Assignment

In a yellow paper, record your current/previous weeks

Activities and
Financial transactions

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

Food 250 300 xx xx xx xx xx

Fare xx xx xx xx xx xx xx
Books
TOTAL
Transaction Processing
System
TOPIC 2
Hall, Romney (Chapter 2)
Transaction Processing System

2-3
Transaction Processing System

2-4
Transaction Processing System
Assignment

A. Data Gathering/Data Collection

B. Data Processing
C. Data Storage/ Database Management
D. Information Generation
A. Data Gathering/Data Collection
What are the important things to consider in
data collection?
What are the documents that help in
facilitating data gathering?
Are there modern ways on gathering data?
What is the data gathering mechanism for
accounting?
 What are the
important things to
consider in data
collection?
A. Data Gathering/Data Collection

Accuracy Completeness

1-8
 What are the
documents that help
in facilitating data
gathering?
Are there modern
ways on gathering
data?
Data Capture
Information collected for an activity includes:
Activity of interest (e.g., sale)
Resources affected (e.g., inventory and cash)
People who participated (e.g., customer and
employee)
Information comes from source documents.

2-11
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)

2-12
What is the data
gathering
mechanism for
accounting?
Source Documents
Journals are chronological records of
transactions.
Special journals are used to record specific
classes of transactions that occur in high
frequency.
General journal is used to record nonrecurring,
infrequent, and dissimilar transactions.

2-16
B. Data Processing

Manual Processing
Different Digital Processes
Different Digital Processing Models
Manual Processing
Manual Processing

According to James Hall, the

mere fact that you have classified,
summarized, discriminated, etc.,
any data, means that you have
already processed them.
2-22
Different Digital
Processes
Digital Data Processing
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).

2-24
 Different Digital
Processing Models
Digital Processing Models

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).

2-26
TP Models: Batch vs. Real-Time
Information time frame:
Batch systems assemble transactions in groups,
resulting in a time lag.
Real-time systems process transactions individually
as they occur with no time lag.
Resources:
Generally fewer required with a batch system.

27
TP Models: Batch vs. Real-Time
Updating master files from transactions:
Involves changing the value of one or more variable fields to
reflect the effects of a transaction (batch and real-time).
Master file backup is a standard procedure to maintain
file integrity in the event that:
An update program error corrupts the master file being
updated.
Undetected transaction errors result in corrupted balances.
A disaster physically destroys current master files.

28
TP Models: Batch vs. Real-Time
Operational efficiency:
Batch processing of noncritical accounts eliminates
unnecessary activities at critical points in the
process.
Designer must consider the trade-off between
efficiency and effectiveness.

29
TP Models: Batch vs. Real-Time
Batch processing using real-time data collection:
Popular approach that captures and processes some
aspects of a transaction when in occurs and other
aspects in batch mode.
Real-time systems process entire transactions as
they occur.

30
Transaction Processing Models

31
Transaction Processing Models

32
C. Data Storage/ Database Management

Manual Accounting Storage

File Structures
Various Digital Files
Data Coding
 Manual
Accounting
Storage
Accounting Records: Manual Systems
Ledger is a book of accounts that reflects the
financial effects of a firms transactions as they are
posted from the various journals.
General ledgers contain account information in
highly summarized control accounts.
Subsidiary ledgers contain details for each 0f the
individual accounts that constitute a particular
control account.

35
Accounting Records: Manual Systems
Together the accounting records provide an audit
trail for tracing account balances contained in the
financial statements back to the source
documents and events that created them.
Important in the conduct of a financial audit.

36
Accounting Records: Manual Systems

37
Accounting Records: Manual Systems

38
Accounting Records: Manual Systems

39
Accounting Records: Manual Systems

40
File Structures
 File Structures

Flat-File Database
Model Model
The Flat-File Model
The flat-file model describes an environment where individual
data files are not related to other files. Leads to three significant
data redundancy problems:
Data Storage:
Organizations must incur the costs of multiple collection and
storage procedures.
Data Updating:
Changes or additions must be performed multiple times which adds
significantly to the task and cost of data management.
Currency of Information:
If update information is not properly disseminated, changes will not
be reflected in some users data, resulting in decisions based on
outdated information. 43
The Flat-File Model
Other problems with the flat-file approach:
Task-Data Dependency:
Users information set is constrained by the data user
possess and controls. This leads to the inability to obtain
additional information as needs change.
Data Integration:
Separate files are difficult to integrate across multiple
users.

