romney ch02

8/8/2019 Romney Ch02

1/119

2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart 1 of 119

C HAPTER 2

Overview of Business

Processes


2/119


INTRODUCTION

Questions to be addressed in this chapterinclude: What are the basic business processes in which an

organization engages?

What decisions must be made to undertake theseprocesses? What information is required to make those decisions?

What role does the data processing cycle play inorganizing business processes and providinginformation to users?

What is the role of the information system andenterprise resource planning in modernorganizations?


3/119


INFORMATION NEEDS AND

BUSINESS PROCESSES

Businesses engage in a variety of processes,including: Acquiring capital

Buying buildings and equipment

Hiring and training employees

Purchasing inventory

Doing advertising and marketing

Selling goods or services

Collecting payment from customers

Paying employees

Paying taxes

Paying vendors

Each activity

requires

different types

of decisions.


4/119



BUSINESS PROCESSES

Businesses engage in a variety of processes,including: Acquiring capital

Buying buildings and equipment

Hiring and training employees

Purchasing inventory

Doing advertising and marketing

Selling goods or services

Collecting payment from customers

Paying employees

Paying taxes

Paying vendors

Each decision

requires

different types

of information.


5/119


Types of information needed for decisions:

Some is financial

Some is nonfinancial

Some comes from internal sources

Some comes from external sources

An effective AIS needs to be able to

integrate information of different types andfrom different sources.


BUSINESS PROCESSES

By improving business processes leading to efficient

production, Toyota has become the largest automobile

manufacturer in the world, a title held by General Motors for

almost 100 years.


6/119


INTERACTION WITH EXTERNAL AND

INTERNAL PARTIES

The AIS interacts with external parties,such as customers, vendors, creditors,and governmental agencies.

AIS

External

Parties


7/119 2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart 7 of 119


INTERNAL PARTIES

The AIS also interacts with internal partiessuch as employees and management.

AIS

Internal

Parties

External

Parties




INTERNAL PARTIES

The interaction is typically two way, in thatthe AIS sends information to and receivesinformation from these parties.

AIS

Internal

Parties

External

Parties



A transaction is: An agreement between two entities to

exchange goods or services; OR

Any other event that can be measured ineconomic terms by an organization.

EXAMPLES:

Sell goods to customers Depreciate equipment

BUSINESS CYCLES


10/119 2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart 10 of

The business transaction cycle is aprocess that:

Begins with capturing data about atransaction.

Ends with an information output, such asfinancial statements.

BUSINESS CYCLES



Many business processes are paired ingive-get exchanges.

Basic exchanges can be grouped into five

major transaction cycles: Revenue cycle

Expenditure cycle

Production cycle Human resources/payroll cycle

Financing cycle

BUSINESS CYCLES




The basic exchanges can be grouped into

five major transaction cycles: Revenue cycle

Expenditure cycle


Financing cycle

BUSINESS CYCLES



The revenue cycle involves interactionswith your customers.

You sell goods or services and get cash.

REVENUE CYCLE

GiveGoods GetCash






Expenditure cycle


Financing cycle

BUSINESS CYCLES



The expenditure cycle involvesinteractions with your suppliers.

You buy goods or services and pay cash.

EXPENDITURE CYCLE

GiveCash GetGoods






Expenditure cycle


Financing cycle

BUSINESS CYCLES



In the production cycle, raw materials andlabor are transformed into finished goods.

PRODUCTION CYCLE

Give Raw

Materials &Labor

Get

FinishedGoods






Expenditure cycle


Financing cycle

BUSINESS CYCLES



The human resources cycle involvesinteractions with your employees.

Employees are hired, trained, paid,evaluated, promoted, and terminated.

HUMAN RESOURCES/

PAYROLL CYCLE

Give

Cash GetLabor






Expenditure cycle


Financing cycle

BUSINESS CYCLES



The financing cycle involves interactions withinvestors and creditors.

You raise capital (through stock or debt), repay

the capital, and pay a return on it (interest ordividends).

FINANCING CYCLE

Give

Cash Getcash



Thousands of transactions can occurwithin any of these cycles.

But there are relatively few types oftransactions in a cycle.

