REPORTERS

VENILDA MAE CUSAMO TYRONE DIRK VENTIGAN

CONTENTS
INTRODUCTION
TO TRANSACTION
PROCESSING LET’S LEARN!
ACT. COUNT. THINK
 OVERVIEW
TRANSACTION PROCESSING SYSTEM
It is central to the overall function of the information
system by converting economic events into financial
transactions, recording financial transactions in the
accounting records, and distributing essential financial
information to operations personnel to support their daily
operation.
 “TPS applications process
financial transactions.”

Economic exchanges with external parties

 sale of goods or services
 purchase of inventory,
 discharge of financial obligations
 receipt of cash on account from customers

Certain internal events

 depreciation of fixed assets
 application of labor, raw materials, and overhead to the
production process
 transfer of inventory from one department to another
 TRANSACTION
CYCLES
1.The Expenditure Cycle
2.The Conversion Cycle
3.The Revenue Cycle
THE EXPENDITURE CYCLE

It shows the flow of cash from the

organization to the various providers of
these resources. Most expenditure
transactions are based on a credit
relationship between the trading parties. It
has two parts which are the physical
component and the financial one.
 THE CONVERSION CYCLE

Transforms input resources, raw materials,

labor, and overhead into finished products or
services for sale.

Manufacturing entities are known to have

formal conversion cycles that can be
observable However, service businesses do not
have those formal procedures. But that doesn't
mean there are no conversion processes.
THE REVENUE CYCLE
Firms sell their finished goods to
customers through the revenue
cycle, which involves processing
cash sales, credit sales, and the
receipt of cash following a credit
sale. It also have physical and
financial component, which are
processed separately.
 ACCOUNTING
RECORDS
1. Manual-Based Systems
2. Computer-Based Systems
Manual
Systems
 DOCUMENTS
A document provides evidence of an economic event and may
be used to initiate transaction processing. Some documents are
a result of transaction processing. The three types of documents
are source documents, product documents, and turnaround
documents.
 Source Document

These are economic events result in some documents being

created at the beginning of the transaction. . Source documents
are used to capture and formalize transaction data that the
transaction cycle needs for processing.
Product Documents

Product documents are the result of transaction

processing rather than the triggering mechanism
for the process.
 Turnaround Documents
These are product documents of one system that become
source documents for another system. A turnaround
document contains important information about a
customer’s account to help the cash receipts system process
the payment. One of the problems designers of cash
receipts systems face is matching customer payments to the
correct customer accounts. Providing this needed
information as a product of the sales system ensures
accuracy when the cash receipts system processes it.
JOURNALS
It is where business transactions are recorded in a chronological manner. It
is known as the “book of original entry.” Documents are the primary source
of data for journals. There are two primary types of journals: special
journals and general journals.
SPECIAL JOURNALS
Special journals are used to record specific classes of transactions that
occur in high volume. Such transactions can be grouped together in a special
journal and processed more efficiently than a general journal permits. Most
organizations use several other special journals, including the cash receipts
journal, cash disbursements journal, purchases journal, and the payroll
journal.

GENERAL JOURNALS
General Journals are used to record nonrecurring, infrequent,
and dissimilar transactions. As a practical matter, most organizations
have replaced their general journal with a journal voucher system. A
journal voucher is actually a special source document that contains a
single journal entry specifying the general ledger accounts that are
affected.
REGISTER
The term register is often used to denote certain types of special journals. We also use the term register,
however, to denote a log.
LEDGERS
A ledger is a book of accounts that reflects the financial effects of the firm’s
transactions after they are posted in various journals. It is known as the “book of
final entry.” It indicates the increases, decreases, and current balance of each
account. Organizations use this information to prepare financial statements,
support daily operations and prepare internal reports. There are two basic types
of ledgers: (1) general ledgers and (2) subsidiary ledgers.
 The Audit Trail
1. The accounting records described previously provide an
audit trail for tracing transactions from source documents to
the financial statements.

2. An audit trail is a step-by-step record by which accounting,

trade details, or other financial data can be traced to their
source.

3. It is most often utilized when the accuracy of an item

needs to be verified, as it might be in the case of an audit.

4. Audit trails in computer-based systems are less

observable than in traditional manual systems, but they
still exist.
Computer-Based
Systems

* Types of Files
MASTER FILE
A master file generally contains account data. The general ledger and subsidiary ledgers are examples of
master files. Data values in master files are updated from transactions.

TRANSACTION FILE
A transaction file is a temporary file of transaction records used to change or update data in a master file.
Sales orders, inventory receipts, and cash receipts are examples of transaction files.

REFERENCE FILE
A reference file stores data that are used as standards for processing transactions. Other reference
files include price lists used for preparing customer invoices, lists of authorized suppliers, employee
rosters, and customer credit files for approving credit sales.

