Group 9

 Norman Dwi Prasetyo (25)

 Pandu Pradana (26)

 Panji Dirgantara (27)

Copyright 2012 © Pearson Education, Inc. publishing as Prentice Hall 2-1

 Chapter 2
Overview of Transaction Processing and ERP Systems
2-2
Copyright © 2012 Pearson Education
 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.

Copyright © 2012 Pearson Education 2-3

 Introduction

 This chapter is divided into two major section :

1. The first section discusses the data processing cycle

and its role in organizing business activities and
providing information to users. It explains how
organization capture and enter data about business
activities into their AIS and how companies process
data and transform it into useful information.

2. The second section discusses the role of the

information system in modern organizations and
introduces the concept of an enterprise resource
planning (ERP) system. An ERP can help intergrate all
aspect of a company’s operation with its traditional
AIS

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 Data Processing Cycle

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 Data Processing Cycle

 One important AIS Function is to process company

transactions efficiently and effectively.

 In manual (non-computer-based) systems, data are

entered into journal and ledgers mantained on paper.

 In computer based system, data are entered into

computers and stored in files and databases.

 The operation performed on data to generate

meaningful and relevant information are referred to
collectively as the data processing cycle.

 Accountant and other system users play a significant role

in the 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

 There are 3 steps in processing input :

 The first step in processing input is to capture transaction

data and enter them into the system. The data capture
process is usually triggered by a business activity.

 The second step in processing input is to make a sure

captured data are accurate and complete. One way to
do this is to use source data automation or well designed
turnaround documents and data entry screen.

 The third step in processing input is to make a sure

company policies are followed, such as approving or
verifying a transaction.

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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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  For the example, the most frequent revenue cycle transaction is a sale,
either for cash or on credit. Company may find it useful to collect the
following data about sales transaction :
 Date and time 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

 Delivery instructions

 For credit sales : customer name, customer bill-to, and ship to addresses

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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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 Common Business Activities and
Source Documents
Business Activity Source Document
Revenue Cycle
Takes Customer Order Sales Order
Delivery or Ship Order Delivery ticket or bill of lading
Receive Cash Remittance advice or remittance list
Deposit cash receipts Deposit slip
Adjust customer account Credit Memo
Expenditure Cycle
Request item Purchase requisition
Order item Purchase order
Receive item Receiving report
Pay for item Check or electronic funds transfer
Human Resource Cycle
Collect employee withholding data W-4 form
Record time worked by employees Time card
Record time spent or specific jobs Job time tickets or time sheet

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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
 A company’s data are one of its most important resources

 However, the mere existence of relevant data does not

guarantee that they are useful.

 To function properly , an organization must have ready and

easy data access to its data.

 In essence, accountants need to know how to manage

data for maximum corporate use.

 Imagine how difficult it would be for company to find an

invoice if all documents were randomly dumped into file
cabinets.

 This section explain basic data storage concepts and

definition.

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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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 Audit Trail

 An audit trail is a traceable

path of transaction
through a data processing
system from point of origin
to final output, or
backwards from final
output to point of origin.

 It is used to check the

accuracy and validity of
ledger postings.

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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 Processing - Updating

 Updating done periodically, such as daily , is referred to

as batch processing.

 Although batch processing is cheaper and more

efficient, the data are current and accurate only
immediately after processing. For that reason, batch
processing is used only for application such as payroll.

 Most companies update each transaction as it occurs,

referred to as online, real-time processing because it
ensures that stored information is always current, thereby
increasing its decision making usefulness.

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 Data Output Types

 Soft copy
 Displayed on a screen

 Hard copy
 Printed on paper

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 Data Output
 Information output is usually presented in one of three forms
: a document, a report, or a query response.

 Documents are records transaction or other company data.

Some such as checks, and invoices , are transmitted to
external parties. Others, such as receiving reports and
purchase requisition, are used internally.

 Reports are used by employees to control operational

activities and by managers to make decisions and
formulate business strategies. External users need reports to
evaluate company profitability, judge creditworthiness, or
comply with regulatory requirements.

 A database query is used to provide the information

needed to deal with problems and questions that need
rapid action or answer.

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 ERP System (Background)

 Traditionally, the AIS has been referred to as transaction

processing system because its only concern was financial
data and accounting transaction.

 Other potentially useful non financial information would

traditionally be collected and processed outside the AIS.

 Consequently, many organization developed additional

information system to collect, process, store, and report
information not contained in the AIS.

 The existence of multiple system creates redundancy,

discrepancies, and difficulty in integrate data.

 ERP overcome the problems as they integrate all aspect of

company’s operations with traditional AIS.