BUSINESS CYCLES



EXAMPLE: In the revenue cycle, the basicgive-get transaction is:

Give goods

Get cash

BUSINESS CYCLES



Other transactions in the revenue cycle include:

BUSINESS CYCLES

Handle customer inquiries

Take customer orders

Approve credit sales Check inventory availability

Initiate back orders

Pick and pack orders

Ship goods Bill customers

Update sales and Accts Rec.for sales

Receive customer payments Update Accts Rec. for

collections

Handle sales returns,discounts, and bad debts

Prepare management reports

Send info to other cyclesNote that the last activity in any

cycle is to send information to other

cycles.


25/119

2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart 25 of

Click on the buttons below if you wish tosee the transactions that occur in the othercycles:

BUSINESS CYCLES

Expenditure

Cycle

Human Res./

Payroll Cycle

Production

Cycle

Financing

Cycle


26/119


Transactions in the expenditure cycle:

BUSINESS CYCLES

MAJOR GIVE-GET:

Give cash; get goods or

services OTHER TRANSACTIONS

Requisition goods and services

Process purchase orders tovendors

Receive goods and services Store goods

Receive vendor invoices

Update accounts payable forpurchase

Approve invoices for payment Pay vendors

Update accounts payable forpayment

Handle purchase returns,

discounts, and allowances


Send info to other cycles

Back


27/119


Transactions in the HR/payroll cycle:

BUSINESS CYCLES

MAJOR GIVE-GET:

Give cash; get labor

OTHER TRANSACTIONS Recruit, hire, and train

employees

Evaluate and promoteemployees

Discharge employees

Update payroll records

Pay employees

Process timecard and

commission data Prepare and distribute

payroll

Calculate and disburse taxand benefit payments



Back


28/119


Transactions in the production cycle:

BUSINESS CYCLES

MAJOR GIVE-GET:

Give labor and raw materials;

Get finished goods OTHER TRANSACTIONS

Design products

Forecast, plan, and scheduleproduction

Requisition raw materials

Manufacture products

Store finished goods

Accumulate costs for

products Prepare management reports


Back


29/119


Transactions in the financing cycle:

BUSINESS CYCLES

MAJOR GIVE-GET:

Give cash; get cash

OTHER TRANSACTIONS Forecast cash needs

Sell securities to investors

Borrow money from lenders

Pay dividends to investorsand interest to lenders

Retire debt Prepare management reports


Back


30/119


Every transaction cycle: Relates to other cycles.

Interfaces with the general ledger and

reporting system, which generates informationfor management and external parties.

BUSINESS CYCLES

Finished Goods


31/119


General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./

Payroll CycleFinancing

Cycle

The Revenue Cycle Gets finished

goods from theproduction cycle.

Provides funds tothe financing cycle.

Provides data tothe general ledgerand reportingsystem.

Funds

Data


32/119


General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The ExpenditureCycle Gets funds from

the financing cycle. Provides raw

materials to the

production cycle. Provides data to

the general ledgerand reportingsystem.

Fund

s

Raw

Mats.

Da

ta

Finished Goods


33/119


General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The Production Cycle: Gets raw materials

from the expenditurecycle.

Gets labor from theHR/payroll cycle.

Provides finishedgoods to the revenuecycle.

Provides data to thegeneral ledger andreporting system.

Raw

Mats.

Data

Finished Goods

Labor


34/119


General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The HR/PayrollCycle: Gets funds from

the financing cycle

Provides labor to

the productioncycle.


Labor

Funds

Data


35/119


General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The FinancingCycle: Gets funds from

the revenue cycle.

Provides funds tothe expenditure

and HR/payrollcycles.


Funds

Data

Funds

Funds


36/119


General Ledger

and ReportingSystem

Revenue

Cycle

Expenditure

CycleProduction

Cycle

Human Res./


Cycle

The General Ledgerand Reporting System:

Gets data from all ofthe cycles.

Provides informationfor internal and

external users.

Information for

Internal & External Users

Da

taDa

ta

Data

Data

Data


37/119


Many accounting software packagesimplement the different transaction cyclesas separate modules.

Not every module is needed in everyorganization, e.g., retail companies dont havea production cycle.

Some companies may need extra modules. The implementation of each transaction cycle

can differ significantly across companies.

BUSINESS CYCLES


38/119


However the cycles are implemented, it iscritical that the AIS be able to:

Accommodate the information needs of

managers. Integrate financial and nonfinancial data.

