Accounting Systems & Business Processes Chapter 4 ACCOUNTING INFORMATION SYSTEMS The Crossroads of Accounting & IT Chapter 4 Accounting Systems & Business Processes © Copyright 2012 Pearson Education. All Rights Reserved.

Imagine tracking activity you perform today on sticky notes that you post online and share with your friends... What if together with your friends you analyze and rearrange the stickies so that tomorrow you are more efficient? Business Process Management Meet Social Networking. © Copyright 2012 Pearson Education. All Rights Reserved.

Business Processes & the Accounting System Accounting spans business processes in the value chain. © Copyright 2012 Pearson Education. All Rights Reserved.

Transaction Cycles Each transaction cycle is expanded to show the transactions in the cycle. © Copyright 2012 Pearson Education. All Rights Reserved.

So you can get a head start by using a baseline accounting system with modules and transactions that are common to most enterprises. © Copyright 2012 Pearson Education. All Rights Reserved.

Baseline Accounting System ABCs of Accounting Accounting System = Baseline Accounting System + Customization The baseline accounting system, such as the one shown here, can be customized to meet an enterprise’s specific needs. © Copyright 2012 Pearson Education. All Rights Reserved.

Customization Customize the baseline system to meet enterprise-specific needs. For example, the customer module can be customized. Here is the customer module from the baseline accounting system and the tasks shown on QuickBooks Home page for the customer section. © Copyright 2012 Pearson Education. All Rights Reserved.

DFDs Create Invoice activity is customized for Espresso Coffee using DFDs. Enterprises may use a tool, such as DFDs, to document the customization needed for their accounting system. For example EspressoCoffee customized the create invoices event shown in the baseline accounting system. This is the DFD EspressoCoffee created to document the customization needed for this business process. © Copyright 2012 Pearson Education. All Rights Reserved.

DFDs Data Flow Diagrams (DFDs) use four symbols: Agent = Square Data Flow = Arrow Data Store (Table) = Open Rectangle Event or Process = Rounded Rectangle There are only four symbols (shown here) used in building DFDs. Some documentation tools, such as UML Diagrams (shown in the chapter extension) may use over 100 different symbols. So when learning how to document business processes, DFDs are a nice place to start. Then you can transition to flowcharting or UML after you become more familiar with business process documentation. © Copyright 2012 Pearson Education. All Rights Reserved.

DFD Example This is an example of how the four symbols are combined to create a DFD. As an accounting professional, you may be asked to read documentation for a business process or to build documentation for a business process. © Copyright 2012 Pearson Education. All Rights Reserved.

Reading a DFD Step 1 Step 2 Step 3 Step 4 Who does What, When, Where & How? Step 1 Identify the agents (internal and external). Step 2 Identify events. Step 3 Identify database tables. Step 4 Trace the data flows. When reading a DFD, you are basically attempting to answer the question: Who does What, When, Where & How? To do this, there are four steps: 1) Identify the agents. 2) Identify the events. 3) Identify the database tables used to store the data. 4) Trace the data flows. © Copyright 2012 Pearson Education. All Rights Reserved.

DFD Exercise For a bank ATM transaction, identify the following: Agents Events Data stores © Copyright 2012 Pearson Education. All Rights Reserved.

Guidelines for Well-Designed DFDs When building DFDs, there are some general guidelines to follow. Notice that there should not be data flow between two agents. Instead, there should be a process between the two agents. © Copyright 2012 Pearson Education. All Rights Reserved.

DFD: 3 Common Errors There are three DFD errors so common that the errors are given special names. A black hole in space has everything going into the black hole and nothing coming out. A black hole in a DFD has all the arrows going into the event, but no arrows (or data) coming out. There should be at least one arrow coming out of the event. A miracle has all the arrows coming out but no data coming into the event. There should be at least one arrow going into the event. The grey hole is more difficult to identify. In this example, customer information is going in, but vendor information is coming out. This is inconsistent and considered a gray hole because the data going in doesn’t correspond to the data coming out of the event. © Copyright 2012 Pearson Education. All Rights Reserved.

