Accounting Information Systems: Overview of Transaction Processing and Enterprise Resource Planning Systems

Accounting Information Systems
Fourteenth Edition, Global Edition
Chapter 2
Overview of Transaction Processing and Enterprise

Resource Planning Systems
Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

Learning Objectives
• Describe the data processing cycle used to process
transactions, including how data is input, stored, and
processed and how information is outputted.
• Discuss how organizations use enterprise resource
planning (ERP) systems to process transactions and
provide information.
Copyright © 2018 Pearson Education, Ltd. Chapter 2: Overview of Transaction Processing and Enterprise Resource Slide 1 - 2
Planning Systems
Data Processing Cycle
Planning Systems
Data Input
Steps in Processing Input are:
• Capture transaction data triggered by a business activity (event).
• Make sure captured data are accurate and complete.
• Ensure company policies are followed (e.g., approval of transaction).
Planning Systems
Data Capture
• Information collected for an activity includes:
– Activity of interest (e.g., sale)
– Resources affected (e.g., inventory and cash)
– People who participated in the activity (e.g., customer and
employee)
• Information comes from source documents.
Planning Systems
Source Documents
• Captures data at the source when the transaction takes
place
– Paper source documents
– Turnaround documents
 Usually paper-based
 Are sent from organization to customer
 Same document is returned by customer to organization
– Source data automation (captured data from machines, e.g., Point

of Sale scanners at grocery store)
Planning Systems
Data Storage
• Important to understand how data is organized
– Chart of accounts
 Coding schemas that are well thought out to anticipate management needs
are most efficient and effective
– Transaction journals (e.g., Sales)
– Subsidiary ledgers (e.g., Accounts receivable)
a ledger used to record detailed data for a general ledger account with many
individual subaccounts.
– General ledger
 a ledger contained summary level data for every asset, liability, equity,
revenue, and expense account.
Note: With the above, one can trace the path of the transaction
(audit trail)
Planning Systems
Audit trail for
Invoice #156 for
$1,876.50 sold to
KDR Builders
Planning Systems
Computer-Based Storage
• Data is stored in master files or transaction files.
Planning Systems
Data Processing
Four types of processing (CRUD):
• Creating new records (e.g., adding a customer)
• Reading existing data
• Updating previous record or data
• Deleting data
Data processing can be batch processed (e.g., post records

at the end of the business day) or in real-time (process as it
occurs).
Planning Systems
Information Output
The data stored in the database files can be viewed
• Online (soft copy)
• Printed out (hard copy)
– Document (e.g., sales invoice)
– Report (e.g., monthly sales report)
– Query (question for specific information in a database, e.g., Which
division had the most sales for the month?)
Planning Systems
• Multiple Choice 1
•
• Which of the following is NOT a step in the data
processing cycle?
• a. Data collection
•
• b. Data input
• c. Data storage
• d. Data processing
•
Planning Systems
•
• Recording and processing information about a transaction
at the time it occurs is referred to as which of the following?
• a. Batch processing
• b. Online, real-time processing
• c. Captured transaction processing
• d. Chart of accounts processing
Planning Systems
•
• How does the chart of accounts list general ledger
accounts?
• a. Alphabetical order
• b. Chronological order
• c. Size order
• d. The order in which they appear in financial statements
•
•
Planning Systems
•
• Which one below is not a type of data processing activity?
• Creating
• Updating
• Recording
• Reading
Planning Systems
Enterprise Resource Planning (ERP)
Systems
• Integrates activities from the entire organization
– Revenue Cycle
– Expenditure Cycle
– Production Cycle
– H/R Payroll Cycle
– General Ledger and Reporting System
Planning Systems
Advantages of ERP System
• Integrated enterprise-wide single view of the organization’s
data which streamlines the flow of information
• Data captured once (i.e., no longer need sales to enter
data about a customer and then accounting to enter same
customer data for invoicing)
• Greater visibility and monitoring capabilities for
management
• Improve access of control of the data through security
settings
• Standardization of procedures and reports
• Improves customer service
• Increases productivity through automation
Planning Systems
Disadvantages of ERP System
• Costly
• Significant amount of time to implement
• Customizing or standardizing a business process
• Complexity
• User resistance (learning new things is sometimes hard
for employees)
Planning Systems
•
• Which of the following is NOT an advantage of an ERP
system?
• Better access control
• Standardization of procedures and reports
• Improved monitoring capabilities
• Simplicity and reduced costs
Planning Systems
Key Terms
• Data processing cycle • Entity
• Source documents • Attributes
• Turnaround documents • Field
• Source data automation • Record
• General ledger • Data value
• Subsidiary ledger • File
• Control account • Master file
• Coding • Transaction file
• Sequence code • Database
• Block code • Batch processing
• Group code • Online, real-time processing
• Mnemonic code • Document
• Chart of accounts • Report
• Specialized journal • Query
• Audit trail • Enterprise resource planning (ERP) system
Planning Systems
Data Processing Cycle
Planning Systems
Data Processing cycle
•
When employees are hired, they complete a new-

employee form. When a change to an employee’s payroll
status occurs, such as a raise or a change in the number of
exemptions, the human resources department completes
an employee change form. A copy of these forms is sent
to payroll. These forms are used to create or update the
records in the employee/payroll file and are then stored in
the file. Employee records are stored alphabetically.
Find the data input and output

