AIS Lecture 2

Accounting Information Systems
Fifteenth Edition
Chapter 2
Overview of Transaction
Processing and Enterprise
Resource Planning Systems
Copyright © 2021, 2018, 2015 Pearson Education, Inc. All Rights Reserved
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 (ERP) systems to process transactions and
provide information.
Figure 2.1 The Data Processing Cycle
Data Input
Steps in Processing Input are:
1. Capture transaction data

triggered by a business
activity (event). (Turnaround
Doc., & Source data
document devices)
3. Ensure company
2. Make sure
policies are
captured data are
followed (e.g.,
accurate and
approval of
complete.
transaction).
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.
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, ATMs)
Data Storage
• Important to understand how data is organized. An
organization must have ready & easy access to its data.
– Chart of accounts
▪ Coding schemas that are well thought out to anticipate
management needs are most efficient and effective
– Transaction journals (e.g., Sales)
– General ledger contains a summary level for each asset,
liability, revenue, expense, & equity (e.g. A/R ledger)
– Subsidiary ledgers contain detailed data for any general
ledger (e.g., detailed information for each customer;
name, address, credit limit,….ect)
Note: With the above, one can trace the path of the
transaction (audit trail)
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 VIN #’s)
• Mnemonic codes—letters and numbers interspersed to
identify an item (i.e. Dry300W05 is low end (300), white
(W) dryer (DRY) made by Sears (05))
Figure 2.2 Recording and Posting a
Credit Sale
Audit trail is a
traceable path of a
transaction through a
data processing
system from point of
origin to final output,
or backward from
final output to point
of origin.
Audit trail for Invoice

#156 for $1,876.50
sold to K D R Builders
Data Storage Elements
• An entity is something about which information is stored,
such as employees, inventory items, and customers.
• Each entity has Attributes, which are characteristics of

interest, that are stored, such as a pay rate and address.
• Data is stored in master files or transaction files.
• A file is a group of related records.
• Each Record consists of the entity attributes.
Thus, Database is a set of interrelated, centrally coordinated

files
Figure 2.3 Data Storage Elements
• Data is stored in master files or transaction files.
Data Processing
Once business activity data have been entered into the
system, they must be processed to keep the databases
current. 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).
Information Output
The final step in the data processing cycle is information output. The
data stored in the database files can be viewed
• On a monitor (soft copy)
• Printed out (hard copy)
Information is usually presented in one of three forms:
– Document (e.g., sales invoice)
– Report are used by employees to control operational activities
and by managers to make decisions and to formulate business
strategies (e.g., monthly sales report)
– Query is used to provide the information needed to deal with
problems and questions that need rapid action or answers
(question for specific information in a database, e.g., Which
division had the most sales for the month?)
Enterprise Resource Planning (ERP)
Systems
• Traditionally, the AIS has been referred to as a transaction
processing system because its only concern was financial
data and accounting transactions. Other potentially useful
nonfinancial information would be collected and processed
outside the AIS.
• Consequently, many organizations developed additional
information systems to collect, process, store, and report
information not contained in the AIS. (This causes
redundancy across systems & lead to discrepancies if data
are changed in one system but not in others).
• ERP overcome these problems & Integrates activities from
the entire organization
Typical (ERP) Modules include
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
Disadvantages of E R P System
• Costly (ERP hardware, software, and consulting costs range from
$50 to $500 million for large companies & $10 to $20 million for
medium sized companies.
• Significant amount of time to implement (It can take years to select
and fully implement an ERP system, depending on business size,
number of modules to be implemented, degree of customization, the
scope of the change, and how well the customer takes ownership of
the project)
• Customizing or standardizing a business process (failure to map
current business processes to existing ERP software is a main cause
of ERP project failures.
• Complexity
• User resistance (It is not easy to convince employees to change how
they do their jobs, train them in new procedures, master the new
system, and persuade them to share sensitive information)
Key Terms
• Data processing cycle • Entity
• Source documents • Attributes
• Turnaround documents • Field
• Source data automation • Record
• General ledger • Data value
• Subsidiary ledger • File
• Control account • Master file
• Coding • Transaction file
• Sequence code • Database
• Block code • Batch processing
• Group code • Online, real-time processing
• Mnemonic code • Document
• Chart of accounts • Report
• Specialized journal • Query
• Audit trail • Enterprise resource planning (E R P)
system

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Accounting Information Systems

1. Capture transaction data

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

Audit trail for Invoice

• Each entity has Attributes, which are characteristics of

• Data is stored in master files or transaction files.

• A file is a group of related records.

• Each Record consists of the entity attributes.

Thus, Database is a set of interrelated, centrally coordinated

Data processing can be batch processed (e.g., post records

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