain, and how is it used?

A data dictionary contains information about the structure of the database. Table 4-1 shows
that there is a record in the dictionary describing each data element. The DBMS maintains the
data dictionary, whose inputs include new or deleted data elements and changes in data element
names, descriptions, or uses. Outputs include reports for programmers, designers, and users.
These reports are used for system documentation, database design and implementation, and as
part of the audit trail.

4-3
 Accounting Information Systems

4.7 Compare and contrast the file-oriented approach and the database approach.
Explain the main advantages of database systems.

Information about the attributes of a customer, such as name and address, are stored in
fields. Fields contain data about one entity (e.g., one customer). Multiple fields form a
record. A set of related records, such as all customer records, forms a file (e.g., the
customer file). A set of interrelated, centrally coordinated files forms a database.

Figure 4-2 illustrates the differences between file-oriented and database systems. In the
database approach, data is an organizational resource that is used by and managed for
the entire organization, not just the originating department. A database management
system (DBMS) is the interface between the database and the various application
programs. The database, the DBMS, and the application programs that access the
database through the DBMS are referred to as the database system.

Database systems were developed to address the proliferation of master files. This
proliferation created problems such as the same data stored in two or more master files.
This made it difficult to integrate and update data and to obtain an organization-wide
view of data. It also created problems because the data in the different files was
inconsistent.

Databases provide organizations with the following benefits:

 Data integration. Master files are combined into large “pools” of data that many
application programs access. An example is an employee database that
consolidates payroll, personnel, and job skills master files.
 Data sharing. Integrated data is more easily shared with authorized users.
Databases are easily browsed to research a problem or obtain detailed information
underlying a report. The FBI, which does a good job of collecting data but a poor
job of sharing it, is spending eight years and $400 million to integrate data from
their different systems.
 Minimal data redundancy and data inconsistencies. Because data items are
usually stored only once, data redundancy and data inconsistencies are minimized.
 Data independence. Because data and the programs that use them are independent
of each other, each can be changed without changing the other. This facilitates
programming and simplifies data management.
 Cross-functional analysis. In a database system, relationships, such as the
association between selling costs and promotional campaigns, can be explicitly
defined and used in the preparation of management reports.

4-4