Planning Systems
•
ACTIVITIES DATA INPUTS DATA OUTPUTS
Update New-employee form Updated

employee/payroll file Employee change form employee/payroll file
Planning Systems
Some S&S employees are paid a salary, but most are hourly
workers who record their time on time cards. At the end of each
pay period, department managers send the time cards to the payroll
department. The payroll clerk uses the time card data, data from the
employee file(such as pay rate and annual salary), and the
appropriate tax tables to prepare a two-part check for each
employee. The clerk also prepares a two-part payroll register
showing gross pay, deductions, and net pay for each employee. The
clerk updates the employee file to reflect each employee’s current
earnings. The original copy of the employee paychecks is
forwarded to Susan. The payroll register is forwarded to the
accounts payable clerk. The time cards and the duplicate copies of
the payroll register and paychecks are stored by date in the payroll
file.
Planning Systems
Pay Time cards Employee checks

employees Employee/payroll Payroll register
file Updated employee/payroll file
Tax rates table
Planning Systems
What data should be captured in
a sales transaction?
Planning Systems
Data Capture
• Information collected for an activity includes:
– Activity of interest (e.g., sale)
– Resources affected (e.g., inventory and cash)
– People who participated in the activity (e.g., customer and
employee)
• Information comes from source documents.
Planning Systems
Data about a sales transaction:
• Date and time of day the sale occurred

• Employee who made the sale and the checkout clerk who
processed the sale
• Checkout register where the sale was processed
• Item(s) sold
• Quantity of each item sold
• List price and actual price of each item sold
• Total amount of the sale
• For credit sales: delivery instructions, customer bill-to and
ship-to addresses, customer name
Planning Systems
Data Capture
Planning Systems
Data Storage
• Important to understand how data is organized
– Chart of accounts
 Coding schemas that are well thought out to anticipate management needs
are most efficient and effective
– Transaction journals (e.g., Sales)
– Subsidiary ledgers (e.g., Accounts receivable)
a ledger used to record detailed data for a general ledger account with many
individual subaccounts.
– General ledger
 a ledger contained summary level data for every asset, liability, equity,
revenue, and expense account.
Note: With the above, one can trace the path of the transaction
(audit trail)
Planning Systems
Data storage
Planning Systems
Planning Systems
• Data is stored in master files or transaction files.
Planning Systems
– Entity
 Person, place, or thing (Noun)
 Something an organization wishes to store data about
– Attributes
 Facts about the entity
– Fields
 Where attributes are stored
– Records
 Group of related attributes about an entity
– File
 Group of related Records
Planning Systems
• Transaction, similar to a journal
– Contains records of a business from a specific period
of time
• Master, similar to a ledger
– Permanent records
– Updated by transaction with the transaction file
• Database (ch4)
– Set of interrelated files
Planning Systems
Computer-based storage
Planning Systems
Data Processing
Four types of processing (CRUD):
• Creating new records (e.g., adding a customer)
• Reading existing data
• Updating previous record or data
• Deleting data
Data processing can be batch processed (e.g., post records

at the end of the business day) or in real-time (process as it
occurs).
Planning Systems
Planning Systems
Planning Systems
Planning Systems
Coding Techniques
• Sequence codes—items numbered consecutively to
account for all items (i.e., prenumbered forms)
• Block code—blocks of numbers reserved for specific
categories of data
• Mnemonic codes—letters and numbers interspersed to

identify an item (i.e. Dry300W05 is low end (300), white
(W) dryer (DRY) made by Sears (05))
Planning Systems
Coding Techniques
• Group codes—two or more subgroups of digits used to
code items
• Digit Position Meaning
• 1–2 Product Line, size, and so on
• 3 Color
• 4–5 Year of Manufacture
• 6–7 Optional Features
• 1241000 12 = Dishwasher
• 4 = White
• 10 = 2010
• 00 = No Options
Planning Systems

Accounting Information Systems: Overview of Transaction Processing and Enterprise Resource Planning Systems

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Accounting Information Systems

Fourteenth Edition, Global Edition

Overview of Transaction Processing and Enterprise

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved

– Source data automation (captured data from machines, e.g., Point

Data processing can be batch processed (e.g., post records

When employees are hired, they complete a new-

Find the data input and output

ACTIVITIES DATA INPUTS DATA OUTPUTS

Update New-employee form Updated

Pay Time cards Employee checks

• Date and time of day the sale occurred

Data processing can be batch processed (e.g., post records

• Mnemonic codes—letters and numbers interspersed to

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