ACCOUNTING FILE &

TRANSACTION
PROCESSING SYSTEM
File Management Issues
 A File is a collection of related data stored
together for future use
 All computerized applications involving
transaction processing typically employ
one or more files
 Because of their involvement with
transaction processing, and auditing of
such processing, accountants need to be
aware of file management issues

Aulelius Lema
File Classifications (Master
Files)
 Master files: A collection of records
pertaining to one of the main subjects of
an information system, such as
customers, employees, products and
vendors.
 These contain (semi) permanent data
(records) pertaining to entities (people,
places, and things).
 Accounting related examples
include:
• General and Subsidiary ledgers
•General ledger master file
•Customer/Accounts Receivable
master file
•Vendor/Accounts Payable master
file
•Inventory master file
•Employee/Payroll master file
•Open WIP master file
•Standard cost master file
File Classification (Transaction
Files - I)
 TRANSACTION FILE is a collection
of transaction records. The data in transaction
files is used to update the master files.
FEATURES
 Transaction files also serve as audit
trails(track) and history for the organization
 Contain records pertaining to events currently
being processed, such as sales, receipts of
goods, etc.
 Transaction files capture detailed
transaction data.
 They are counterparts to general and
special journals in manual systems
 Transaction data are periodically
posted to related master file(s) and are
then either removed or archived
File Classification (Transaction
Files - II)
 Accounting related transaction
files include:
• General/Special journal file
(General ledger)
• Sales/Cash receipts file
(Accounts receivable)
• Receiving/Purchases file, Cash
disbursements file (Inventory,
Accounts payable)
• Inventory issuance file/shipment
file/sales file/adjustments file
(Inventory)
• Payroll/Cash disbursements (Payroll)
Other File Classifications - I
 Reference files: These contain tables or
lists of data needed for making
calculations or for checking the
accuracy of input data. e.g., product
price tables, customer lists, etc.
 History files: These are also called
archive files since they contain
records pertaining to completed
transactions such as past sales
Other File Classifications - I
 Open files: These record incomplete
transactions.
 Whereas transaction files are purged or
archived at the end of a given period,
open files remain indefinitely open.
 Only individual records from Open files get
purged as the transaction actually occurs or
does not. e.g., Open sales order file Sales
transaction file
Other File Classifications - II
 Report files: These are derived from
records within master or transaction
files. e.g., data may be periodically
extracted from the Accounts
Receivable master file to construct an
aging schedule/of debtors
 Backup file: This is a copy of a current
file generated so that the original file
can be recreated from it
 Suspense file: This is a collection
of those records of a transaction
file that appear to contain
erroneous or questionable data
Record-Key
 Record keys: These are data elements
within records that serve as sort keys.
e.g., customer-account number
 Two types of keys often used in master
and transaction file records are a
primary key and one or more
secondary keys
Record-Key
• A Primary key (also called a record key)
is the attribute that uniquely identifies a
specific record. They are usually of
numeric or alphanumeric modes, e.g.,
customer number
• A Secondary key is an attribute other
than the primary key and represents an
alternative way to sort or access records
in a file, e.g., customer last name
Transaction Processing
Systems
 A fundamental task in any AIS is to
process transactions affecting the
organization
 Transaction processing systems)
involve three stages:
• Data entry
• Data and file processing
• Output preparation
Benefits of Understanding
Transaction Processing Systems
 Recognize limitations in currently installed
Transaction Processing Systems such as:
• inadequate data controls
• inefficient processing
• out-of-date files
• stored data that cannot be accessed quickly
• data that is poorly classified and coded
 Recommend new or improved processing
approaches and storage methods
Layout of Input-Process-Output
Discussion
Data Processing M odel

