OVERVIEW OF

BUSINESS PROCESSES
Maica Bien Q. Balonso
Mikylla Q. Ebelte
Alyzza E. Lemque
Russel John G. Mary
John Paul R. Quinsay
Yasmine Jade E. Soriano

GROUP 1
BUSINESS PROCESS AND EVENTS
TRANSACTION
 Agreement between two entities to exchange goods or services.
 Any other event that can be measured in economic terms by an
organization.

BUSINESS PROCESS
 Is a set of related , coordinated, and structure activities and tasks
that are performed by a person, a computer or a machine.
FIVE MAJOR BUSINESS PROCESS
REVENUE CYCLE
Where goods and services are sold for
cash or a future promise to receive
cash. PRODUCTION OR CONVENTION
EXPENDITURE CYCLE CYCLE CYCLE

Where companies purchase where raw materials are

inventory for resale or raw transformed into finished goods.
materials to use in producing
HUMAN
products in exchange for cash
RESOURCES/PAYROLL CYCLE
or a future promise to pay
cash.FINANCING CYCLE
Where employees are hired,
Where companies sell shares in trained, compensated,
the company to investors and evaluated, promoted, and
borrow money and where terminated.
investors are paid dividends and
 IDENTIFYING EVENTS IN BUSINESS
PROCESS
A financial transaction is an economic event
that affects the assets and equities of the
firm, is
reflected in its accounts, and is measured in
monetary terms.
 THE EXPENDITURE CYCLE
Business activities begin with the acquisition of materials, property, and labor in exchange for cash in the
expenditure cycle.Most expenditure transactions are based on a credit relationship between the trading
parties. The actual disbursement of cash takes place at some point after the receipt of the goods or
services.

Thus, from a systems perspective, this transaction has two parts:

 physical component (the acquisition of the goods)

 financial component (the cash disbursement to the supplier).

Major subsystems of the expenditure cycle

 Purchases/accounts payable system

 Cash disbursements system

 Payroll system

 Fixed asset system

 THE CONVERSION CYCLE

The conversion cycle is composed of two major subsystems: the production system and
the cost
accounting system.

 The production system: involves the planning, scheduling, and control of the physical
product through the manufacturing process.

 The cost accounting system: monitors the flow of cost information related to productio
The information this system produces is used for inventory valuation, budgeting, cost
control,
performance reporting, and management decisions, such as make-or-buy decisions.
 THE REVENUE CYCLE

Firms sell their finished goods to customers through the revenue cycle, which involves
processing
cash sales, credit sales, and the receipt of cash following a credit sale

 Sales order processing: The majority of business sales are made on credit and involve
tasks such as preparing sales orders, granting credit, shipping products (or rendering
a service) to
the customer, billing customers, and recording the transaction in the accounts (accounts
receivable, inventory, expenses, and sales).

 Cash receipts: For credit sales, some period of time (days or weeks) passes between t
point
of sale and the receipt of cash.
FIGURE 2.1. RELATIONSHIP BETWEEN TRANSACTION CYCLE
ORGANIZATION DATA IN AIS:THE
DATA (TRANSACTION) PROCESSING
CYCLE
Accountants and other system users play a
significant role in the data processing cycle
.

Next slide
One important AIS function is to process company
transactions efficiently and effectively. In manual
(non-computer-based) systems, data are entered
into journals and ledgers maintained on paper. In
computer-based systems, data are entered into
computers and stored in files and data
bases. The operations performed on data to
generate meaningful and relevant information are
referred to collectively as the data processing cycle.
 DATA INPUT
The first step in processing input is to capture
transaction data and enter them into the system.

Three (3) facets of each business activity:

1) Each activity of interest
2) The resource(s) affected by each activity
3) The people who participate in each activity
Companies may find it useful to collect the following data
about a 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
Historically, most businesses used paper source documents to collect
data about their business activities.
 Paper Source Documents - is use to capture and formalize transaction data
needed for transaction processing.

 Turn around documents are company output sent to an external party, who
often adds data to the document, and then are returned to the company as an
input document.

 Source data automation devices capture transaction data in machine readable

form at the time and place of their origin.

The second step in processing input is to make sure captured data are accurate
and complete.

The third step in processing input is to make sure company policies are followed,
such as approving or verifying a transaction.
 DATA STORAGE
Accountants need to understand
how data are organized and stored
in an AIS and how they can be
accessed. In essence, they need to
know how to manage data for
maximum corporate use.
 CODING TECHNIQUES
Coding is the systematic assignment
of numbers or letters to items to
classify and organize them.
USING CODING IN AIS
 Concisely represents large amount of complex
information that would otherwise be
unmanageable

 Provide a means of accountability over the

completeness of the transactions process

 Identify unique transaction and accounts within a file

 Support the audit function by providing an effective

audit trail
SEQUENTIAL CODES
 Represent items in sequential order

 Used to prenumber source documents

 Track each transaction processed

 Identify any out-of-sequence documents

Disadvantages:
 arbitrary information
 hard to make changes and insertions
BLOCK CODES
 Represent whole classes by assigning each class a specific
range within the coding scheme

