1. 2-1 ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart Overview of Business Processes

2. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-2 Learning Objectives 1 Explain the three basic functions performed by an accounting information system (AIS). 2 Describe the documents and procedures used in an AIS to collect and process transaction data. 3 Discuss the types of information that can be provided by an AIS. 4 Describe the basic internal control objectives of an AIS and explain how they are accomplished.

3. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-3 Introduction This chapter provides an overview of how an AIS can perform its three basic functions : 1. To collect and store data about the organization’s business activities and transactions efficiently and effectively 2 To provide information useful for decision making 3 To provide adequate controls to ensure that data are recorded and processed accurately

4. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-4 The Three Basic Functions Performed by an AIS 1 To collect and store data about the organization’s business activities and transactions efficiently and effectively: Capture transaction data on source documents. Record transaction data in journals, which present a chronological record of what occurred. Post data from journals to ledgers, which sort data by account type.

5. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-5 The Three Basic Functions Performed by an AIS 2 To provide management with information useful for decision making: In manual systems, this information is provided in the form of reports that fall into two main categories: –financial statements –managerial reports

6. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-6 The Three Basic Functions Performed by an AIS 3 To provide adequate internal controls: Ensure that the information produced by the system is reliable. Ensure that business activities are performed efficiently and in accordance with management’s objectives. Safeguard organizational assets.

7. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-7 Basic Subsystems in the AIS 1. The revenue cycle: involves activities of selling goods or services and collecting payment for those sales. 2. The expenditure cycle: involves activities of buying and paying for goods or services used by the organization. 3. The human resources/payroll cycle: involves activities of hiring and paying employees.

8. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-8 Basic Subsystems in the AIS 4. The production cycle: involves activities converting raw materials and labor into finished goods. 5. The financing cycle: involves activities of obtaining necessary funds to run the organization, repay creditors, and distribute profits to investors.

9. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-9 Basic Subsystems in the AIS Expenditure Cycle Human Resources Production Cycle Revenue Cycle Financing Cycle General Ledger & Reporting System

10. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-10 The Data Processing Cycle The data processing cycle consists of four steps: 1. Data input 2. Data storage 3. Data processing 4. Information Output

11. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-11 The Data Processing Cycle The trigger for data input is usually business activity. Data must be collected about: 1. Each event of interest 2. The resources affected by each event 3. The agents who participate in each event

12. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-12 Data Processing Cycle: Data Input Historically, most businesses used paper source documents to collect data and then transferred that data into a computer. Today, most data are recorded directly through data entry screens.

13. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-13 Data Processing Cycle: Data Input Control over data collection is improved by: prenumbering each source document and using turnaround documents having the system automatically assign a sequential number to each new transaction employing source data automation

14. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-14 Common Source Documents and Functions Source DocumentFunction Sales orderTake customer order. Delivery ticketDeliver or ship order Remittance adviceReceive cash. Deposit slipDeposit cash receipts. Credit memoAdjust customer accounts REVENUE CYCLE

15. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-15 CheckPay for items. Common Source Documents and Functions Source Document Function Purchase order Order items. Purchase requisitionRequest items. Receiving reportReceive items. EXPENDITURE CYCLE

16. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-16 Common Source Documents and Functions HUMAN RESOURCES CYCLE W4 formsCollect employee withholding data. Time cardsRecord time worked by employees. Job time ticketsRecord time spent on specific jobs. Source DocumentFunction

17. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-17 Common Source Documents and Functions GENERAL LEDGER AND REPORTING SYSTEM Journal voucherRecord entry posted to general ledger. Source DocumentFunction

18. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-18 Data Processing Cycle: Data Processing Batch processing is the periodic updating of the data stored about resources and agents On-line, real-time processing is the immediate updating as each transaction occurs

19. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-19 Data Processing Cycle: Data Storage An entity is something about which information is stored. Each entity has attributes or characteristics of interest, which need to be stored.

20. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-20 Record Transaction Data in Journals After transaction data have been captured on source documents, the next step is to record the data in a journal. A journal entry is made for each transaction showing the accounts and amounts to be debited and credited.

21. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-21 Record Transaction Data in Journals The general journal records infrequent or nonroutine transactions. Specialized journals simplify the process of recording large numbers of repetitive transactions. What are the four most common types of transactions?

22. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-22 Record Transaction Data in Journals 1 Credit sales 2 Cash receipts 3 Purchases on account 4 Cash disbursements

23. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-23 Record Transaction Data in Journals Sales Journal InvoiceAccountAccount Post Date NumberDebitedNumber Ref. Amount Dec. 1201Lee Co.120-122 3 800.00 Dec. 1202May Co.120-033 3 700.00 Dec. 1203DLK Co.120-111 3 900.00 TOTAL: 2,400.00 120/502 Page 5

24. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-24 Post Transactions to Ledgers Ledgers are used to summarize the financial status, including the current balance, of individual accounts. The general ledger contains summary-level data for every asset, liability, equity, revenue, and expense account of an organization.

25. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-25 Post Transactions to Ledgers A subsidiary ledger records all the detailed data for any general ledger account that has many individual subaccounts. What are some commonly used subsidiary ledgers? – accounts receivable – inventory – accounts payable

26. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-26 Post Transactions to Ledgers What is the general ledger account corresponding to a subsidiary ledger called? – control account A control account contains the total amount for all individual accounts in the subsidiary ledger.

27. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-27 Post Transactions to Ledgers Sales Journal Page 5 DateInvoice Number Account Debited Account Number Post Ref. Amount Dec 1203DLK Co.120-1113900.00 Total 120/502 2,400.00 General Ledger Account: Accounts Receivable Account Number: 120 DateDescriptionPost Ref.DebitCreditBalance Dec 1SalesSJ52,400

28. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-28 What is the Chart of Accounts? The chart of accounts is a list of all general ledger accounts used by an organization. It is important that the chart of accounts contains sufficient detail to meet the information needs of the organization.

29. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-29 Providing Information for Decision Making The second function of the AIS is to provide management with information useful for decision making. The information an AIS provides falls into two main categories: Financial Statements Managerial Reports

30. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-30 Financial Statements Prepare a trial balance. Make adjusting entries. Prepare the adjusted trial balance. Produce the income statement. Make closing entries. Produce the balance sheet. Prepare the statement of cash flows.

31. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-31 Managerial Reports The AIS must also be able to provide managers with detailed operational information about the organization’s performance. Two important types of managerial reports are – budget – performance reports

32. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-32 Managerial Reports What is a budget? A budget is the formal expression of goals in financial terms. One of the most common types of budget is a cash budget.

33. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-33 Managerial Reports What is a performance report? A performance report lists the budgeted and actual amounts of revenues and expenses and also shows the variances, or differences, between these two amounts.

34. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-34 Magic Co. Monthly Performance Report Budget Actual Variance Sales$32,400$31,500 ($900) Cost of Goods 12,000 14,000 (2,000) Gross Margin$20,400$17,500($2,900) Other Expenses 9,000 7,000 2,000 Operating Income$11,400$10,500 ($900) Managerial Reports

35. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-35 Internal Control Considerations The third function of an AIS is to provide adequate internal controls to accomplish three basic objectives: 1 Ensure that the information is reliable. 2 Ensure that business activities are performed efficiently. 3 Safeguard organizational assets.

36. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-36 Internal Control Considerations What are two important methods for accomplishing these objectives? 1 Provide for adequate documentation of all business activities. 2 Design the AIS for effective segregation of duties.

37. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-37 Adequate Documentation Documentation allows management to verify that assigned responsibilities were completed correctly. What did Ashton encounter while working as an auditor that gave him a firsthand glimpse of the types of problems that can arise from inadequate documentation? – failure to bill for repair work

38. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-38 What is Segregation of Duties? Segregation of duties refers to dividing responsibility for different portions of a transaction among several people. What functions should be performed by different people? – authorizing transactions – recording transactions – maintaining custody of assets

39. 2-39 ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart Introduction to e-Business

40. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-40 Learning Objectives 1. Explain what e-business is and how it affects organizations. 2. Discuss methods for increasing the likelihood of success and for minimizing the potential risks associated with e-business. 3. Describe the networking and communications technologies that enable e-business.

41. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-41 Introduction: E-Business E-business refers to all uses of advances in information technology (IT), particularly networking and communications technology, to improve the ways in which an organization performs all of its business processes.

42. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-42 Introduction: E-Business E-business encompasses an organization’s external interactions with its: Suppliers Customers Investors Creditors The government Media

43. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-43 Introduction: E-Business E-business includes the use of IT to redesign its internal processes. For organizations in many industries, engaging in e-business is a necessity. Engaging in e-business in and of itself does not provide a competitive advantage. However, e-business can be used to more effectively implement its basic strategy and enhance the effectiveness and efficiency of its value-chain activities.

44. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-44 E-Business Models Business to Consumers (B2C): Interactions between individuals and organizations. Business to Business (B2B): Interorganizational e-business.

45. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-45 Categories of E-Business Type of E-BusinessCharacteristics B2C Organization-individual Smaller dollar value One-time or infrequent transactions Relatively simple B2B B2G B2E Interorganizational Larger dollar value Established, on-going relationships Extension of credit by seller to customer More complex

46. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-46 E-Business Effects on Business Processes Electronic Data Interchange (EDI): Standard protocol, available since the 1970s, for electronically transferring information between organizations and across business processes. EDI: Improves accuracy Cuts costs

47. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-47 Recent EDI Facilitators Traditional EDI was expensive. New developments that have removed this cost barrier are: The Internet: Eliminates the need for special proprietary third-party networks. XML: Extensible Markup Language – Set of standards for defining the content of data on Web pages.

48. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-48 Integrated Electronic Data Interchange (EDI) Reaping the full benefits of EDI requires that it be fully integrated with the company’s AIS. SuppliersCustomers AIS Company EDI Purchase orders Customer orders EDI

49. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-49 E-Business Effects on Value Chain Activities Value Chain – Primary Activities E-Business Opportunity Inbound logistics Acquisition of digitizable products Reduced inventory “buffers” Operations Faster, more accurate production Outbound logistics Distribution of digitizable products Continuous status tracking Sales and Marketing Improved customer support Reduced advertising costs More effective advertising Post-sale Support and Service Reduced costs 24/7 Service availability

50. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-50 E-Business Effects on Value Chain Activities Value Chain – Support Activities E-Business Opportunity Purchasing Human Resources Infrastructure Source identification and reverse auctions Employee self-service EFT, FEDI, other electronic payments

51. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-51 Purchasing and Inbound Logistics The Internet improves the purchasing activity by making it easier for a business to identify potential suppliers and to compare prices. Purchase data from different organizational subunits can be centralized. This information can be used to negotiate better prices. Number of suppliers can be reduced. Reverse auctions can be held For products that can be entirely digitized, the entire inbound logistics function can be performed electronically.

52. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-52 Internal Operations, Human Resources, and Infrastructure Advanced communications technology can significantly improve: The efficiency of internal operations. Planning. The efficiency and effectiveness of the human resource support activity. The efficiency and effectiveness of customer payments.

53. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-53 Information Flows in Electronic Commerce Buyer Seller 1. Inquiries 2. Responses 3. Orders 4. Acknowledgment 5. Billing 6. Remittance data 7. Payments Explanations: EDI = Steps 1-6 EFT = Step 7 FEDI = Steps 1-7

54. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-54 Financial Electronic Data Interchange (FEDI) The use of EDI to exchange information is only part of the buyer- seller relationship in business-to- business electronic commerce. Electronic funds transfer (EFT) refers to making cash payments electronically, rather than by check. EFT is usually accomplished through the banking system’s Automated Clearing House (ACH) network.

55. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-55 Financial Electronic Data Interchange (FEDI) An ACH credit is an instruction to your bank to transfer funds from your account to another account. An ACH debit is an instruction to your bank to transfer funds from another account into yours.

56. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-56 Financial Electronic Data Interchange (FEDI) Company A’s bank Company B’s bank Company ACompany B Remittance data and payment instruction Remittance data and funds

57. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-57 Outbound Logistics E-Business can improve the efficiency and effectiveness of sellers’ outbound logistical activities. Timely and accurate access to detailed shipment information. Inventory optimization. For goods and services that can be digitized, the outbound logistics function can be performed entirely electronically.

58. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-58 Sales and Marketing Companies can create electronic catalogs to automate sales order entry. Significantly reduce staffing needs. Customization of advertisements

59. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-59 Post-Sale Support and Service Consistent information to customers. Provide answers to frequently asked questions (FAQs).

60. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-60 E-Business Success Factors The degree to which e-business activities fit and support the organization’s overall business strategy. The ability to guarantee that e-business processes satisfy the three key characteristics of any business transaction Validity Integrity Privacy

61. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-61 Encryption There are two principal types of encryption systems: Single-key systems: Same key is used to encrypt and decrypt the message Simple, fast, and efficient Example: the Data Encryption Standard (DES) algorithm Public Key Infrastructure (PKI): Uses two keys: Public key is publicly available and usually used to encode message Private key is kept secret and known only by the owner of that pair of keys. Usually used to decode message

62. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-62 Advantages & Disadvantages of PKI Advantages No sharing of key necessary More secure than single-key systems Disadvantages Much slower than single-key systems

63. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-63 Digital Signatures and Digests Digital signature: An electronic message that uniquely identifies the sender of that message. Digest: The message that is used to create a digital signature or digital summary. If any individual character in the original document changes, the value of the digest also changes. This ensures that the contents of a business document have not been altered or garbled during transmission

64. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-64 Digital Certificates & Certificate Authorities Digital Certificate: Used to verify the identity of the public key’s owner. A digital certificate identifies the owner of a particular private key and the corresponding public key, and the time period during which the certificate is valid. Digital certificates are issued by a reliable third party, called a Certificate Authority, such as: Verisign Entrust Digital Signature Trust The certificate authority’s digital signature is also included on the digital certificate so that the validity of the certificate can also be verified.

65. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-65 Types of Networks The global networks used by many companies to conduct electronic commerce and to manage internal operations consist of two components: 1 Private portion owned or leased by the company 2 The Internet

66. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-66 Types of Networks The private portion can be further divided into two subsets: 1 Local area network (LAN) — a system of computers and other devices, such as printers, that are located in close proximity to each other. 2 Wide area network (WAN) — covers a wide geographic area.

67. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-67 Types of Networks Companies typically own all the equipment that makes up their local area network (LAN). They usually do not own the long-distance data communications connections of their wide area network (WAN). They either contract to use a value-added network (VAN) or use the Internet.

68. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-68 Types of Networks The Internet is an international network of computers (and smaller networks) all linked together. What is the Internet’s backbone? – the connections that link those computers together Portions of the backbone are owned by the major Internet service providers (ISPs).

69. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-69 Types of Networks What is an Intranet? The term Intranet refers to internal networks that connect to the main Internet. They can be navigated with the same browser software, but are closed off from the general public. What are Extranets?

70. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-70 Types of Networks Extranets link the intranets of two or more companies. Either the Internet or a VAN can be used to connect the companies forming the extranet. Value-added networks (VAN) are more reliable and secure than the Internet, but they are also expensive.

71. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-71 Company A AIS VPN equipment ISP Internet Types of Networks Companies build a virtual private network (VPN) to improve reliability and security, while still taking advantage of the Internet.

72. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-72 Data Communications System Components There are five basic components in any data communication network (whether it is the Internet, a LAN, a WAN, or a VAN): 1 The sending device 2 The communications interface device 3 The communications channel 4 The receiving device 5 Communication software

73. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-73 Data Communications System Components The following are components of the data communications model: – interface devices – communications software – communications channel

74. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-74 Interface Devices There are six basic communication interface devices that are used in most networks: 1 Network interface cards 2 Modems 3 Remote access devices 4 Hubs 5 Switches 6 Routers

75. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-75 Interface Devices Company A PC-1 NIC PC-2PC-3 NIC Switch Router Hub 1 Other LANs Internet service provider Remote access device Frame relay switch Router

76. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-76 Interface Devices Home PC Modem Remote access device Frame relay switch Router Home PC Modem Internet service provider

77. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-77 Communications Software Communications software manages the flow of data across a network. It performs the following functions: – access control – network management – data and file transmission – error detection and control – data security

78. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-78 Communications Channels A communications channel is the medium that connects the sender and the receiver. – standard telephone lines – coaxial cables – fiber optics – microwave systems – communications satellites – cellular radios and telephones

79. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-79 Communications Channels Satellite Microwave stations

80. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-80 Network Configuration Options Local area networks (LANs) can be configured in one of three basic ways: 1 Star configuration 2 Ring configuration 3 Bus configuration

81. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-81 Network Configuration Options A star configuration is a LAN configured as a star; each device is directly connected to the central server. All communications between devices are controlled by and routed through the central server. Typically, the server polls each device to see if it wants to send a message.

82. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-82 Network Configuration Options The star configuration is the most expensive way to set up a LAN, because it requires the greatest amount of wiring. Host computer or server AB C GF E DH

83. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-83 Network Configuration Options In a LAN configured as a ring, each node is directly linked to two other nodes A H B D C EG F

84. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-84 Network Configuration Options In a LAN configured as a bus, each device is connected to the main channel, or bus. Communication control is decentralized on bus networks. ABC GFE D H Host computer or server Bus channel

85. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-85 Network Configuration Options Wide area networks (WANs) can be configured in one of three basic ways: 1 Centralized system 2 Decentralized system 3 Distributed data processing

86. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-86 Network Configuration Options In a centralized WAN, all terminals and other devices are connected to a central corporate computer.

87. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-87 Network Configuration Options In a decentralized WAN, each departmental unit has its own computer and LAN. Decentralized systems usually are better able to meet individual department and user needs than are centralized systems.

88. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-88 Network Configuration Options A distributed data processing system WAN is essentially a hybrid of the centralized and decentralized approaches

89. ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart 2-89 Network Configuration Options Many WANs, and most LANs, are set up as client/server systems. Each desktop computer is referred to as a client. The client sends requests for data to the servers. The servers perform preprocessing on the database and send only the relevant subset of data to the client for local processing.