overview of transaction processing and enterprise resource planning systems
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Copyright © 2015 Pearson Education, Inc.
Overview of Transaction Processing and Enterprise Resource Planning Systems
Chapter 2
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Learning Objectives• Describe the four parts of the data processing
cycle and the major activities in each. • Describe the ways information is stored in
computer-based information systems. • Discuss how organizations use enterprise
resource planning (ERP) systems to process transactions and provide information.
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Data Processing Cycle
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Data Input
Steps in Processing Input are:•Capture transaction data triggered by a
business activity (event).▫Information comes from source documents.
•Make sure captured data are accurate and complete.
•Ensure company policies are followed (e.g., approval of transaction).
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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)
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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.
▫General ledger▫Subsidiary ledgers (e.g., Accounts receivable)▫General journal▫Transaction/specialized journals (e.g., Sales)Note: With the above, one can trace the path of the transaction (audit trail).
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Audit trail for Invoice #156 for $1,876.50 sold to KDR Builders
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DATA STORAGE•General ledger
The general ledger is the summary level information for all accounts (asset, liability, equity, revenue, and expense). Detail information is not kept in this account.
A/P$100
0
A/R$600
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DATA STORAGE
•General ledgerExample: Suppose XYZ Co. has three customers. Anthony Adams owes XYZ $100. Bill Brown owes $200. And Cory Campbell owes XYZ $300. The balance in accounts receivable in the general ledger will be $600, but you will not be able to tell how much individual customers owe by looking at that account. The detail isn’t there.
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DATA STORAGE
•General ledger•Subsidiary ledger
The subsidiary ledgers contain the detail accounts associated with the related general ledger account. The accounts receivable subsidiary ledger will contain three separate t-accounts—one for Anthony Adams, one for Bill Brown, and one for Cory Campbell.
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DATA STORAGE
•General ledger•Subsidiary ledger
The related general ledger account is often called a “control” account.
The sum of the subsidiary account balances should equal the balance in the control account.
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DATA STORAGE•General ledger•Subsidiary
ledger▫Detailed data for a
General Ledger (Control) Account that has individual sub-accounts e.g.: Accounts Payable Accounts
Receivable
• Joe Smith $250
• Patti Jones $750
A/P$100
0
• ACME Inc.$150
• Jones, Inc $450
A/R$600
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Journals•General
▫Infrequent or specialized transactions▫Used to record:
Non-routine transactions, such as loan payments
Summaries of routine transactions Adjusting entries Closing entries
DATA STORAGE
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Journals•Specialized
▫Repetitive transactions E.g., sales transactions
▫Used to record routine transactions. ▫The most common special journals are:
Cash receipts Cash disbursements Credit sales Credit purchases
DATA STORAGE
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COMPUTER-BASED STORAGE CONCEPTS•Data is stored in master files or
transaction files.
•A master file is a file that stores cumulative information about an organization’s entities.
•It is conceptually similar to a ledger in a manual AIS in that:▫The file is permanent.▫The file exists across fiscal periods.▫Changes are made to the file to reflect the
effects of new transactions.
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COMPUTER-BASED STORAGE CONCEPTS•A transaction file is a file that contains
records of individual transactions (events) that occur during a fiscal period.
•It is conceptually similar to a journal in a manual AIS in that:▫The files are temporary.▫The files are usually maintained for one
fiscal period.
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COMPUTER-BASED STORAGE CONCEPTS• 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
Transaction File
Master before Update
Updated
Master File
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DATA PROCESSING•Batch processing:
▫Source documents are grouped into batches, and control totals are calculated.
▫Periodically, the batches are entered into the computer system, edited, sorted, and stored in a temporary file.
▫The temporary transaction file is run against the master file to update the master file.
▫Output is printed or displayed, along with error reports, transaction reports, and control totals.
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DATA PROCESSING•Online, batch processing:
▫Transactions are entered into a computer system as they occur and stored in a temporary file.
▫Periodically, the temporary transaction file is run against the master file to update the master file.
▫The output is printed or displayed.
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DATA PROCESSING•Online, real-time processing
▫Transactions are entered into a computer system as they occur.
▫The master file is immediately updated with the data from the transaction.
▫Output is printed or displayed.
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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., What division had the most sales for the month?)
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Enterprise Resource Planning (ERP) Systems
•Integrates activities from the entire organization ▫Production▫Payroll▫Sales ▫Purchasing▫Financial Reporting
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Advantages of ERP System
• Integrated enterprise-wide allowing for better flow of the information as it’s stored in a centralized database and can be accessed by various departments which also improves customer service.
• 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)
• Improve access of control of the data through security settings
• Standardization of procedures and reports
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Disadvantages of ERP System
•Costly•Significant amount of time to implement•Changes to an organization’s existing
business processes can be disruptive•Complex•User resistance (learning new things is
sometimes hard for employees)
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