ARCHIVE FILE
An archive file contains records of past transactions that are retained for future reference. Archive
files include journals, prior-period payroll information, lists of former employees, records of
accounts written off, and prior-period ledgers.
DOCUMENTATION
TECHNIQUES
 DATA FLOW DIAGRAMS
 ENTITY RELATIONSHIP
DIAGRAMS
 SYSTEM FLOWCHARTS
 PROGRAM FLOWCHARTS
 RECORD LAYOUT DIAGRAMS
DATA FLOW DIAGRAMS
(DFD)
 The data flow diagram (DFD) uses symbols to represent the entities, processes,
data flows, and data stores that pertain to a system. DFDs are used to represent
systems at different levels of detail from very general to highly detailed. Entities in a
DFD are external objects at the boundary of the system being modeled. They
represent sources of and destinations for data. Entities may be other interacting
systems or functions, or they may be external to the organization. DFDs show what
logical tasks are being done, but not how they are done or who (or what) is
performing them.
Notes:
 Entities should always be labeled as nouns on a DFD, such as
customer or supplier
 Processes in the DFD should be labeled with a descriptive verb
such as Ship Goods, Update Records, or Receive Customer
Order. Process objects should not be represented as nouns like
Warehouse, AR Dept., or Sales Dept.
 Each data flow label should be unique—the same label should
not be attached to two different flow lines in the same DFD.
ENTITY RELATIONSHIP
DIAGRAMS (ER)
 It is a documentation technique used to represent the relationship between
entities and its one common use is to model an organization’s Database. ER Models
uses a defined set of symbols such as rectangles, diamonds, ovals and connecting
lines to depict the interconnectedness of entities, relationships and their attributes.

Uses:
 Database design
 Database troubleshooting
 Business information systems
 Business process re-engineering (BPR)
 Education
 Research
1 Relationship between ER Diagrams and Data Flow
Diagrams
ER DIAGRAMS DF DIAGRAMS

models the data is a model of

used in or affected system processes
by the system.

DFDs and ER diagrams depict different aspects of the same

system, but they are related and can be reconciled. The two
diagrams are related through data; each data store in the
DFD represents a corresponding data entity in the ER
diagram.
SYSTEM FLOWCHARTS
It is the graphical representation of the physical relationships
among key elements of a system. These elements may include
organizational departments, manual activities, computer
programs, hard-copy accounting records (documents, journals,
ledgers, and files), and digital records (reference files,
transaction files, archive files, and master files).

System flowcharts also describe the type of

computer media being employed in the
system, such as magnetic tape, magnetic
disks, and terminals.
Rules and Convention to be observed in
Flowcharting Manual Activities

2 All symbols on the 3 Lines should have

1 The flowchart should flowchart should be arrowheads to clearly
be labeled to clearly labeled. show the process flow
identify the system that and sequence of events.
it represents.

5 If complex processes need additional

4 The correct symbols explanation for clarity, a text
should be used to description should be included on the
represent the various flowchart or in an attached document
entities in the system. referenced by the flowchart.
Step in Preparing
the Flowchart
1. LAYOUT THE
PHYSICAL
AREAS
OF ACTIVITY
2. TRANSCRIBE THE
WRITTEN FACTS INTO
VISUAL FORMAT
PROGRAM FLOWCHARTS
It is a data flow that shows the data flow
while writing a program or algorithm. It
allows the user to explain the process
quickly as they collaborate with others.
These programming flowcharts also
analyze the logic behind the program to
process the code of the programming.
RECORD LAYOUT
DIAGRAMS
 Record Layout Diagrams is used to reveal the
internal structure of the records that constitute a file or
database table. The layout diagram usually shows the
name, data type, and length of each attribute (or field) in
the record.
Detailed data structure information is needed for such
tasks as identifying certain types of system failures,
analyzing error reports, and designing tests of
computer logic for debugging and auditing purposes.
 COMPUTER- BASED
ACCOUNTING SYSTEMS
 Batch Systems
 Real-time Systems
 Batch Systems

Batch systems assemble transactions into groups

for processing. Under this approach, there is
always a time lag between the point at which an
economic event occurs and the point at which it
is reflected in the firm’s accounts.
Real-Time Systems

Real-time systems process transactions

individually at the moment the event
occurs.