BUSINESS CYCLES


39/119


Accountants play an important role in dataprocessing. They answer questions such as: What data should be entered and stored?

Who should be able to access the data? How should the data be organized, updated, stored,

accessed, and retrieved?

How can scheduled and unanticipated information

needs be met? To answer these questions, they must

understand data processing concepts.

TRANSACTION PROCESSING:

THE DATA PROCESSING CYCLE


40/119


An important function of the AIS is toefficiently and effectively process the dataabout a companys transactions.

In manualsystems, data is entered into paperjournals and ledgers.

In computer-basedsystems, the series of

operations performed on data is referred to asthe data processing cycle.




41/119


The data processing cycle consists of foursteps:

Data input

Data storage

Data processing

Information output




42/119



Data input

Data storage

Data processing

Information output




43/119


The first step in data processing is tocapture the data.

Usually triggered by a business activity.

Data is captured about:

The eventthat occurred.

The resources affected by the event.

The agents who participated.

DATA INPUT


44/119


A number of actions can be taken toimprove the accuracy and efficiency ofdata input:

Turnaround documents.

DATA INPUT

EXAMPLE: The stub on your telephone bill that you tear off andreturn with your check when you pay the bill.

The customer account number is coded on the document, usuallyin machine-readable form, which reduces the probability of human

error in applying the check to the correct account.


45/119



Turnaround documents.

Source data automation.

DATA INPUT

Capture data with minimal human intervention.

EXAMPLES: ATMs for banking.

Point-of-sale (POS) scanners in retail stores.

Automated gas pumps that accept your credit card.


46/119


47/119



Turnaround documents. Source data automation.

Well-designed source documents and dataentry screens.

Using pre-numbered documents or havingthe system automatically assignsequential numbers to transactions.

DATA INPUT

What does it mean if a document number is missing in thesequence?


48/119



Turnaround documents. Source data automation.

Well-designed source documents and dataentry screens.

Using pre-numbered documents or havingthe system automatically assignsequential numbers to transactions.

DATA INPUT

What does it mean if there are duplicate documentnumbers?


49/119


A number of actions can be taken to improve theaccuracy and efficiency of data input: Turnaround documents.

Source data automation. Well-designed source documents and data entry

screens.

Using pre-numbered documents or having the system

automatically assign sequential numbers totransactions.

Verify transactions.

DATA INPUT

EXAMPLE: Check for inventory availability beforecompleting an online sales transaction.


50/119



Data input

Data storageData storage

Data processing

Information output




51/119


Data needs to be organized for easy andefficient access.

Lets start with some vocabulary termswith respect to data storage.

DATA STORAGE


52/119


Ledger

DATA STORAGE

A ledgeris a file used to store cumulative

information about resources and agents. Wetypically use the word ledgerto describe the setof t-accounts. The t-account is where we keeptrack of the beginning balance, increases,

decreases, and ending balance for each asset,liability, owners equity, revenue, expense, gain,loss, and dividend account.


53/119


Ledger Following is an example of a ledger account

for accounts receivable:

DATA STORAGE

ACCOUNT: Accounts


54/119


Ledger

General ledger

DATA STORAGE

The general ledgeris the summary levelinformation for all accounts. Detail information isnot kept in this account.


55/119


Ledger

General ledger

DATA STORAGE

Example: Suppose XYZ Co. has threecustomers. Anthony Adams owes XYZ $100. BillBrown owes $200. And Cory Campbell owesXYZ $300. The balance in accounts receivable in

the general ledger will be $600, but you will notbe able to tell how much individual customersowe by looking at that account. The detail isntthere.


56/119


Ledger

General ledger

Subsidiary ledger

DATA STORAGE

The subsidiary ledgers contain the detailaccounts associated with the related generalledger account. The accounts receivable

subsidiary ledger will contain three separatet-accountsone for Anthony Adams, one for BillBrown, and one for Cory Campbell.


57/119


Ledger

General ledger

Subsidiary ledger

DATA STORAGE

The related general ledger account is oftencalled a control account.

The sum of the subsidiary account balancesshould equal the balance in the controlaccount.


58/119


59/119


Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

With sequence codes, items (such as checks or invoices) arenumbered consecutively to ensure no gaps in the sequence.

