ICANManagement InformationInformation Systems in Business2023

A Nigerian manufacturing company uses an Enterprise Resource Planning (ERP) system. The Finance Act 2021 introduced a 7.5% VAT rate on taxable supplies. When the ERP system automatically calculates VAT on a sales invoice of ₦4,800,000 (VAT-exclusive), which of the following correctly describes the role of the information system in this context?

AThe ERP system performs a transaction processing function by capturing, calculating and recording VAT of ₦360,000 on the invoiceCORRECT
BThe ERP system performs a decision support function by recommending whether to charge VAT of ₦360,000 on the invoice
CThe ERP system performs a management information function by producing strategic reports on the ₦360,000 VAT liability
DThe ERP system performs an executive information function by alerting the board to the ₦360,000 VAT exposure
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Why the answer is A, and why the others tempt you.
VAT = ₦4,800,000 × 7.5% = ₦360,000. The automatic capture, calculation and recording of routine financial transactions such as VAT on invoices is the hallmark of a Transaction Processing System (TPS). Decision Support, Management Information and Executive Information Systems operate at higher levels of management and are not responsible for routine transactional computations.
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