1. Overview of Transaction Processing and Enterprise Resource Planning Systems
Chapter 2

2. Learning Objectives
Describe the four parts of the data processing cycle and the major activities in each.
Describe the ways information is stored in computer-based information systems.
Discuss how organizations use enterprise resource planning (ERP) systems to process transactions and provide information.

3. Data Processing Cycle

4. Data Input Steps in Processing Input are:
Capture transaction data triggered by a business activity (event).
Information comes from source documents.
Make sure captured data are accurate and complete.
Ensure company policies are followed (e.g., approval of transaction).

5. Source Documents
Captures data at the source when the transaction takes place
Paper source documents
Turnaround documents
Source data automation (captured data from machines, e.g., Point of Sale scanners at grocery store)

6. 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.
General ledger
Subsidiary ledgers (e.g., Accounts receivable)
General journal
Transaction/specialized journals (e.g., Sales)
Note: With the above, one can trace the path of the transaction (audit trail).

7. Audit trail for Invoice #156 for $1,876.50 sold to KDR Builders

8. DATA STORAGE A/R $600 A/P $1000 General ledger
The general ledger is the summary level information for all accounts (asset, liability, equity, revenue, and expense). Detail information is not kept in this account.
A/P
$1000
A/R
$600

9. DATA STORAGE General ledger
Example: Suppose XYZ Co. has three customers. Anthony Adams owes XYZ $100. Bill Brown owes $200. And Cory Campbell owes XYZ $300. The balance in accounts receivable in the general ledger will be $600, but you will not be able to tell how much individual customers owe by looking at that account. The detail isn’t there.

10. DATA STORAGE General ledger Subsidiary ledger
The subsidiary ledgers contain the detail accounts associated with the related general ledger account. The accounts receivable subsidiary ledger will contain three separate
t-accounts—one for Anthony Adams, one for Bill Brown, and one for Cory Campbell.

11. DATA STORAGE General ledger Subsidiary ledger
The related general ledger account is often called a “control” account.
The sum of the subsidiary account balances should equal the balance in the control account.

12. DATA STORAGE A/R $600 A/P $1000 General ledger Subsidiary ledger
Detailed data for a General Ledger (Control) Account that has individual sub-accounts e.g.:
Accounts Payable
Accounts Receivable
Joe Smith $250
Patti Jones $750
A/P
$1000
ACME Inc.$150
Jones, Inc $450
A/R
$600

13. DATA STORAGE Journals General Infrequent or specialized transactions
Used to record:
Non-routine transactions, such as loan payments
Summaries of routine transactions
Adjusting entries
Closing entries

14. DATA STORAGE Journals Specialized Repetitive transactions
E.g., sales transactions
Used to record routine transactions.
The most common special journals are:
Cash receipts
Cash disbursements
Credit sales
Credit purchases

15. COMPUTER-BASED STORAGE CONCEPTS
Data is stored in master files or transaction files.
A master file is a file that stores cumulative information about an organization’s entities.
It is conceptually similar to a ledger in a manual AIS in that:
The file is permanent.
The file exists across fiscal periods.
Changes are made to the file to reflect the effects of new transactions.

16. COMPUTER-BASED STORAGE CONCEPTS
A transaction file is a file that contains records of individual transactions (events) that occur during a fiscal period.
It is conceptually similar to a journal in a manual AIS in that:
The files are temporary.
The files are usually maintained for one fiscal period.

17. COMPUTER-BASED STORAGE CONCEPTS
Transaction
Contains records of a business from a specific period of time
Master
Permanent records
Updated by transaction with the transaction file
Database
Set of interrelated files
Transaction File
Master before Update
Updated Master File

18. DATA PROCESSING Batch processing:
Source documents are grouped into batches, and control totals are calculated.
Periodically, the batches are entered into the computer system, edited, sorted, and stored in a temporary file.
The temporary transaction file is run against the master file to update the master file.
Output is printed or displayed, along with error reports, transaction reports, and control totals.

19. DATA PROCESSING Online, batch processing:
Transactions are entered into a computer system as they occur and stored in a temporary file.
Periodically, the temporary transaction file is run against the master file to update the master file.
The output is printed or displayed.

20. DATA PROCESSING Online, real-time processing
Transactions are entered into a computer system as they occur.
The master file is immediately updated with the data from the transaction.
Output is printed or displayed.

21. 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., What division had the most sales for the month?)

22. Enterprise Resource Planning (ERP) Systems
Integrates activities from the entire organization
Production
Payroll
Sales
Purchasing
Financial Reporting

23. Advantages of ERP System
Integrated enterprise-wide allowing for better flow of the information as it’s stored in a centralized database and can be accessed by various departments which also improves customer service.
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)
Improve access of control of the data through security settings
Standardization of procedures and reports

24. Disadvantages of ERP System
Costly
Significant amount of time to implement
Changes to an organization’s existing business processes can be disruptive
Complex
User resistance (learning new things is sometimes hard for employees)