Module 3

Electronic Business (e-Business)

Systems

ACINSY23S: Accounting Information System

Academic Year 2020-2021
Second Semester
Phase 3
Synopsis
This module:
 Introduces electronic business (e-Business)

or e-commerce: The application of electronic

networks (including the Internet) to exchange
information and link business processes
among organizations and individuals.
 Discusses processes which include interaction

between back-office processes, and front-

office processes.
Introduction
 The shift towards automated business
processes and communications is based on
transfer of electronic data is designed to
achieve greater efficiencies in business
processing.
 When an organization engages in E-business, it
completes electronic-based business events.
 Electronic-based business events entail the
interconnection of the underlying back-office
processes of organizations.
Learning Objectives
1. Appreciate the business advantages gained
through effective use of e-business.
2. Recognize the possible changes to
organizational processes that occur when e-
business is introduced.
3. Identify the major approaches used to record
and transfer electronic data during business
event processing.
Learning Objectives
4. Recognize the complexities surrounding
electronic data interchange (EDI) that are
introduced when linking two different
organizations’ computer systems for joint
business event data processing.
5. Relate to the challenges faced by organizations
when they pursue direct business links with
customers via the Internet or other networks.
Applying E-Business to the
Value Chain
 Amazon.com has grown because it uses
technology to enhance the company’s value
chain and to satisfy customer needs.
 Another innovation from Amazon.com is the
collection and analysis of customer purchase
data.
 Companies and consumers have included
social networking applications as part of their
value chain.
The Changing World of
Business Processing
 Evolution of information technology has
provided for alternative forms of business
processes and business event data
processing.
 Enables some organizations to become
more efficient and effective by changing the
traditional means by which they have done
business.
A Comparison of Manual and Automated
Accounting Information Systems
Activities in the manual accounting process:
1. Journalize the business event.

2. Post the business event from the journal to a

subsidiary ledger.
3. Post the total from the journal to the general
ledger.
4. Summarize the business events by preparing a
trial balance.
A Comparison of Manual
and Automated Accounting
Information Systems
A Comparison of Manual and Automated
Accounting Information Systems
A Comparison of Manual and Automated
Accounting Information Systems
 Master data are repositories of relatively
permanent data maintained over an extended
period of time.
 Two types of updates can be made:
 Information processing includes data
processing functions related to economic events.
 Data maintenance includes activities related to
adding, deleting, or replacing standing data
(relatively permanent portions of master data).
Automating an Accounting
Information System
 Batch processing: The aggregation of several
business events over some period of time with the
subsequent processing of these data as a group by
the information system.
 Periodic mode: Processing mode with delay
between the various data processing steps. Heavily
dependent on the use of batch processing.
 Immediate mode: Processing mode in which little
or no delay occurs between any two data
processing steps.
Automating an Accounting
Information System
Automating an Accounting
Information System
Subprocesses
 Business event occurs: Information is recorded on
a source document.
 Record business event data: A batch of source
documents is entered in a computerized format using
an offline device.
 Update master data: The computer processes the
entered information and updates the master data.
 Generate outputs: After the update, periodic
outputs (i.e., reports) are generated for management.
Online Transaction Entry (OLTE)

 Online transaction entry (OLTE)

system: Use of data entry devices to
enter business event data directly into the
information system at time and place that
business event occurs.
 Merges the traditional subprocesses of
business event occurrences and records
business event data into a single
operation.
Online Transaction Entry (OLTE)

