Transcript Objectives for Chapter 2 - University of Texas at El Paso

Chapter 2
Introduction
to
Transaction
Processing
COPYRIGHT © 2007 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo,
and South-Western are trademarks used herein under license
1
Objectives for Chapter 2
Broad objectives of transaction cycles
Types of transactions processed by each of the
three transaction cycles
The basic accounting records used in TPS
The traditional accounting records and their
magnetic equivalents
Documentation techniques
Batch and real-time processing and the impact
of these technologies on transaction processing
2
Cycles
Revenue Cycle
Expenditure Cycle
Conversion Cycle
3
SubCycles
 Revenue Cycle: time lag between sub-cycles due to credit relations with
customers :
 physical component (sales to customers)
 financial component (cash receipts from customers)
 Expenditure Cycle: time lag between sub-cycles due to credit relations
with suppliers:
 physical component (acquisition of goods from suppliers)
 financial component (cash disbursements to suppliers)
 Conversion Cycle :
 production system (planning, scheduling, and control of physical
product through manufacturing process)
 cost accounting system (monitors flow of cost information related to
production)
4
Manual System Accounting
Records
Documents:
Source - used to capture and formalize
transaction data needed for transaction
processing (ex: Customer PO)
Product - result of transaction processing
(ex: check)
Turnaround - product document of one
system that becomes source document for
another system (ex: remittance advice)
5
Manual System Accounting
Records (continued)
Journals - record of chronological entry
special journals - specific classes of transactions
that occur in high frequency (ex: sales journal)
general journal - nonrecurring, infrequent, and
dissimilar transactions
Ledger - book of financial accounts
general ledger - shows activity for each account
listed on chart of accounts
subsidiary ledger - shows activity by detail for each
account type (ex: A/R sub. ledger)
6
Audit Trail
(manual)
Source
Document
Journal
General
Ledger
Source
Document
Journal
General
Ledger
Financial
Statements
Financial
Statements
7
Computer-Based Systems
(CBIS)
Audit trail is less observable in computerbased systems than traditional manual
systems.
Data entry and computer programs are
physical trail.
Data are stored in magnetic files.
8
Computer Files
Master File - generally contains cumulative
account data (e.g., general ledger and
subsidiary ledgers)
Transaction File - temporary file containing
transactions since last update (journals)
Reference File - contains relatively constant
information used in processing (e.g., tax
tables, service fees)
Archive File - contains past transactions for
reference purposes (History)
9
Documentation
Techniques
 Five common documentation
techniques:
1.
2.
3.
4.
5.
6.
Entity Relationship Diagram
Data Flow Diagrams
Document Flowcharts
System Flowcharts
Program Flowcharts
Record Layout Diagrams
10
Documentation
Techniques
 Three documentation techniques
we study this semester:
1. Entity Relationship Diagram
2. Document Flowcharts
3. System Flowcharts
11
Entity Relationship
Diagram (ERD)
A documentation technique to represent
relationship between entities in system.
12
Cardinality
represents the
numerical mapping
between entities:
one-to-one
one-to-many
many-to-many
13
Examples of Cardinalities
Entity
Car
Relationship
1
is assigned
Customer
Company A
Entity
1
Salesperson
Examples of Cardinalities
Entity
Relationship
1
Car
Entity
M
is assigned
Salesperson
Company B
Customer
Examples of Cardinalities
Entity
Relationship
1
Customer
places
Entity
M
Order
16
Examples of Cardinalities
Entity
Vendor
Relationship
M
supplies
Entity
M
Inventory
17
Flowcharts
18
Keys to successful document
flowcharting
Create logical functions (usually
departments)
Symbol sizes are standardized
Most are same size; a few are smaller (on
page & off page connectors; file-blue symbols
on previous slide)
Drag documents along!! (Copy/paste)
Don’t violate “sandwich rule”
Very few shortcuts
19
Document Flowcharts
illustrate relationship among processes
and documents that flow between them
clearly depict separation of functions in
system
20
System Flowcharts
used to represent relationship between key
elements--input sources, programs, and output
products--of computer systems
depict type of media being used (paper,
magnetic disks, and terminals)
some symbols same in both document and
system flowcharts
21
Databases
22
Data Hierarchy for
Physical Database
Example from Revenue Cycle
Database
File (Accounts Receivable)
Record (Customer)
0
1
Field (Name, Address, Balance, etc.)
Bit - magnetically encoded (1,0)
23
Modern Systems versus Legacy
Systems
 Modern systems characteristics:
client-server based and process transactions in real time
use relational database tables
have high degree of process integration and data sharing
some are mainframe based and use batch processing
 Some firms still employ legacy systems for certain aspects of data
processing; therefore accountants need to understand legacy
systems.
 Legacy systems characteristics:
mainframe-based applications
batch oriented
early legacy systems use flat files for data storage
later legacy systems use hierarchical and network databases
data storage systems promote a single-user environment that
discourages information integration
24
Data Structures
allow records to be located, stored,
retrieved and allow movement through
database. Two components:
organization of file is physical arrangement
of records (how they are stored)
access method is technique used to locate
records and to navigate through database or
file (how they are retrieved)
25
Sequential Access Structure
All records lie in contiguous storage
spaces in specified sequence arranged
by primary key.
Data retrieval requires that all records
before desired record must be read in
order first.
Cannot directly access record.
26
Direct Access Structures
Records are stored at unique
locations known as addresses.
Address tells operating system exact
location of record on disk.
Allows access to record without going
through all preceding records.
27
Database Backup Procedures
• Destructive updates leave no backup.
• To preserve adequate records, backup procedures must be
implemented, as shown below:
 The master file being updated is copied as a backup.
 A recovery program uses the backup to create a pre-update
version of the master file.
28
CBIS
Two broad classes of systems:
Batch systems
Real-time systems
29
Batch Processing
A batch is group of similar transactions that are
accumulated over time and processed together.
 Time lag between event and processing.
30
Advantages of Batch
Processing
Organizations can increase efficiency
by grouping similar transactions into
batches rather than processing each event
separately.
Batch processing provides control over
transaction process via control figures.
Although-tradeoff between batch size and
errors.
31
Real-Time Systems
process transactions individually at moment
economic event occurs
no time lag between economic event and
processing
generally require greater resources than
batch processing because they require dedicated
processing capacity; (however, these cost
differentials are decreasing)
oftentimes have longer systems
development time (for internally developed
systems)
32
Why Do So Many AISs Use
Batch Processing?
Much AIS processing characterized by highvolume, independent transactions:
recording cash receipts checks received in mail
Payroll
Processing of such high-volume can be done
during an off-peak computer time
(overnight).
33
34