The numbering helps ensure that: All items are accounted for.

There are no duplicated numbers, which would suggest errors orfraud.


60/119


Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

When block codes are used, blocks of numbers within anumerical sequence are reserved for a particular category.

EXAMPLE: The first three digits of a Social Security numbermake up a block code that indicates the state in which the

Social Security number was issued:

001003 New Hampshire

004007 Maine

008009 Vermont


61/119


Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

When group codes are used, two or more subgroups ofdigits are used to code an item.

EXAMPLE: The code in the upper, right-hand corner of manychecks is a group code organized as follows:

Digits 12 Bank number

Digit 3 Federal Reserve District

Digits 47 Branch office of Federal Reserve

Digits 89 State


62/119


Ledger

General ledger

Subsidiary ledger

Coding techniques

DATA STORAGE

Group coding schemes are often used in assigning generalledger account numbers. The following guidelines should be

observed:

The code should be consistent with its intended use, so makesure you know what users need.

Provide enough digits to allow room for growth.

Keep it simple in order to:

Minimize costs

Facilitate memorization

Ensure employee acceptance

Make sure its consistent with:

The companys organization structure

Other divisions of the organization

The chart of accounts is a list of all general ledger accounts an organization uses.

Group coding is often used for these numbers e g :


63/119


Ledger

General ledger

Subsidiary ledger

Coding techniques

Chart of accounts

DATA STORAGEGroup coding is often used for these numbers, e.g.:

The first section identifies the major account categories, such as asset, liability,revenue, etc.

The second section identifies the primary sub-account, such as current asset or

long-term investment. The third section identifies the specific account, such as accounts receivable or

inventory.

The fourth section identifies the subsidiary account, e.g., the specific customercode for an account receivable.

The structure of this chart is an important AIS issue, as it must contain sufficient

detail to meet the organizations needs.


64/119


Ledger

General ledger

Subsidiary ledger

Coding techniques

Chart of accounts

DATA STORAGE Table 2-4 in your textbook contains the chart of accounts for

S&S. What is the account number for federal unemployment taxes

payable?

What is the account number for cost of goods sold?

What is the range of account numbers for expenses?

With this chart of accounts, can S&S easily distinguish the coststhey incur for automobile insurance from the costs for health

insurance?

In manual systems and some accounting packages, thefirst place that transactions are entered is the journal


65/119


Ledger

General ledger

Subsidiary ledger

Coding techniques

Chart of accounts

Journals

DATA STORAGEfirst place that transactions are entered is the journal.

A general journal is used to record:

Non-routine transactions, such as loan payments

Summaries of routine transactions

Adjusting entries Closing entries

A special journal is used to record routine transactions. Themost common special journals are:

Cash receipts

Cash disbursements Credit sales

Credit purchases


66/119


Ledger

General ledger

Subsidiary ledger

Coding techniques

Chart of accounts

Journals Audit trail

DATA STORAGE

An audit trail exists when there is sufficientdocumentation to allow the tracing of a

transaction from beginning to end or from the

end back to the beginning.

The inclusion of posting references anddocument numbers enable the tracing oftransactions through the journals and ledgers

and therefore facilitate the audit trail.


67/119


Now that weve learned some storageterminology, lets return to the datastorage process.

When transaction data is captured on asource document, the next step is torecord the data in a journal.

A journal entry is made for eachtransaction showing the accounts andamounts to be credited.

DATA STORAGE


68/119


If you took a principles of financial accounting class, youprobably worked with journals that looked something likethis:

DATA STORAGE

01/15/04 Accounts receivable 2,200

Sales revenue 2,200

01/18/04 Cash 1,800

Accounts receivable 1,800

01/21/04 Salaries expense 900

Cash 900


69/119


You may not have gotten much experience withspecial journals, but in most real-worldsituations, journal entries really work like this. Entries are originally made in the general journal only

for: Non-routine transactions

Summaries of routine transactions

Routine transactions are originally entered in specialjournals. The most common special journals are:

Credit sales

Cash receipts

Credit purchases

Cash disbursements

DATA STORAGE


70/119


Lets work through an example with aspecial journal. In this case well use thesales journal.

