BSAC 322

Accounting Information Systems

Chapter 2
Introduction to Transaction Processing

The Stages in Data Processing Cycle includes

 Input
 Process
 Output
 Storage
The data processing cycle determines
 What data to be stored
 Who has access to the data
 How data is organized
 How information requirements of user will be met.

DATA INPUT
• As a business activity occurs data is collected about:
1. Each activity of interest
2. The resources affected
3. The people who are participating
Sources of Data:

 Paper-Based source documents

Source Product Turnaround
Documents Document Document
Documents that
Documents used are created as a
to capture and result of Product
formalize transaction document of one
transaction data. processing. system that
becomes source
document of
another system.

This document Paycheck is an

serves as the example of a
basis for data product
processing document.
 • Source Data Automation
– In machine-readable form
– At the time of the business activity

• How to ensure accuracy and completeness of data input?

– The answer: Use Source Data Automation or Well-designed source documents.
– Well-designed source documents and screen can ensure that data captured is
• Accurate
• Provide instructions and prompts
• Check boxes
• Drop-down boxes
• Complete
• Internal control support via pre-numbered documents

DATA STORAGE
 Traditional Systems
• Journals
• Special journal
• Register
• General Journal
• Ledgers
• General Ledger
• Subsidiary Ledgers

• CODING TECHNIQUES
• Sequence Codes
• Items are numbered consecutively
• Block Codes
• Blocks of numbers are reserved for specific categories.
• Group Codes
• Positioning of digits in code provide meaning.
• Mnemonics
• Letters and numbers are interspersed to identify an item.
• Code derived from description of item

 Guidelines for a better coding scheme:

• Be consistent with intended use.
• Allow for growth.
 • Be as simple as possible
• To minimize cost
• Facilitate memorization and interpretation
• Ensure employee acceptance.

• Computer-Based Systems
• Master file
• Contains account data
• The equivalent of the General Ledger
• Transaction File
• Temporary file of transaction records
• Used to update or change data in a master file.
• Reference File
• Stores data that are used as standards for processing transactions.
• Withholding tax table
• Price list
• Archive File
• Contains record of fast transactions.
• Use as reference for Audit trail.
• Database

• DATA PROCESSING
• Four Main Activities
1. Create new records.
• Adding a newly hired employee to the payroll database.
2. Read existing records
• Retrieving or viewing existing files.
3. Update existing records
• Posting journal entries to the ledger will adjust previous account balances to
make it current.
4. Delete records or data from records
• Removing from the list vendors the company no longer does business with.

• DATA UPDATING PROCESS

1. Batch processing
• Updating is done on periodic basis.
• Used only for application that do not need frequent updating. Example: payroll system.
2. On-line, Real-time processing
• Updating is done when the activity happens.
 • Advantage: Stored information is always current.
3. Online Batch processing
• Transaction data are entered and edited as they occur and stored for later processing.

INFORMATION OUTPUT
• Information output can be
1. Soft copy output.
• If the output is displayed on monitor or screen
2. Hard copy output
• When the output is printed on paper.

• Forms of information output:

1. Documents
• Records of transactions, product documents.
2. Reports
• Output of FRS and MRS.
• Result of database query which is use to deal with problems that
require immediate action.

TRANSACTION PROCESSING SYSTEMS CYCLES

• Expenditure Cycle
1. Purchases/Accounts Payable System
2. Cash Disbursement Systems
3. Payroll systems
4. Fixed Assets Systems
• Conversion cycle
1. Production System
2. Cost Accounting Systems
• Revenue Cycle
1. Sales Order Processing Systems
2. Cash Receipt Systems

ENTERPRISE RESOURCE PLANNING SYSTEMS

 Enterprise resource planning (ERP) is the integrated management of core business
processes, often in real-time and mediated by software and technology.
Advantages of Implementing an ERP Systems
• Integration of an organization’s data and financial information (Central database)
• Data is captured once
• Greater management visibility, increased monitoring
• Better access controls (consolidated multiple permissions and security models)
• Standardizes business operating procedures
• Improved customer service (quick access to customer order, available inventory etc.)
• More efficient manufacturing (real-time orders lead to increased productivity)

Disadvantages of ERP Systems

• Cost (US$ 50 – 500 million)
• Time-consuming to implement ( years to fully implement)
• Changes to an organization’s existing business processes can be disruptive (occurs
when converting a non-ERP system to ERP)
• Complex (integrating the different business process)
• Resistance to change (A natural reaction to change)