 Used for chart of accounts

 The basis of the general ledger

 Allows for the easy insertion of new codes within a block

 Don't have to reorganize the coding structure

Disadvantage:

 arbitrary information
Group Codes
Numeric group codes are used to represent complex
items or events involving two or more pieces of
related data. The code consists of zones or fields that
possess specific meaning. For example, a
department store chain might code sales order
transactions from its branch stores as follows:
Mnemonic Codes
Mnemonic codes are alphabetic characters in the
form of acronyms and other combinations that
convey meaning..
 CHARTS OF
ACCOUNTS
A chart of accounts is a list of all the accounts used by a
company to record its financial transactions. It serves as a
systematic way to organize and categorize different types of
financial activities, such as assets, liabilities, equity, revenue,
and expenses.
CHARTS OF
ACCOUNTS
 AUDIT TRIAL
An audit trail is a traceable path of a 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.
 DATA PROCESSING
Once business activity data have been entered into the system,
they must be processed to keep the databases current. The four
different types of data processing activities, referred to as CRUD,
are as follows:

2. Reading (R)
•Retrieving or viewing
existing data.
Example: Accessing customer
details from the sales
1. Creating (C) database.
• Adding new data records. 3. Updating (U)
Example: Adding a newly hired •Modifying previously
employee to the payroll database. stored data.
Example: Updating an
4. Deleting (D) accounts receivable record
•Removing data, such as purging with a sales transaction.
obsolete records.
Example: Purging the vendor
master
BATCH VS. REAL – TIME PROCESSING
A. Batch Processing
Definition:
 Updating done periodically, like daily,
processing transactions as a single batch.
Characteristics:
 Accumulation of transactions over time.
 Cheaper and more efficient.
Applications:
 Suitable for processes with infrequent
updates (e.g., payroll).
Example:
 A store updating sales records daily after
B. Real-Time Processing (OLTP)
Definition:
 Immediate processing of transactions as they
occur.
Characteristics:
 Ensures current and accurate data.
 Allows correction of input errors in real time.
 Provides competitive advantages.
Applications:
 Ideal for systems requiring up-to-the-minute
information (e.g., airline reservations, stock
market).
Examples:
 Airline ticket reservations where bookings and
changes are made instantly.
FINAL STEP: INFORMATION OUTOUT

SOFT COPY VS. HARD COPY

 Information displayed on a monitor is a “soft copy,” while
printed information is a “hard copy.”
Forms of Presentation:
 Presented as a document, a report, or a query response.
A. Documents
Definition:
 Records of transactions or company data.
Usage:
 Some transmitted externally (e.g., checks, invoices), others
used internally (e.g., receiving reports).
Storage:
 Can be printed or stored electronically (e.g., Toys ‘Rʼ Us using
electronic data interchange).
B. Reports
Purpose:
 Control operational activities for employees, aid managers in
decision-making and business strategies.
 External use for evaluating profitability, creditworthiness, or
regulatory compliance.
Types:
 Regular reports (e.g., financial statements, sales analyses) and
exception reports highlighting unusual conditions.
Production:
 Regular basis or on-demand (e.g., identifying top salesperson
during a specific promotional period).
Assessment of Report Needs
 Importance:
 Periodic assessment crucial to avoid waste of time, money, and
resources.
Examples of companies reducing excessive reports for efficiency
C. Database Query
Purpose:
 Provides information for immediate action
or answers.
Process:
 User requests specific information,
retrieved, displayed, or analyzed
accordingly.
 Repetitive queries by information systems
specialists, one-time queries by users.
Examples:
 Companies like Wal-Mart allowing suppliers
database access for better product
TYPES OF 01
THE MANUAL PROCESS
MODEL

FILES AND
DATA 02
COMPUTER – BASED
SYSTEM
 THE MANUAL PROCESS MODEL
The manual process model is the oldest and most traditional form of
accounting systems. Manual systems constitute the physical events,
resources, and personnel that characterize many business processes.
This includes such tasks as order-taking, warehousing materials,
manufacturing goods for sale, shipping goods to customers, and
placing orders with vendors.
A. DOCUMENT
A document provides evidence of an economic event and may be used
to initiate transaction processing.

TYPES OF DOCUMENT

 Source Documents: Source documents are used to capture and

formalize transaction data that the transaction cycle needs for
processing.
 Product Documents: Product documents are the result of
transaction processing rather than the triggering mechanism for
the process.
 Turnaround Documents: Turnaround documents are product
 B. JOURNALS
A journal is a record of a chronological entry. Documents are the primary
source of data for journals. The journal holds a complete record of transactions
and thus provides a means for posting to accounts.

TWO PRIMARY TYPES OF JOURNALS

 Special Journals
Special journals are used to record specific classes of transactions
that occur in high volume.
 General Journals
General Journals are used to record nonrecurring, infrequent, and
dissimilar transactions.
 C. LEDGER
A ledger is a book of accounts that reflects the financial
effects of the firm's transactions after they are posted from the
various journals. A ledger indicates the increases, decreases, and
current balance of each account. Organizations use this information to
prepare financial statements, support daily operations, and prepare
internal reports.
TWO BASIC TYPES OF LEDGER
 General Ledger
The general ledger summarizes the activity for each of the organization's
accounts. This highly summarized information is sufficient for financial reporting,
but it is not useful for supporting daily business operations.

 Subsidiary Ledger
Subsidiary ledgers are kept in various accounting departments of the firm,
including inventory, accounts payable, payroll, and accounts receivable. This
separation provides better control and support of operations.
 AUDIT TRIAL
Generally, 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. COMPUTER – BASED SYSTEM
A. Master File
A master file generally contains account data.

B. Transaction File
A transaction file is a temporary file of transaction records used to change or update data in a
master file.

C. Reference File
A reference file stores data that are used as standards for processing transactions.

D. Archive File
An archive file contains records of past transactions that are retained for future reference.
These transactions form an important part of the audit trail.
Thank You