Input Process Output

Online Offline Periodic Realtim e

Alw ays Batched (Batched) (Im m ediate)
Processing

M ay lead to M ay lead to Direct Sequential

Realtim e Processing Batched Processing Updating Updating

Sequential Updating Sequential Updating

after Online Data Entry from Batched
(Offline) Inputs
Data Entry
 Most transactions are initiated by
business events triggered by various
agents or by instructions within a
computer program
 Other transactions are initiated by the
passage of time, e.g., interest accruals
 Computer-based systems employ an off-
line or on-line approach to data entry
Off-line Data Entry
 Off-line refers to input devices not directly
connected to the computer. Examples are
key-to-tape, key-to-disk, and OCR
readers
 Data must be first captured on source
documents and similar transactions are batched
together
 Batched transactions are transcribed into
machine-readable form using an off-line device
 Turnaround documents may be used as
direct input into a system
On-line Data Input
 On-line refers to devices that are directly and continuously
connected to a computer system
 In on-line data entry, transaction data are entered into the
computer directly as they occur
 Characteristics of on-line data entry may include:
• nonexistence of source documents (telephones, face-
to-face conversations)
• input of data using source data automation (scanners
at POS terminals)
• origination of data by parties external to the firm (ATM
machines, telephone touch-tone based transactions)
• capture of data at remote sites (remote job entry or
remote batch processing)
Input Documents
 Input documents typically do the
following:
• Authorize Subsequent Transactions
• Trigger Desired Actions
• Reflect Accountability
• Provide Data for Output and Reference
On-line Data Entry design
 Four factors that can reduce the tendency for errors
in on-line data entry are:
• Menus that clearly define alternative actions
• Dialogue prompts that display suggestions or
questions to the user
• Graphical user interfaces that allow a user to make
selections
• Preformatted screens that display formats for
transaction documents. These can be associated with
menu options
Data Processing Methods
 Batch data processing involves the
processing of data in groups (or batches)
of like transactions at periodic intervals.
Used when transaction activity is low or
periodic
 Real-time processing consists of
processing each transaction as it arises
and is captured
Batch Processing Method
 In batch processing, transaction data are stored
in a transaction file until a master-file update is
performed.
 The storing of transaction data in a transaction
file may occur either through off-line or on-line
entry of data
 Advantages of batch processing include:
• processing can be done in background mode
• processing is only performed when needed
• batch processing leaves a good audit trail
 Disadvantages:
• the master-file is only as current
as last processing run.
• If transactions are batched before
entry, any errors in transaction
data cannot be corrected at the
time of entry. They must be
corrected and reentered either
through a separate run or during
the next processing cycle
Real-time Processing Method
 Real-time processing involves the
processing of each transaction as it arises
and is captured
 Data from each transaction are entered via
an online device and posted directly and
immediately to the affected record(s) in one
or more master files
 Real-time processing may be interactive in
that it may involve direct interactions
between humans and computerized systems
Real-time Processing Method
 Advantages of real-time processing include:
• This method keeps the master file more current
than the batch runs
• Errors are caught at the time of data entry
 Drawbacks of real-time processing include:
• More complex and expensive than batch systems
• Harder to audit
• Controls and backup procedures are more
complex in order to guard against unwarranted
access and human error
DFD Showing Batched Sequential
Processing of Transactions
Source Documents Batch of
Origination of Batch Documents
Transactions Documents &
Compute
Totals
Batch Totals
Prepare Batch
Prepare Documents
Financial for Sequential
Outputs Subsidiary and Processing
General ledgers
Updated Post Data to
Financial Statement
Records Accounting
& other Outputs Sorted Batch
Records &
of Documents
Verify Batch
Recipients Totals
of Transaction Data
Outputs (Journals)
Enterprise Resource Planning
 ERP is a software with an integrated set of
applications for enterprise-wide use in functional
areas such as finance, accounting, human resource
management, manufacturing, logistics, etc.
 ERP systems permit an integration of data and
applications. Both financial and non-financial data
can be integrated
 ERP systems also facilitate access to data that are
within the firm but outside the ERP system
 Standardization of worldwide systems, consistent
and accessible data, and on-line processing of data
result in firm-wide data availability
Randomization
 This is the access procedure in which
computations are performed to generate
addresses for individual records.
 These computational procedures are known
as “Hashing Schemes.”
 When the records of a file are located
throughout a direct access storage
medium by means of a randomizing
procedure, the file is described as a
random file.
 A Hashing Scheme provides a random
file with its major advantage: fast
access.
 Hashing schemes are typically faster
than the table lookup procedures
required with indexed sequential files.
Coding
• AISs depend on coding to record, store,
classify and retrieve financial data.
• Computer systems most often use numeric
codes or alphanumeric codes for processing
accounting transactions.
• Purposes of coding:
• uniquely identifies transactions and accounts
• compresses data
• aids in classification process
• conveys special meanings
Coding Systems
• Mnemonic Codes give visible clues
concerning the objects they represent.
Examples of mnemonic codes are MPY for
multiply, “ACCT” could stand for “account,”
“DT” for “date” or “GTL” for “grand total.”
• Sequence Codes are the simplest type of
coding scheme that assign numbers or letters
in consecutive order
Coding Systems
• Block Codes assign a series of
numbers within a sequence to entities
or events having common features
• Group Codes reveal two or more
dimensions or facets pertaining to an
object
Design Considerations in
Coding
• Codes should serve some useful purpose
• Codes should be consistent
• Codes should be standardized throughout
the organization
• Codes should plan for future
expansion