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Chapter 2 Introduction to Transaction
Processing
A Financial Transaction is...
an economic event that afects the assets
and equities o the rm, is reected in its
accounts, and is measured in monetary
terms.
similar types o transactions are grouped
together into three transaction cycles:
the expenditure cycle,
the conversion cycle, and
the revenue cycle.
Relationship between Transaction
Cycles
Each Cycle has Two Subsystes
Expenditure Cycle: time lag beteen the
to due to credit relations ith suppliers:
physical coponent !acquisition
o goods"
!nancial coponent !cash
disbursements to the supplier" Conversion Cycle :
the production syste
!planning, scheduling, and control o
the physical product through the
manuacturing process"
the cost accounting syste
!monitors the o o cost inormation
related to production"
#evenue Cycle: time lag beteen the to
due to credit relations ith customers :
physical coponent !sales order
processing"
!nancial coponent !cash
receipts"
"anual Syste Accounting Records
Source #ocuents $ used to capture
and ormali%e transaction data needed or
transaction processing
Product #ocuents $ the result o
transaction processing
Turnaround #ocuents $ a product
document o one system that becomes a
source document or another system
$ournals $ a record o chronological entry
special %ournals $ specic classes
o transactions that occur in high
requency general %ournal $ nonrecurring
inrequent, and dissimilar transactions
&edger $ a boo& o nancial accounts
general ledger $ shos activity
or each account listed on the chart o
accounts
subsidiary ledger $ shos activity
by detail or each account type
Flow o' Econoic E(ents Into the
)eneral &edger
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Accounting Records in a Coputer*
+ased Syste
E,P&A-ATI- F STEPS I- FI)/RE:
0. Compare the '# balance in the balance
sheet ith the master le '# control account
balance.
2. #econcile the '# control gure ith the
'# subsidiary account total.
1. (elect a sample o update entries made to
accounts in the '# subsidiary ledger
and trace these to transactions in the sales
)ournal !archive le".
. *rom these )ournal entries, identiy source
documents that can be pulled rom their les
and veried. + necessary, conrm these
source documents by contacting the
customers.
Audit Trail
'ccountants should be able to trace in both
directions.
(ampling and conrmation are to common
techniques.
E3aple o' Tracing an Audit Trail
eriying 'ccounts #eceivable
Coputer*+ased Systes
-he audit trail is less observable in
computer$based systems than traditiona
manual systems.
-he data entry and computer programs
are the physical trail.
-he data are stored in magnetic les.
Coputer Files
"aster File $ generally contains account
data !e.g., general ledger and subsidiary
le"
Transaction File $ a temporary le
containing transactions since the last
update
Re'erence File $ contains relatively
constant inormation used in processing
!e.g., tax tables, customer addresses"
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Archi(e File $ contains past transactions
or reerence purposes
#ocuentation Techni4ues
ocumentation in a C/ environment is
necessary or many reasons.
*ive common documentation techniques:
Entity #elationship iagram
ata *lo iagrams
ocument *locharts
(ystem *locharts
0rogram *locharts
Entity Relationship #iagra 5ER#67
is a documentation technique to
represent the relationship 1 beteen
entities 2 in a system.
-he #E' model version o E# is idely
used in '+(. #E' uses 3 types o entities:
resources !cash, ra materials"
e(ents !release o ra materials
into the production process"
agents !inventory control cler&,
vendor, production or&er"
Cardinalities7
represents the numerical mapping
beteen entities:
one$to$one
one$to$many
many$to$many
Cardinalities
#ata Flow #iagras 5#F#67
use symbols to represent the processes
data sources, data os, and entities in a
system
represent the logical eleents o the
system
do not represent the physical syste
#ata Flow #iagra Sybols
#ocuents Flowcharts7
illustrate the relationship among
processes and the documents that o
beteen them
contain more details than data o
diagrams
clearly depict the separation o unctions
in a system
Sybol Set 'or #ocuent Flowcharts
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First Stages in Constructing #ocuent
Flowchart Showing Areas o' Acti(ity
Finished #ocuent Flowchart Showing
Areas o' Acti(ity
Syste Flowcharts7
are used to represent the relationship
beteen the &ey elements$$input sources
programs, and output products$$o
computer systems
depict the type o media being used
!paper, magnetic tape, magnetic dis&s
and terminals"
in practice, not much diference beteen
document and system ocharts
Systes Flowchart Sybols
First Stages in Constructing Syste
Flowchart Showing Areas o' Acti(ity
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Finished Syste Flowchart Showing All
Facts Translated into 8isual Sybols
Progra Flowcharts7
illustrate the logic used in programs
Progra Flowchart Sybols
"odern Systes (ersus &egacy Systes
4odern systems characteristics:
client$server based and process
transactions in real time
use relational database tables
have high degree o process
integration and data sharing
some are mainrame based and
use batch processing
(ome rms employ legacy systems or
certain aspects o their data processing.
'ccountants need to understand
legacy systems.
5egacy systems characteristics:
mainrame$based applications
batch oriented
early legacy systems use at les
or data storage
later legacy systems use
hierarchical and netor& databases
data storage systems promote a
single$user environment that
discourages inormation integration
/pdating "aster Files: Priary 9eys
5P96 and Secondary 9eys 5S96
#atabase +acup Procedures
• estructive updates leave no bac&up.
• -o preserve adequate records, bac&up
procedures must be implemented, as
shon belo:
-he master le being updated is
copied as a bac&up.
' recovery program uses the
bac&up to create a pre$update version
o the master le.
Coputer*+ased Accounting Systes
-o broad classes o systems:
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batch systems
real$time systems
+atch Processing
' batch is a group o similar transactions
that are accumulated over time and then
processed together.
-he transactions must be independent of
one another during the time period over
which the transactions are accumulated
in order or batch processing to be
appropriate.
' time lag exists beteen the event and
the processing.
+atch Processing;Se4uential File
Steps in +atch Processing;Se4uential
File
9eystroe $ source documents are
transcribed by cler&s to magnetic tape or
processing later
Edit Run $ identies clerical errors in the
batch and places them into an error le
Sort Run $ places the transaction le in
the same order as the master le using a
primary &ey
/pdate Run $ changes the value o
appropriate elds in the master le to
reect the transaction
+acup Procedure
- the original master
continues to exist and a ne master le is
created
Ad(antages o' +atch Processing
6rgani%ations can increase e<ciency
by grouping large numbers o
transactions into batches rather than
processing each event separately.
/atch processing pro(ides control over
the transaction process via contro
gures.
Real*Tie Systes7
process transactions indi(idually at
the moment the economic event occurs
have no tie lag beteen the economic
event and the processing
generally re4uire greater resources
than batch processing since they require
dedicated processing capacity7 hoever,
these cost diferentials are decreasing
otentimes have longer systes
de(elopent tie
=hy #o So "any AIS /se +atch
Processing>
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'+( processing is characteri%ed by high$
volume, independent transactions, such
are recording cash receipts chec&s
received in the mail.
-he processing o such high$volume
chec&s can be done during an of$pea&
computer time.
-his is one reason hy batch processing
maybe done using real$time data
collection.