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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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 Problem 1.8
Classify Item
a. Purchase raw materials Expenditure Cycle
b. Pay off mortgage on a factory Financing Cycle
c. Hire a new assistant controller Human resources / Payroll Cycle
d. Establish a $10,000 credit limit for a new customer Revenue Cycle
e. Pay for raw materials Expenditure Cycle
f. Disburse payroll checks to factory workers Human resources / Payroll Cycle
g. Record goods received from a vendor Expenditure Cycle
h. Update the allowance for doubtful accounts Revenue Cycle
i. Decide how many units to make next month Production Cycle
j. Complete a picking ticket for a customer order Revenue Cycle
k. Record factory employee time cards Human resources / Payroll Cycle
l. Sell concert tickets Revenue Cycle

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 Problem 1.8
Classify Item
m. Draw on line of credit Financing Cycle
n. Send new employees to a business ethics course Human resources / Payroll Cycle
o. Pay utility bills Expenditure Cycle
p. Pay property taxes on an office building Expenditure Cycle
q. Pay federal payroll taxes Human resources / Payroll Cycle
r. Sell a DVD player Revenue Cycle
s. Collect payments on customer accounts Revenue Cycle
t. Obtain a bank loan Financing Cycle
u. Pay sales commissions Human resources / Payroll Cycle
v. Send an order to a vendor Expenditure Cycle
w. Put purchased goods into the warehouse Expenditure Cycle

Copyright 2012 © Pearson Education, Inc. publishing as Prentice Hall 2-33

 Problem 2.2

 Ilustration :

 There are 4 major operating division in SDC

 Reports should provide a basis for measuring the return

on investment for each division.

 Asset account divide into 6 major categories, no more

than 10 control account with in each categories, and 100
subsidiary account are more than adequate for each
control account.

 No division has more than five major product groups, six

cost center within product groups, and 44 expense
accounts plus 12 specific variance accounts would be
adequate.

Copyright 2012 © Pearson Education, Inc. publishing as Prentice Hall 2-34

 Problem 2.2
 Solution

 Chart accounts design for SDC is six digit code (123456)

 1 (represents 4 division in SDC)

 2 (represents major accounts for each divisions such as asset,

liability, equity, revenue, and expense)

 3 (represents subcategories for balance sheet account and

product groups)

 4 (represents control accounts for balance sheet account and

cost center)

 56 (represents subsidiary accounts for control account and 44

expense accounts plus 12 specific variance accounts for cost
center)

Copyright 2012 © Pearson Education, Inc. publishing as Prentice Hall 2-35

 Problem 2.5
Term Definition
10 a. data processing cycle 1. Contains summary-level data for every asset, liability, equity, revenue, and expense
account

23 b. source documents 2. Items are numbered consecutively to account for all items; missing items cause a
gap in the numerical sequence

7 c. turnaround documents 3. 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

16 d. source data automation 4. List of general ledger account numbers; allow transaction data to be coded
classified, and entered into proper accounts; facilitates preparation of financial
statements and reports

1 e. general ledger 5. Contents of a specific field, such as “George” in a name field

13 f. subsidiary ledger 6. Portion of a data record that contains the data value for a particular attribute, like
a cell in spreadsheet

26 g. control account 7. Company data sent to an external party and then returned to the system as input

21 h. coding 8. Used to record infrequent or non routine transactions

2 i. sequence code 9. Characteristics of interest that need to be stored

25 j. block code 10. The steps a company must follow to efficiently and effectively process data about
its transactions

19 k. group code 11. Something about which information is stored

22 l. mnemonic code 12. Stores cumulative information about an organization; like a ledger in a manual AIS

4 m. chart of accounts 13. Contains detailed data for any general ledger account with many individual
subaccounts
2-36
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 Problem 2.5
Term Definition
8 n. general journal 14. Contains records of individual business transactions that occur during specific time
period

17 o. specialized journal 15. Updating each transaction as it occurs

3 p. audit trail 16. Devices that capture transaction data in machine-readable form at the time and
place of origin

11 q. entity 17. Used to record large numbers of repetitive transactions

9 r. attribute 18. Set of interrelated, centrally coordinated files

6 s. Field 19. Two or more subgroups of digits are used to code items

24 t. record 20. Updating done periodically such as daily

5 u. data value 21. Systematic assignment of numbers or letters to items to clasify and organize them

12 v. master file 22. Letters and numbers, derived from the item description, are interpersed to identify
items; usually easy to memorize

14 w. transaction file 23. Initial record of a transaction that takes place, usually recorded on preprinted
forms or formatted screens

18 x. database 24. Fields containing data about entity attributes; like a row in spreadsheet

20 y. batch processing 25. Sets of numbers are reserved for specific categories of data

15 z. online, real-time processing 26. The general ledger account corresponding to a subsidiary ledger, where the sum
of all subsidiary ledger entries should equal the amount in the general ledger account
2-37
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 Thank You

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