DATA STORAGE


71/119


On December 1, a sale is made to LeeCo. for $800. Lee Co. was sent InvoiceNo. 201.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account

Number Post Re f. Amount

12/01/04 201 Lee Co. 120-122 800.00

Sales Journal


72/119


The general ledger account number for accountsreceivable is No. 120. Lee Co. was about the 122ndcustomer, so their subsidiary account number is 120-122.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account

Number Post Re f. Amount

12/01/04 201 Lee Co. 120-122 800.00

Sales Journal


73/119


The next sale on December 1 was madeto May Co. for $700.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account

Number Post Ref. Amount

12/01/04 201 Lee Co. 120-122 800.00

12/01/04 202 May Co. 120-033 700.00

Sales Journal


74/119


The third and final sale on December 1was made to DLK Co. for $900.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account


12/01/04 201 Lee Co. 120-122 800.00

12/01/04 202 May Co. 120-033 700.00

12/01/04 203 DLK Co. 120-111 900.00

Sales Journal


75/119


Suppose the company making these sales poststransactions at the end of each day. Consequently,at days end, they will post each individualtransaction to the accounts receivable subsidiary

ledger: An $800 increase in accounts receivable (debit) will be

posted to Lee Co.s subsidiary account (120-122).

A $700 debit will be posted to May Co.s subsidiary

account (120-033).

A $900 debit will be posted to DLK Co.s subsidiaryaccount (120-111).

DATA STORAGE


76/119


Then a summary journal entry must be made tothe general journal. The sales for the period aretotaled. In this case, they add up to $2,400.

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account


12/01/04 201 Lee Co. 120-122 800.00

12/01/04 202 May Co. 120-033 700.00

12/01/04 203 DLK Co. 120-111 900.00

TOTAL 2,400.00

120/502

Sales Journal


77/119


The 120/502 that appears beneath the total indicatesthat a summary journal entry is made in the general

journal with a debit to accounts receivable (120) and acredit to sales (502).

DATA STORAGE

Page 5

Date

Invoice

Number

Account

Debited

Account


12/01/04 201 Lee Co. 120-122 800.00

12/01/04 202 May Co. 120-033 700.00

12/01/04 203 DLK Co. 120-111 900.00

TOTAL 2,400.00

120/502

Sales Journal


78/119


The entries in the general journal are periodically (orautomatically) posted to the general ledger. The $2,400debit to accounts receivable will be posted to theaccounts receivable control account, and the $2,400

credit will be posted to the general ledger account forsales.

DATA STORAGE

12/01/04 Accounts rece ivable 2,400

Sales revenue 2,400

12/01/04 Cash 1,800

Accounts receivable 1,800

12/01/04 Salaries expense 900

Cash 900


79/119


From time to time, the subsidiary accountbalances will be added up, and this sumwill be compared to the balance of the

control account. What does it mean if they arent equal?

DATA STORAGE


80/119


Review so far: When routine transactions occur, they are recorded in

special journals.

When non-routine transactions occur, they are recorded inthe generaljournal.

Periodically, the transactions in the special journal aretotaled, and a summary entry is made in the general journal.

The individual line items in the special journal are posted tothe subsidiary ledger accounts.

The items in the general journal are posted to the general

ledger. Periodically, the balances in the general ledger control

accounts are compared to the sums of the balances in therelated subsidiary accounts.

DATA STORAGE


81/119


Click the button below if you wish togo through a summary of theremaining steps in the accounting

cycle:

DATA STORAGE

See Remainder

Of

Accounting Cycle


82/119


The rest of the story: As transactions occur, they are

recorded in journals and then posted to

ledgers. But thats not the end of the story.

At the end of each accounting period,

we complete the process by carrying outthe following steps.

DATA STORAGE

S O G


83/119


Using the balances in the general ledger, prepare a trialbalance.

DATA STORAGE

Debit Credit

Cash 1,000

Accounts Receivable 250

Equipment 4,000

Accum. Deprec. 360Notes Payble 300

Common Stock 1,800

Retained Earnings 2,400

Sales Revenue 1,290

Salary expense 300

Rent expense 600

6,150 6,150

DATA STORAGE


84/119


Prepare the end-of-period adjusting entries. Record in journal

Post to ledger

Make an adjusted trial balance.

Using the numbers in the adjusted trial balance,prepare an income statement.

Prepare closing entries.

