Chapter 2

Overview of Transaction Processing and ERP Systems

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 Learning Objectives

 Describe the four major steps in the data processing cycle.

 Describe the major activities in each cycle.
 Describe documents and procedures used to collected
and process data.
 Describe the ways information is stored in computer-based
information systems.
 Discuss the types of information that an AIS can provide.
 Discuss how organizations use ERP systems to process
transactions and provide information.

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 Data processing Cycle

 Accountants and other system user

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 Data Processing Cycle

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 The Data Processing Cycle
Determines
 What data is stored?

 Who has access to the data?

 How is the data organized?

 How can unanticipated information needs be met?

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 Data Input—Capture

 As a business activity occurs data is collected about:

1. Each activity of interest
2. The resources affected
3. The people who are participating

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 Paper-Based Source Documents

 Data are collected on

source documents
 E.g., a sales-order form
 The data from paper-
based will eventually
need to be transferred to
the AIS

 Turnaround
 Usually paper-based
 Are sent from
organization to customer
 Same document is
returned by customer to
organization
Turnaround Document

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 Source Data Automaton

 Source data is captured

 In machine-readable form
 At the time of the business activity
 E.g., ATM’s; POS

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 Data Input—Accuracy and Control

 Well-designed source documents can ensure that data

captured is
 Accurate
 Provide instructions and prompts
 Check boxes
 Drop-down boxes
 Complete
 Internal control support
 Prenumbered documents

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 Data Storage

 Types of AIS storage:

 Paper-based
 Ledgers
 Journals
 Computer-based

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 Ledgers

 General • Joe Smith

 Summary level data for each: $250
 Asset, liability, equity, • Patti Jones
revenue, and expense $750
 Subsidiary
 Detailed data for a General
Ledger (Control) Account
that has individual sub- • ACME
accounts Inc.$150
 Accounts Receivable • Jones, Inc
 Accounts Payable $350

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 Journals

 General
 Infrequent or specialized transactions

 Specialized
 Repetitive transactions
 E.g., sales transactions

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 Coding Techniques

 Sequence
Digit Position Meaning
 Items numbered consecutively
1–2 Product Line, size,
 Block and so on
 Specific range of numbers are
associated with a category 3 Color
 10000–199999 = Electric Range
4–5 Year of
 Group Manufacture
 Positioning of digits in code provide
meaning 6–7 Optional Features
1241000 12 = Dishwasher
 Mnemonic
 Letters and numbers 4 = White
 Easy to memorize 10 = 2010
 Code derived from description of item 00 = No Options

 Chart of accounts
 Type of block coding

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 Computer Based Storage
 Entity
 Person, place, or thing (Noun)
 Something an organization wishes to store data about
 Attributes
 Facts about the entity
 Fields
 Where attributes are stored
 Records
 Group of related attributes about an entity
 File
 Group of related Records

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 File Types

 Transaction
 Contains records of a
business from a specific
period of time

 Master
 Permanent records
 Updated by transaction
with the transaction file

 Database
 Set of interrelated files

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 Data Processing

 Four Main Activities

1. Create new records
2. Read existing records
3. Update existing records
4. Delete records or data from records

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 Data Output Types

 Soft copy
 Displayed on a screen

 Hard copy
 Printed on paper

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 ERP Systems

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 Enterprise Resource Planning (ERP)

 Integrate an organization’s information into one overall

AIS

 ERP modules:
 Financial
 Human resources and payroll
 Order to cash
 Purchase to pay
 Manufacturing
 Project management
 Customer relationship management
 System tools

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 ERP Advantages

 Integration of an organization’s data and financial

information

 Data is captured once

 Greater management visibility, increased monitoring

 Better access controls

 Standardizes business operating procedures

 Improved customer service

 More efficient manufacturing

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 ERP Disadvantages

 Cost

 Time-consuming to implement

 Changes to an organization’s existing business processes

can be disruptive

 Complex

 Resistance to change

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