Transaction Processing and Enterprise Resource Planning Systems

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© 2012 Pearson Education, Inc. Accounting Information Systems, Romney/Steinbart

HAPTER 2

Overview of Transaction Processing and Enterprise

Resource Planning Systems

© 2006 Prentice Hall Business Publishing Accounting Information Systems, 10/e Romney/Steinbart 2 of 35© 2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart 2 of 32© 2012 Pearson Education, Inc. Accounting Information Systems, Romney/Steinbart

TRANSACTION PROCESSING:THE DATA PROCESSING CYCLE

• Accountants play an important role in data processing. They answer questions such as:– What data should be entered and stored?– Who should be able to access the data?– How should the data be organized, updated, stored,

accessed, and retrieved?– How can scheduled and unanticipated information

needs be met?

• To answer these questions, they must understand data processing concepts.

© 2006 Prentice Hall Business Publishing Accounting Information Systems, 10/e Romney/Steinbart 3 of 35© 2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart© 2012 Pearson Education, Inc. Accounting Information Systems, Romney/Steinbart

Data Processing Cycle

InputInput ProcessProcess OutputOutput

StorageStorage


DATA INPUT

• The first step in data processing is to capture the data.

• Usually triggered by a business activity.

• Data is captured about:– Each activity of interest– The resources affected– The people who are participating


DATA INPUT

• Source Documents– Data are collected on source documents

• E.g., a sales-order form• The data from paper-based source documents will

eventually need to be transferred to the AIS


DATA INPUT

• Turnaround Documents– Usually paper-based and machine-readable– Are sent from organization to customer– Same document is returned by customer to

organization

Cust.Cust.Org.Org.

Turnaround Document


DATA INPUT

• Source Data Automation– Source data is captured

• In machine-readable form• At the time of the business activity

– E.g., ATM’s; POS


DATA INPUT

• Well-designed source documents can ensure that data captured is– Accurate

• Provide instructions and prompts• Check boxes• Drop-down boxes

– Complete• Internal control support• Prenumbered documents


Data Storage

• Types of AIS storage:– Paper-based

• Ledgers• Journals

– Computer-based


DATA STORAGE

• General ledger

The general ledger is the summary level information for all accounts (asset, liability, equity, revenue, and expense). Detail information is not kept in this account.

A/P

$1000

A/R

$600


DATA STORAGE

• General ledger

Example: Suppose XYZ Co. has three customers. Anthony Adams owes XYZ $100. Bill Brown owes $200. And Cory Campbell owes XYZ $300. The balance in accounts receivable in the general ledger will be $600, but you will not be able to tell how much individual customers owe by looking at that account. The detail isn’t there.


DATA STORAGE

• General ledger

• Subsidiary ledger

The subsidiary ledgers contain the detail accounts associated with the related general ledger account. The accounts receivable subsidiary ledger will contain three separate t-accounts—one for Anthony Adams, one for Bill Brown, and one for Cory Campbell.


DATA STORAGE

• General ledger


The related general ledger account is often called a “control” account.

The sum of the subsidiary account balances should equal the balance in the control account.


DATA STORAGE

• General ledger

• Subsidiary ledger– Detailed data for a

General Ledger (Control) Account that has individual sub-accounts e.g.:

• Accounts Payable• Accounts

Receivable


DATA STORAGE

• General ledger


• Coding techniques• Coding is a method of systematically assigning numbers or

letters to data items to help classify and organize them.


Coding Techniques

• Sequence– Items numbered consecutively

• Block– Specific range of numbers are associated

with a category• 100000–199999 = Electric Range

• Group– Positioning of digits in code provide

meaning• Mnemonic

– Letters and numbers– Easy to memorize– Code derived from description of item

• Chart of accounts– Type of block coding

Digit Position Meaning

1–2 Product Line, size, and so on

3 Color

4–5 Year of Manufacture

6–7 Optional Features

1241000 12 = Dishwasher4 = White10 = 201000 = No Options


Journals

• General– Infrequent or specialized transactions– Used to record:

• Non-routine transactions, such as loan payments• Summaries of routine transactions• Adjusting entries• Closing entries


Journals

• Specialized– Repetitive transactions

• E.g., sales transactions

– Used to record routine transactions. – The most common special journals are:

• Cash receipts• Cash disbursements• Credit sales• Credit purchases


DATA STORAGE

• Ledger

• General ledger


• Coding techniques

• Journals

• Audit trail

• An audit trail exists when there is sufficient documentation to allow the tracing of a transaction from beginning to end or from the end back to the beginning.

• The inclusion of posting references and document numbers enable the tracing of transactions through the journals and ledgers and therefore facilitate the audit trail.


COMPUTER-BASED STORAGE CONCEPTS

• A master file is a file that stores cumulative information about an organization’s entities.

• It is conceptually similar to a ledger in a manual AIS in that:– The file is permanent.– The file exists across fiscal periods.– Changes are made to the file to reflect the

effects of new transactions.



• A transaction file is a file that contains records of individual transactions (events) that occur during a fiscal period.

• It is conceptually similar to a journal in a manual AIS in that:– The files are temporary.– The files are usually maintained for one fiscal

period.



• Transaction– Contains records of a

business from a specific period of time

• Master– Permanent records– Updated by transaction

with the transaction file• Database

– Set of interrelated files


DATA PROCESSING

• Once data about a business activity has been collected and entered into a system, it must be processed.


DATA PROCESSING

• There are four different types of file processing:1. Create new records, e.g., a new customer

2. Read existing records, e.g. viewing all information for an existing customer

3. Updating existing records, e.g., recording a sale to a customer.

4. Deleting data, e.g., removing an old customer that has not purchased anything in 5 years.


DATA PROCESSING

• Updating can be done through several approaches:– Batch processing– Online, batch processing– Online, real-time processing


DATA PROCESSING

• Batch processing:– Source documents are grouped into batches,

and control totals are calculated.– Periodically, the batches are entered into the

computer system, edited, sorted, and stored in a temporary file.

– The temporary transaction file is run against the master file to update the master file.

– Output is printed or displayed, along with error reports, transaction reports, and control totals.


DATA PROCESSING

• Online, batch processing:– Transactions are entered into a computer

system as they occur and stored in a temporary file.

– Periodically, the temporary transaction file is run against the master file to update the master file.

– The output is printed or displayed.


DATA PROCESSING

• Online, real-time processing– Transactions are entered into a computer

system as they occur.– The master file is immediately updated with

the data from the transaction.– Output is printed or displayed.


INFORMATION OUTPUT

• Output can be in the form of:– Documents– Reports– Queries

• Physical output types:– Soft copy

• Displayed on a screen

– Hard copy• Printed on paper


Enterprise Resource Planning (ERP)

• Integrate an organization’s information into one overall AIS

• ERP modules:– Financial– Human resources and payroll– Order to cash– Purchase to pay– Manufacturing– Project management– Customer relationship management– System tools


ERP Advantages

• Integration of an organization’s data and financial information

• Data is captured once• Greater management visibility, increased

monitoring• Better access controls• Standardizes business operating procedures• Improved customer service• More efficient manufacturing


ERP Disadvantages

• Cost

• Time-consuming to implement

• Changes to an organization’s existing business processes can be disruptive

• Complex

• Resistance to change

Transaction Processing and Enterprise Resource Planning Systems

Documents

accounting

batch processing

information

based storage

data processing

temporary

source documents

data processing