Prepare:

Statement of stockholders equity Balance sheet

Statement of cash flows

DATA STORAGE

COMPUTER-BASED STORAGE


85/119


Now lets move on to discussing somecomputer-based storage concepts, including: Entity

Attribute

Record Data Value

Field

File

Master File Transaction File

Database

COMPUTER BASED STORAGE

CONCEPTS



86/119


An entity is something about which informationis stored.

In your universitys student information system,one entity is the student. The student information

system stores information about students. What are some other entities in your student

information system?


CONCEPTS



87/119


Attributes are characteristics of interest withrespect to the entity.

Some attributes that a student informationsystem typically stores about the student entity

are: Student ID number

Phone number

Address

What are some other attributes about studentsthat a university might store?


CONCEPTS



88/119


A field is the physical space where an attribute isstored.

The space where the student ID number isstored is the student ID field.


CONCEPTS

Col. 19 Col. 1030 Col. 3140 Col. 4150

328469993 SIMPSON ALICE 4053721111328500732 ANDREWS BARRY 4057440236

529036409 FLANDERS CARLA 4057475863



89/119


A record is the set of attributes stored for aparticular instance of an entity.

The combination of attributes stored for BarryAndrews is Barrys record.


CONCEPTS

Col. 19 Col. 1030 Col. 3140 Col. 4150


529036409 FLANDERS CARLA 4057475863



90/119


A data value is the intersection of the row andcolumn.

The data value for Barry Andrews phonenumber is 405-744-0236.


CONCEPTS

Col. 19 Col. 1030 Col. 3140 Col. 4150


529036409 FLANDERS CARLA 4057475863



91/119


A file is a group of related records. The collection of records about all students at

the university might be called the student file. Ifthere were only three students and four

attributes stored for each student, the file mightappear as shown below:

CO U S S O G

CONCEPTS

Col. 19 Col. 1030 Col. 3140 Col. 4150


529036409 FLANDERS CARLA 4057475863


92/119



93/119


A transactionfile is a file that containsrecords of individual transactions (events)that occur during a fiscal period.

It is conceptually similar to a journal in amanual AIS in that: The files are temporary.

The files are usually maintained for one fiscal

period.

CONCEPTS



94/119


A database is a set of interrelated, centrally-coordinated files.

When files about students are integrated withfiles about classes and files about instructors,

we have a database.

CONCEPTS

Student

FileClass

File

Instructor

File



95/119



Data input

Data storage Data processingData processing

Information output


DATA PROCESSING


96/119


Once data about a business activity hasbeen collected and entered into a system,it must be processed.

DATA PROCESSING

DATA PROCESSING


97/119


There are four different types of fileprocessing: Updating data to record the occurrence of an

event, the resources affected by the event, andthe agents who participated, e.g., recording asale to a customer.

Changing data, e.g., a customer address.

Adding data, e.g., a new customer.

Deleting data, e.g., removing an old customerthat has not purchased anything in 5 years.

DATA PROCESSING

DATA PROCESSING


98/119


Updating can be done through severalapproaches: Batch processingBatch processing

DATA PROCESSING

DATA PROCESSING


99/119


Batch processing: Source documents are grouped into batches,

and control totals are calculated.

Periodically, the batches are entered into thecomputer system, edited, sorted, and storedin 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 errorreports, transaction reports, and control totals.

DATA PROCESSING

DATA PROCESSING


100/119


Updating can be done through severalapproaches: Batch processing

Online batch processingOnline batch processing

DATA PROCESSING

DATA PROCESSING


101/119


Online batch processing: Transactions are entered into a computer

system as they occur and stored in atemporary file.

Periodically, the temporary transaction file isrun against the master file to update themaster file.

The output is printed or displayed.

DATA PROCESSING

DATA PROCESSING


102/119



Online batch processing Online, real-time processingOnline, real-time processing

DATA PROCESSING

DATA PROCESSING


103/119


Online, real-time processing Transactions are entered into a computer

system as they occur.

The master file is immediately updated withthe data from the transaction.

Output is printed or displayed.

DATA PROCESSING

DATA PROCESSING


104/119



Online batch processing Online, real-time processing

If youre going through enrollment,which of these approaches would you

prefer that your university was using? Why?

