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

2. Data Processing Cycle
Input
Process
Output
Storage

3. THE DATA PROCESSING CYCLE
An important function of the AIS is to efficiently and effectively process the data about a company’s transactions.
In manual systems, data is entered into paper journals and ledgers.
Source documents stored in files
In computer-based systems, data entered into computers and stored in files and databases.
Operations performed to transform data into relevant information referred to as the data processing cycle

4. The Data Processing Cycle Determines
What data is captured/stored?
Encryption?
Who has access to the data?
Data protection issues
How is the data organized?
How can unanticipated information needs be met?
Adaptable

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

6. Data Capture Information collected for an activity includes:
Activity of interest (e.g., sale)
Resources affected (e.g., inventory and cash)
People who participated (e.g., customer and employee)
Information comes from source documents.

7. Data Input—Capture Example- sales transaction
Date and time of day the sale occurred
 Employee who made the sale and the checkout clerk who processed the sale
 Checkout register where the sale was processed
 Item(s) sold
 Quantity of each item sold
 List price and actual price of each item sold
 Total amount of the sale
 For credit sales: delivery instructions, customer bill-to and ship-to addresses, customer name

8. 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)
It is important to emphasize Table 2-1 in the text as this sets the stage for understanding the transaction cycles and the source documents associated with those activities in the transaction cycle. A solid foundational understanding of:
Activities
Source documents associated with the activity
Information flows (i.e., debit and credit postings in the ledger)
This helps the student understand how to establish controls for this information in the subsequent chapters. For example, the text in Chapter 2 does mention that prenumbering documents is a good control, a good question to ask students is why do they think prenumbering of the source documents would be important to have in an organization? This gets them thinking more intuitively based on their own experiences as a consumer and it may not make learning controls seem like memorizing a list and seem more like something that a student can think about as they understand the details and fit it to a bigger picture.
Another good class discussion is thinking about all the data that is collected using sensors (e.g., RFID tags). How much of this data would be important for the organization to capture?

10. Source Data Automaton Source data is captured In machine-readable form
At the time of the business activity
Examples
ATM’s
POS in retail stores
Bar code scanners or RFID tags in warehouses

11. Data Input—Accuracy and Control
Well-designed source documents or data entry screens can ensure that data captured is
Accurate
Provide instructions and prompts
Check boxes
Drop-down boxes
Complete
Internal control support
Prenumbered documents

12. Data Storage Types of AIS storage: Paper-based Ledgers Journals
File cabinets
Computer-based
Electronic

13. 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.
Transaction journals (e.g., Sales)
Subsidiary ledgers (e.g., Accounts receivable)
General ledger
Note: With the above, one can trace the path of the transaction (audit trail).
The importance of data storage cannot be stressed enough. Many organizations change and evolve, but rarely do accountants have the luxury to really think ahead to organize how they want the information to be stored. Yet many AIS allow you to run special reports based on the coding schemas in the chart of accounts. For example, if your organization is expanding, is it important to have individual location financials as well as roll them up into regional financials? The coding schema of the chart of accounts, if not well thought out, can limit an organization and cause additional work; however, if the schema is well thought out, it can be more efficient to get the information to management.

14. Audit trail for Invoice #156 for $1,876.50 sold to KDR Builders
Figure 2-2 from the text shows how the different ledgers and journals are used to trace the path of one transaction found in Table 2-3 (invoice # 156 from KDR Builders). This example, should also reinforce the accounting knowledge for the student as they may understand the debit and credit of a sale transaction but not necessarily understand how the AIS would store that transactional data.
A good question to ask the students is why are there transactional journals and subledgers and not just one big general ledger? As they may have learned in their introductory accounting class, this becomes a very large file and it is easier to parcel out the information that is specific to the transaction (e.g., sales or purchasing) and the associated subsidiary ledgers.

15. Coding Techniques Sequence Block Group Mnemonic Chart of accounts
Items numbered consecutively
Block
Specific range of numbers are associated with a category
10000– = Electric Range
Group
Positioning of digits in code provide meaning
Mnemonic
Letters and numbers
Easy to memorize
Code derived from description of item
Chart of accounts
Type of block coding
Digit Position
Meaning
1–2
Product Line, size, and so on 3
Color
4–5
Year of Manufacture
6–7
Optional Features
12 = Dishwasher
4 = White
10 = 2010
00 = No Options

16. Coding Techniques
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall

17. Journals General Specialized Infrequent or specialized transactions
Repetitive transactions
E.g., sales transactions

18. Sales Journal
Figure 2-2 from the text shows how the different ledgers and journals are used to trace the path of one transaction found in Table 2-3 (invoice # 156 from KDR Builders). This example, should also reinforce the accounting knowledge for the student as they may understand the debit and credit of a sale transaction but not necessarily understand how the AIS would store that transactional data.
A good question to ask the students is why are there transactional journals and subledgers and not just one big general ledger? As they may have learned in their introductory accounting class, this becomes a very large file and it is easier to parcel out the information that is specific to the transaction (e.g., sales or purchasing) and the associated subsidiary ledgers.

19. Computer Based Storage
Entity(table in a DB)
Something an organization wishes to store data about
Customers, employees, inventory items, etc.
Attributes
Facts about the entity
Fields
Where attributes are stored
Data value
Contents of field
Records
Group of related attributes about an entity
File
Group of related Records

20. Computer-Based Storage
Data is stored in master files or transaction files.
Its important to understand how the data aggregates as this will be useful in subsequent chapters for designing query (questions) of the data or reports.
Students should be thinking about what information is in master files and what would be in transaction files. It is helpful to refer to slide 2-5 such that master files usually include “resource” and “people” data and the transaction file is the activity or event data that is captured.
Thus, there is the following hierarchy:
Database includes
Files (master/transaction) which include
Records (entities) which include
Attributes (individual fields)

21. File Types Master Transaction Database Cumulative
Permanent records(exist across multiple time periods)
Updated by transaction with the transaction file
(Ledger in a manual system)
Transaction
Contains records of a business from a specific period of time
(journal in manual system)
Database
Set of interrelated files
Transaction File
Master before Update
Updated Master File

22. Data Processing Four types of processing (CRUD):
Creating new records (e.g., adding a customer)
Reading existing data
Updating previous record or data
Deleting data
Data processing can be batch processed (e.g., post records at the end of the business day) or in real-time (process as it occurs).

23. A/R record update

24. 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.

25. 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.

26. 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.
Transaction log produced that consists of chronological record of all transactions
Output is printed or displayed.

27. 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?)
Queries are shown in Chapter 4 and a are a very useful tool used in accounting to get specific information out of a database.

28. Data Output Types This output can be in the form of: Documents Reports
Source(beginning)
Operational(end)
Reports
External users
Financial statements
Internal users
Queries

29. Enterprise Resource Planning (ERP) Systems
Integrates activities from the entire organization
Production
Payroll
Sales
Purchasing
Financial Reporting
Major Players for the Highp-End Apps
Oracle
SAP
This is a good place to emphasize that good internal controls are necessary as an integrated database has the benefit of inputting data once in the system, if that input is inaccurate, it will be useless. That is why most people only have access to certain portions of the system and that good data entry controls are necessary.

30. ERP Systems

31. 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

32. Disadvantages of ERP System
Costly
Significant amount of time to implement
Complex
User resistance (learning new things is sometimes hard for employees)