Joey’s DFD What changes would you request? Joey, from IT, has built a DFD and asked for your approval. What would you say to Joey? Would you request any changes before you signed the approval form? If so, what changes would you request? © Copyright 2012 Pearson Education. All Rights Reserved.

DFD Exercise The following data flow diagram has three agents (A1, A2, A3), two processes/events (P1, P2), and two database tables (T1, T2). Identify and list the errors that you see in the DFD. How many errors can you identify in this DFD? © Copyright 2012 Pearson Education. All Rights Reserved.

How Do I Build a DFD (Level 0)? After learning how to read DFDs, the next step is to learn how to build a DFD. First, we will begin with a level 0 DFD, which is a higher level view. Then after a level 0 DFD is built, it is possible to drill down into greater and greater detail for the business processes, which are labeled level 1, level 2, etc. Step 1 is to write a narrative for the business activity. The narrative is just a brief description of the steps and actions taken. © Copyright 2012 Pearson Education. All Rights Reserved.

How Do I Build a DFD (Level 0)? After the narrative is written to describe the process, the next step is to annotate the narrative to identify the events. Notice that the events are numbered in the order in which they would occur. Also notice that events typically start with an action verb, such as process or generate. Since this is a level 0 DFD, notice that the events have a zero after the decimal place (2.0, 3.0) © Copyright 2012 Pearson Education. All Rights Reserved.

How Do I Build a DFD (Level 0)? Step 3 is to create a table to summarize the information about events, agents, and database tables needed. The information is organized by event number.. © Copyright 2012 Pearson Education. All Rights Reserved.

How Do I Build a DFD (Level 0)? Step 4 is to select one event from the EAD table and build a DFD for that one event. This can be referred to as a DFD fragment. © Copyright 2012 Pearson Education. All Rights Reserved.

How Do I Build a DFD (Level 0)? After building a DFD fragment for each event in the EAD table, you then combine the fragments into one DFD. Notice that duplicates, such as duplicate data stores, can be eliminated when the DFD fragments are combined. © Copyright 2012 Pearson Education. All Rights Reserved.

How Do I Build a DFD (Level 1)? Steps 6-10: Repeat steps 1-5 to create a level-1 DFD. Step 6 through 10 relate to building a level-1 DFD that contains more detail. You would select event 1 in your level 0 DFD and then expand that event to include additional detail for a level 1 DFD. Notice how the events are numbered. For example, the event number 1.2 indicates that this is Event 1. Because there is a number other than zero after the decimal place, that tells us this is a level 1 DFD. One way to remember this is if there is a number in the 1st decimal place it is a Level 1 DFD. Building the level 1 DFD involves the following steps: Step 6 (same as step 1 except for level 1 instead of level 0) write a narrative Step 7 (same as step 2 except for level 1 instead of level 0) annotate the narrative Step 8 (same as step 3 except for level 1 instead of level 0) create an EAD table Step 9 (same as step 4 except for level 1 instead of level 0) create DFD fragments for each event in the table Step 10 (same as step 5 except for level 1 instead of level 0) combine the DFD fragments to create one DFD © Copyright 2012 Pearson Education. All Rights Reserved.

Level-1 DFD This is an example of a Level 1 DFD for EspressoCoffee -- Create Invoices. The more detailed the DFD, the higher the level number. © Copyright 2012 Pearson Education. All Rights Reserved.

DFD Exercise Select an authentic enterprise of your choice and describe how the enterprise processes sales transactions with customers. 1. List: Agents Events Data stores Draw a level-0 data flow diagram (DFD) to document the sales transaction for the enterprise of your choice, showing agents, events, data stores, and data flow. © Copyright 2012 Pearson Education. All Rights Reserved.