DATA PROCESSING



105/119



Data input

Data storage Data processing

Information outputInformation output


INFORMATION OUTPUT


106/119


The final step in the information process isinformation output.

This output can be in the form of:

DocumentsDocuments

INFORMATION OUTPUT

Documents are records oftransactions or other company data.

EXAMPLE: Employee paychecks orpurchase orders for merchandise.

Documents generated at the end ofthe transaction processing activities

are known as operational documentsoperational documents(as opposed to source documents).

They can be printed or stored aselectronic images.

INFORMATION OUTPUT


107/119




Documents

ReportsReports

INFORMATION OUTPUT

Reports are used by employees tocontrol operational activities and by

managers to make decisions anddesign strategies.

They may be produced: On a regular basis

On an exception basis

On demand Organizations should periodicallyreassess whether each report isneeded.

INFORMATION OUTPUT


108/119




Documents

Reports

QueriesQueries

INFORMATION OUTPUT

Queries are user requests for specificpieces of information.

They may be requested: Periodically

One time

They can be displayed: On the monitor, called soft copy.

On the screen, called hard copy.

INFORMATION OUTPUT


109/119


Output can serve a variety of purposes: Financial statements can be provided to both

external and internal parties.

Some outputs are specifically for internal use: For planning purposesFor planning purposes

INFORMATION OUTPUT

Examples of outputs for planningpurposes include:

Budgets Budgets are an entitys formal expression of

goals in financial terms.

Sales forecasts

INFORMATION OUTPUT


110/119




Some outputs are specifically for internal use: For planning purposes

For management of day-to-day operationsFor management of day-to-day operations

INFORMATION OUTPUT

Example: Delivery schedules

INFORMATION OUTPUT


111/119





For management of day-to-day operations

For control purposesFor control purposes

INFORMATION OUTPUT Performance reports are outputs that are

used for control purposes.

These reports compare an organizationsstandard or expected performance withits actual outcomes.

Management by exception is an approach

to utilizing performance reports thatfocuses on investigating and acting ononly those variances that are significant.

INFORMATION OUTPUT


112/119





For management of day-to-day operations

For control purposes

For evaluation purposesFor evaluation purposes

INFORMATION OUTPUT

These outputs might include: Surveys of customer satisfaction.

Reports on employee error rates.

INFORMATION OUTPUT


113/119


Behavioral implications of managerialreports:

YOU GET WHAT YOU MEASURE!

INFORMATION OUTPUT

INFORMATION OUTPUT


114/119


Suppose an instructor wants to improve studentlearning. He decides to encourage better attendance by

grading students on attendance (i.e., measuring it). The result will be better student attendance, i.e., you

get what you measure. The improved attendance may or may not improve

learning outcomes. Students may be getting better grades when

attendance is measured, but not learning more.

Some students may in fact reduce their studyingbecause they believe they can use the attendancescore to boost their grade. This behavior would be adysfunctional result of the measurement.

INFORMATION OUTPUT

INFORMATION OUTPUT


115/119


Budgets can cause dysfunctional behavior. EXAMPLE: In order to stay within budget, the IT

department did not buy a security package for its

system.

A hacker broke in and devastated some of theirdata files.

Critical security measures were foregone in orderto meet budgetary goals.

The resulting costs far outweighed the savings.

INFORMATION OUTPUT


116/119

INFORMATION OUTPUT


117/119


The saying goes, Not many people sitaround and have a roast goose fall in their

lap.

In other words, if you want a roast goose,you have to aim.

With financial results, youre also unlikely toachieve when you dont aim.

Just be careful where you aim!

INFORMATION OUTPUT

ROLE OF THE AIS


118/119


The traditional AIS captured financial data. Non-financial data was captured in other,

sometimes-redundant systems

Enterprise resource planning (ERP) systemsare designed to integrate all aspects of a

companys operations (including both

financial and non-financial information) with

the traditional functions of an AIS.

ROLE OF THE AIS

SUMMARY


119/119

Weve learned about the basic business processesin which an organization engages, the decisions

that need to be made, and the information required

to make those decisions.

Weve reviewed the data processing cycle and itsrole in organizing business processes and

providing information to users.

Finally, weve touched on the role of the

information systems in modern organizations andintroduced the notion of enterprise resource

planning systems

SUMMARY