Chapter 2_AIS615

Accounting Information Systems

Fifteenth Edition, Global Edition

Chapter 2

Overview of Transaction
Processing and Enterprise
Resource Planning Systems

•Copyright © 2021 Pearson Education Ltd.

•Copyright © 2021 Pearson Education Ltd.

Learning Objectives

• Describe the data processing cycle used to process

transactions, including how data is input, stored, and
processed and how information is output.

• Discuss how organizations use enterprise resource

planning (E R P) systems to process transactions and
provide information.

Open Ended

Discuss what you have learned from Chapter 1

•Copyright © 2021 Pearson Education Ltd.

Figure 2.1 The Data Processing Cycle

•Copyright © 2021 Pearson Education Ltd.

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).

Open Ended

What kinds of input or output documents or forms would you find in the production (also referred to as the conversion cycle)?

•Copyright © 2021 Pearson Education Ltd.

Data Capture

• Information collected for an activity includes:

– Activity of interest (e.g., sale)

– Resources affected (e.g., inventory and cash)

– People who participated in the activity (e.g., customer

and employee)

• Information comes from source documents.

•Copyright © 2021 Pearson Education Ltd.

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)

•Copyright © 2021 Pearson Education Ltd.

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)

•Copyright © 2021 Pearson Education Ltd.

Coding Techniques

• Sequence codes—items numbered consecutively to

account for all items (i.e., prenumbered forms)

• Block code—blocks of numbers reserved for specific

categories of data (i.e., product numbers that start with a 2
are refrigerators)

• Group codes—two or more subgroups of digits used to

code items (i.e., car V I N #’s)

• Mnemonic codes—letters and numbers interspersed to

identify an item (i.e. Dry300W05 is low end (300), white
(W) dryer (D R Y) made by Sears (05))

Multiple Choice

Which of the following guidelines DOES NOT result in a better coding system

• Allow for growth

• Randomly selected

• Be consistent with the company’s organizational structure and across the company’s divisions

• Be consistent with its intended use

•Copyright © 2021 Pearson Education Ltd.

Figure 2.2 Recording and Posting a
Credit Sale

Audit trail for Invoice #156 for
$1,876.50 sold to K D R
Builders

Open Ended

The purpose of an audit trail is to be able to trace a transaction from its origin on source documents to the final output or backwards from the final output to the original source documents to prove the accuracy and validity of ledger posting.

Describe in detail the audit trail for customers returning .defective goods

•Copyright © 2021 Pearson Education Ltd.

Figure 2.3 Data Storage Elements

• Data is stored in master files or transaction files.

•Copyright © 2021 Pearson Education Ltd.

Data Processing

Four types of processing (C R U D):

• 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).

•Copyright © 2021 Pearson Education Ltd.

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., Which division had the most sales for the month?)

Multiple Choice

Which of the following actions update a master file?

• Update accounts receivable balance

• Record employee commission on sales

• Record cash receipts

• Record purchases of raw materials

Multiple Choice

Which of the following actions would be stored as a record in a transaction file?

• Update unit prices of selected stock items

• Update supplier payment terms

• Change the tax percentage on taxable goods

• Record payroll checks

•Copyright © 2021 Pearson Education Ltd.

Enterprise Resource Planning (E R P)
Systems

• Integrates activities from the entire organization

– Revenue Cycle

– Expenditure Cycle

– Production Cycle

– H/R Payroll Cycle

– General Ledger and Reporting System

•Copyright © 2021 Pearson Education Ltd.

Advantages of E R P System

• Integrated enterprise-wide single view of the organization’s

data which streamlines the flow of information

• 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)

• Greater visibility and monitoring capabilities for

management

• Improve access of control of the data through security

settings

• Standardization of procedures and reports
• Improves customer service
• Increases productivity through automation

•Copyright © 2021 Pearson Education Ltd.

Disadvantages of E R P System

• Costly

• Significant amount of time to implement

• Customizing or standardizing a business process

• Complexity

• User resistance (learning new things is sometimes hard

for employees)

Multiple Choice

ERP implementation costs for large companies with multiple sites are usually about half the cost of the ERP user license.

• True

• False

Multiple Choice

Transaction files are permanent and must be maintained for several years for backup purposes.

• True

• False

Multiple Choice

Updating done periodically, such as daily or weekly, is referred to as batch processing.

• True

• False

Match

Match the following

• Turnaround documents

• Sequence code

• Real-time processing

• Coding

• Field

These documents are company output sent to an external party and returned as an input document.

Items numbered consecutively to account for all items

Updating each transaction as it occurs

Systematic assignment of numbers or letters to items to classify and organize them

Portion of a data record that contains the data value for a particular attribute

• These documents are company output sent to an external party and returned as an input document.

• Items numbered consecutively to account for all items

• Updating each transaction as it occurs

• Systematic assignment of numbers or letters to items to classify and organize them

• Portion of a data record that contains the data value for a particular attribute

•Copyright © 2021 Pearson Education Ltd.

Key Terms

• Data processing cycle
• Source documents
• Turnaround documents
• Source data automation
• General ledger
• Subsidiary ledger
• Control account
• Coding
• Sequence code
• Block code
• Group code
• Mnemonic code
• Chart of accounts
• Specialized journal
• Audit trail

• Entity
• Attributes
• Field
• Record
• Data value
• File
• Master file
• Transaction file
• Database
• Batch processing
• Online, real-time processing
• Document
• Report
• Query
• Enterprise resource planning (E R P)

system