Because records are not grouped into

batches, there are no time lags between
occurrence and recording.
EFFICIENCY VS. EFFECTIVENESS
ALTERNATIVE DATA
PROCESSING
APPROACHES
Legacy Systems Versus Modern Systems
 LEGACY
SYSTEM

They are mainframe- Early legacy systems use flat
based applications; files for data storage, but
they tend to be batch hierarchical and network
oriented; databases are often associated
with later-era legacy systems
These highly structured and Auditors need to know
inflexible storage systems promote how to evaluate and test
a single-user environment that them.
discourages information
integration within business
organizations.
 MODERN
SYSTEM

They are mainframe- tend to be client-server store transactions and master files A major advantage of
based applications; (network)–based and in relational database tables. database storage is the
they tend to be batch degree of process
process transactions in real
oriented; integration and data
time
sharing that can be
achieved.
Updating Master Files from Transactions

Whether batch or real-time processing is

being used, updating a master file record
involves changing the value of one or more
of its variable fields to reflect the effects of
a transaction.
Database Backup Procedures
Database Backup Procedures
 BATCH PROCESSING

Batch processing permits the efficient management of a large volume of

transactions. A batch is a group of similar transactions (such as sales
orders) that are accumulated over time and then processed together. Batch
processing offers two general advantages. First, organizations improve
operational efficiency by grouping together large numbers of transactions
into batches and processing them as a unit of work rather than processing
each event separately. Second, batch processing provides control over the
transaction process.
 BATCH PROCESSING USING
REAL-TIME DATA COLLECTION

By distributing data input capability to users,

certain transaction errors can be prevented or
detected and corrected at their source. The result
is a transaction file that is free from most of the
errors that plague older legacy systems.
 REAL-TIME
PROCESSING
Real-time systems process the entire
transaction as it occurs.

Real-time processing is well suited to

systems that process lower transaction
volumes and those that do not share
common records. These systems make
extensive use of local area network and
wide area network technology.
 NUMERIC AND
ALPHABETIC
CODING SCHEMES
 Sequential Codes
 Block Codes
 Group Codes
 Alphabetic Codes
 Mnemonic Codes
 Sequential Codes

Sequential codes represent items in some

sequential order (ascending or descending). A
common application of numeric sequential
codes is the prenumbering of source documents.
 ADVANTAGES
Sequential coding supports the
DISADVANTAGES
reconciliation of a batch of transactions, Sequential codes carry no information
such as sales orders, at the end of content beyond their order in the
sequence. Also, sequential coding
processing. If the transaction processing schemes are difficult to change.
system detects any gaps in the sequence of
transaction numbers, it alerts management
to the possibility of a missing or misplaced
transaction.
 DISADVANTAGES
Sequential codes carry no information
content beyond their order in the
sequence. Also, sequential coding
schemes are difficult to change.
 Block Codes
A numeric block code is a variation on
sequential coding that partly remedies the
disadvantages just described. This approach can
be used to represent whole classes of items by
restricting each class to a specific range within
the coding scheme. A common application of
block coding is the construction of a chart of
accounts.
 ADVANTAGES
Block coding allows for the
insertion of new codes within a
DISADVANTAGES
As with the sequential codes, the
information content of the block code
is not readily apparent.

block without having to

reorganize the entire coding
structure.
 DISADVANTAGES
As with the sequential codes, the
information content of the block
code is not readily apparent.
 Group Codes
Numeric group codes are used to represent
complex items or events involving two or more
pieces of related data. The code consists of
zones or fields that possess specific meaning.
 ADVANTAGES
1. They facilitate the representation of
large amounts of diverse data.
2. They allow complex data structures
to be represented in a hierarchical form
that is logical and more
easily remembered by humans.
3. They permit detailed analysis and
reporting both within an item class and
across different classes of items.
DISADVANTAGES
They tend to be overused. Unrelated
data may be linked simply because it can
be done which can lead to unnecessarily
complex group codes that cannot be
easily interpreted. Over usage can
increase storage costs, promote clerical
errors, and increase processing time and
effort.
 DISADVANTAGES
They tend to be overused. Unrelated
data may be linked simply because it
can be done which can lead to
unnecessarily complex group codes
that cannot be easily interpreted. Over
usage can increase storage costs,
promote clerical errors, and increase
processing time and effort.
 Alphabetic Codes
Alphabetic codes are used for many of the same
purposes as numeric codes. Alphabetic
characters may be assigned sequentially (in
alphabetic order) or may be used in block and
group coding techniques.
 ADVANTAGES
The capacity to represent large DISADVANTAGES

numbers of items is increased The primary drawbacks with alphabetic

coding are (1) as with numeric codes,
there is difficulty rationalizing the
dramatically through the use of pure meaning of codes that have been
sequentially assigned, and (2) users tend

alphabetic codes or alphabetic

to have difficulty sorting records that are
coded alphabetically.

characters embedded within numeric

codes (alphanumeric codes).
 DISADVANTAGES
The primary drawbacks with alphabetic
coding are (1) as with numeric codes,
there is difficulty rationalizing the
meaning of codes that have been
sequentially assigned, and (2) users
tend to have difficulty sorting records
that are coded alphabetically.
 Mnemonic Codes

Mnemonic codes are alphabetic characters in

the form of acronyms and other combinations
that convey meaning.
 ADVANTAGES
It does not require the user to DISADVANTAGES

They have limited ability to represent

memorize meaning; the code itself items within a class.

conveys a high degree of information

about the item that is being
represented.
 DISADVANTAGES

They have limited ability to represent

items within a class.