 Considered online because the data entry

device is connected to the computer.
 Data entry is completed using bar code
readers, scanners, or radio-frequency
identification (RFID) readers.
Online Transaction Entry (OLTE)
Online Real-Time (OLRT)
Processing
 Online real-time (OLRT) systems: Gathers and
records business event data at time of
occurrence.
 Updates master data instantaneously.
 Provides results in real time.
 Also known as immediate mode in which little
or no delay occurs between any two data
processing steps.
Online Real-Time (OLRT)
Processing
Online Real-Time (OLRT)
Processing
 OLRT systems require three basic
subprocesses to be completed:
1. Business event occurs; record business event
data.
2. Update master data.
3. Generate reports (and support queries).
 Processing methods requires data
communications pathways among PCs,
terminals, or other systems.
Online Real-Time (OLRT)
Processing
 Communication Networks
 Client/server technology
 Local area networks (LANs)
 Wide area networks (WANs)
 Internet
 Web browsers
 Intranet
 Extranet
Methods for Conducting
e-Business
 Methods of e-business include:
 Electronic mail (e-mail)
 Electronic document management (EDM)
 Electronic data interchange (EDI)
 Internet commerce
Commerce through e-Mail
 Electronic mail (e-mail): Non-standardized
messages between individuals linked via a
communications network.
 Weak form for e-business because of non-
standardized format.
 Data capture is difficult due to unstructured nature.
 From a sales standpoint, a targeted market can be
identified by an e-mail list.
 General objectives of e-business are not achieved.
Electronic Document
Management (EDM)
 Electronic Document Management (EDM):
Capture, storage, management, and control of
document images.
 Applications fall into two categories:
 Document storage and retrieval.
 Business event data processing.
Electronic Document
Management (EDM)
 Benefits include:
 Reduced cost of handling and storing paper.
 Improved productivity and customer service.
 Enhanced management of workflow.
 Faster processing.
Electronic Data Interchange
(EDI)
 Electronic Data Interchange (EDI):
Computer-to-computer exchange of business
data in structured formats that allow direct
processing of those electronic documents by
the receiving computer system.
Electronic
Data
Interchange
(EDI)
Electronic Data Interchange
(EDI)
 Application Software (circles 1 and 7):
Originating application software prepares an
electronic business document (PO). Destination
application processes the business data.
 Translation Software (circles 2 and 6):
Application’s electronic business document
must be translated to the structured EDI format
that will be recognized by the receiving
computer.
Electronic Data Interchange
(EDI)
 Communications Network (circles 3 and 5):
The trading partners must have a method of
communicating the electronic messages to each
other. Organizations may use either EDI service
bureaus or the Internet.
 Value-Added Network (VAN) Service (circle
4): Rather than connecting to each trading
partner, an organization can connect to a value-
added network (VAN) service that acts as an EDI
“post office.”
Electronic Data
Interchange
(EDI)
EDI over the Internet
 Internet EDI (IEDI): Use of secure,
structured messages over the Internet to
execute business transactions.
 Main difference between traditional and
Internet EDI is use of a VAN for the
traditional method.
 It is expected that IEDI will replace traditional
EDI.
EDI and Business Event Data
Processing
 Main advantage of EDI is reduction in the need
for interaction between humans and OLTE.
 EDI is moving to the Internet, allowing
companies to save the cost of the VANs.
 By eliminating VANs it is possible for a company
to have a significant reduction in costs.
 It is expected that Internet EDI will dominate B2B
e-commerce.
EDI and Business Event Data
Processing
 Web Services: A software application that
supports direct interactions with software
objects over an intranet or the Internet.
 Service-oriented architecture (SOA):
Refers to well-defined, independent
functions (or applications) that can be
distributed over a network via Web
Services.
EDI and Business Event Data
Processing
Internet Commerce
 Internet commerce: Computer-to-
computer exchange of business event
data via Internet communication that
allows the initiation and consummation of
business events.
 Network providers: Provide a link to the
Internet by making their directly connected
networks available for access by fee-
paying customers
Internet Commerce
 Client/Server Relationship (circles 1 and 7):
Customer connects to vendor in an extended form of
client/server application.
 Network Providers (circles 2 and 5): Connection to
Internet through direct connection or network provider.
 Assurance Providers (circles 4 and 6): Internet
assurance services provide limited assurance that
Web site is reliable and secure.
 Internet Connection (circle 3): The network diagram
of a cloud, displayed at circle 3, pictorially represents
how the Internet operates.
Internet Commerce
Internet Commerce
 Internet assurance: Service provided for a
fee to vendors to provide limited assurance to
users of the vendor’s Web site that the site is
in fact reliable and event data security is
reasonable. Examples include WebTrust.
 Cloud computing: The use of the Internet to
provide scalable services—such as software,
resources, hardware, and data storage—to
users. Examples include gmail.
Internet Commerce
 Internet auction markets: Provide an
Internet base for companies to put products
up for bid or for buyers to put proposed
purchases up for bid.
 Electronic storefronts: The creation of
Internet-located resources for displaying
goods and services for sale and for
conducting related sales events.
Internet Commerce
 Internet market exchanges: Brings together
a variety of suppliers in a given industry with
one or more buyers in the same industry to
provide Internet commerce through organized
markets.
Summary
 Future of E-business will see an increased
merging of technologies as the lines between
EDI and Internet continue to blur.
 The major impediment to conducting
business over the Internet is the concern
about security.
 Advances in Internet security have been
significant in the past few years.
Summary
 Evolution of EDI practices toward the Internet
facilitated by use of corporate extranets.
 Extranet environment simplifies processing
and higher levels of control and security.
 Extranets open to business partners using
programs that limit access to selected
business partners.
Summary
 Increases in security will:
 Allow the Internet to become the communication
infrastructure of choice.
 Help fuel the growth of Internet commerce.
 Web Services and service-oriented
architectures will allow:
 Opportunities for reaching customers.
 New globalization of the customer base.
 New competition from distant companies.
Summary
 E-business is a fundamental change in the
way organizations do business, and a driver
of organizational change.
 To succeed in an E-business environment, an
organization must recognize the need to
embrace change and must effectively plan
and manage change.
 Management must take a proactive stance
and lead.
End of Module 3
ELECTRONIC BUSINESS
(E-BUSINESS) SYSTEMS
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