44
The Flat-File
Model

45
The Database Model
A database is a set of computer files that minimizes
data redundancy and is accessed by one or more
application programs for data processing.
The database approach to data storage applies whenever
a database is established to serve two or more
applications, organizational units, or types of users.
A database management system (DBMS) is a
computer program that enables users to create,
modify, and utilize database information efficiently.
46
The Database Model
Solves the following problems of the flat file
approach
no data redundancy - except for primary keys,
data is only stored once
single update
current values
task-data independence - users have access
to the full domain of data available to the firm
47
The Database Model

48
Various Digital Files
Digital Accounting Records
Master file contains account data.
Transaction file is a temporary file of transaction records used
to update data in a master file.
Reference file stores data that are use as standards for
processing transactions.
Archive file contains records of past transactions retained for
future reference
Form an important part of the audit trail.
Digit record audit trails are less observable than those between
hard-copy documents, but they still exist.
50
Digital
Accounting
Records

51
C. Data Storage/ Database Management

Manual Accounting Storage

File Structures
Various Digital Files
Data Coding
Data Coding
Data Coding Schemes
Involves creating simple codes to facilitate efficient data
processing.
Business organizations process large volumes of transactions
with similar basic attributes.
Uncoded entries require extensive recording space, are time consuming
to record and are error prone.
Advantages of data coding in AIS:
Concisely represents large amounts of complex information that would
otherwise be unmanageable.
Provides accountability over transaction completeness.
Identifies unique transactions and accounts within a file
Supports the audit function by providing an effective audit trail.
54
Data Coding Schemes
As the name implies, sequential codes represent items
in some sequential order (ascending or descending).
A common application of numeric sequential codes is the
prenumbering of source documents.
Sequential coding supports the reconciliation of a batch of
transactions, such as sales orders, at the end of processing.
However, sequential codes carry no information content
beyond their order in the sequence.
Also, sequential coding schemes are difficult to change.

55
Data Coding Schemes
A numeric block code is a variation on sequential
coding that partly remedies its disadvantages.
This approach can be used to represent whole classes of items by
restricting each class to a specific range within the coding scheme
A common application of block coding is the construction of a
chart of accounts
Block coding allows for the insertion of new codes within a block
without having to reorganize the entire coding structure
As with the sequential codes, the information content of the block
code is not readily apparent

56
Data
Coding
Schemes

57
Data Coding Schemes
Numeric group codes are used to represent complex items or events
involving two or more pieces of related data.
Zones or fields have specific meanings.
For example, a coding scheme for tracking sales might be 04-09-
476214-99, meaning:
Store Number Dept. Number Item Number Salesperson
04 09 476214 99

Facilitates representation of large amounts of diverse data.

Allows complex data to be logically represented.
Permits detailed analysis and reporting.
Disadvantages are overuse which can increase costs and linking of
unrelated data.
58
Data Coding Schemes
Alphabetic codes are used for many of the same purposes as
numeric codes.
May use sequential, block or group coding techniques.
Dramatically increases the capacity to represent large numbers of items.
Disadvantages are it is difficult to rationalize the meaning of the codes
and they tend to be difficult for users to sort.
Mnemonic codes are alphabetic character acronyms and other
combinations that convey meaning.
Common application is the two code state abbreviations or college
course coding (in combination with numeric codes).
Codes convey a high degree of information.
Disadvantage is limited ability to represent items within a class.
59
D. Information Generation

Types of Output
Audit Trail
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?)

2-61
Audit Trail - Manual
The accounting records described previously
provide an audit trail for tracing transactions
from source documents to the financial
statements.
Of the many purposes of the audit trail, most
important to accountants is the year-end audit.

2-62
Audit Trail - Computerized
Digit record audit trails are less observable than
those between hard-copy documents, but they
still exist.

2-63
Audit Trail

64