Chapter 2: Introduction To Transaction Processing Flashcards
Expenditure Cycle
Business activities begin with the acquisition of materials, property, and labor in exchange for cash
Purchases/Accounts Payable System
This system recognizes the need to acquire physical inventory and places an order with the vendor
Cash Disbursements System
When the obligation created in the purchases system becomes due, the cash disbursement system authorizes the payment, disburses the funds to the vendor, and records the transaction by reducing the cash and accounts payable accounts
Payroll System
The payroll system collects labor usage data for each employee, computes the payroll and disburses pay checks to the employees
Fixed Asset System
A firm’s fixed asset system processes transactions pertaining to the acquisition, maintenance, and disposal of its fixed assets. These are relatively permanent assets that collectively represents the organizations largest financial investment
Conversion Cycle
Is comprised of two major subsystems: the production system and the cost accounting system.
Production System
Involves the planning, scheduling, and control of the physical product through the manufacturing process
Cost Accounting System
Monitors the flow of cost information including labor, overhead, and raw materials related to production
Revenue Cycle
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, and recording the transaction
Cash Receipts
Some period of time passes between the point of sale and the receipt of cash. Cash receipt processing includes collecting cash, depositing cash, and recording these events in the accounts
Source Documents
Economic events result in the creation of some documents at the beginning of the transaction. These are used to capture and formalize transaction data that the transaction cycle uses for processing
Product Documents
Are the result of transactions processing rather than the triggering mechanism for the process.
Turnaround Documents
Are product documents of one system that become source documents for another system
Journal
Is a chronological record of a transaction. When all relevant facts of a transaction are known they are recorded in chronological order
Special Journals
Are used to record specific classes of transactions that occur in high volume. Are processed more efficiently than a general journal permits
Register
Is often used to denote certain types of special journals
General Journals
Used to record nonrecurring, infrequent, and dissimilar transactions.
Journal Voucher
Is a special source document that contains a single journal entry specifying the general ledger accounts that are affected
Ledger
Is a book of accounts that reflects the financial effects of the firm’s transactions after they are posted from the various journals. Show activity by account type
General Ledgers
Contain the firms account information in the form of highly summarized control accounts
Subsidiary Ledgers
Contain the details of the individual accounts that constitute a particular control account
Audit Trail
Accounting records provide a way of tracing account balances contained in the financial statements back to source documents and the economic events that created them
Master File
Contains account data. The general ledger and subsidiary ledger are examples of master files
Transaction File
Is a temporary file of transaction records used to update data in the master file. Ex. Sales orders and cash receipts
Reference File
Stores data that are used as standards for processing transactions. Ex. Invoices, employee rosters, price lists
Archive File
Contains records of past transactions that are retained for future reference and form an important part of the audit trail
Flat File Model
Describes an environment in which individual data files are not related to other files. End users in this environment own their data files rather than share them with other users
Data Storage
An efficient information system captures and stores data only once and makes this single source available to all users who need it
Data Updating
Organizations have a great deal of data stored in files that require periodic updating to reflect changes
Currency of Information
If update information is not properly disseminated the change will not be reflected in some of the users data resulting in decisions based on outdated information
Task Data Dependency
The users information set is constrained by the data that he or she possesses and controls. Users act independently rather than as members of a user community
Database Management System
Is a software system that permits users to access authorized data only. This system authorizes access based on the users level of authority
Data Flow Diagram
Uses symbols to represent the entities, processes, data flows, and data stores that pertain to a system
Entity Relationship Diagram
Is a documentation technique used to represent the relationship between business entities
Cardinality
The labeled connecting line represents the nature of the relationship between two entities such as one to one, one to many, or many to many
Data Model
Is the blueprint for what ultimately will become the physical database
System Flowchart
Is the graphical representation of the physical relationships among key elements of a system
Program Flowchart
Every program represented in a system flowchart should have a supporting program flowchart that describes its logic
Record Layout Diagrams
Used to reveal the internal structure of digital records in a flat file or database table. Usually shows the name, data type, and length of each attribute in the record
Batch Systems
Assemble transactions into groups for processing, a time lag will always exist between the point at which an economic event occurs and the point at which it is processed by the system and reflected in the firms accounts
Real Time Systems
Process transactions individually at the moment the event occurs therefore no time lags exist between occurrence and processing
Sequential Codes
Represent items in some sequential order. Common application is the pre numbering of source documents to track each transaction
Advantages of Sequential Codes
If the transaction processing system detect any gaps in the sequence of transaction numbers it alerts to the possibility of a missing or misplaced transaction
Disadvantages of Sequential Codes
Sequential codes carry no information content beyond their order in the sequence. Entering new information is also difficult
Block Code
Is a variation on sequential coding that partly remedies the disadvantages of sequential coding. This approach can be used to represent whole classes of items by restricting each class to a specific range within the coding scheme
Advantages of Block Codes
Allows for the insertion of new codes within a block without having to reorganize the entire coding structure
Disadvantages of Block Coding
The information content of block codes are not readily apparent
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
Advantages of Group Codes
They facilitate the representation of large amounts of diverse data. They allow complex data structures to be represented in a hierarchal form that is logical and more easily remembered by humans. They permit detailed analysis and reporting both within an item class and across different classes of items
Disadvantages of Group Codes
Group codes effectively present diverse information they tend to be overused. Unnecessary information can also be added to make group codes not interpretable
Alphabetic Codes
Are used for many of the same purposes as numeric codes. May be assigned sequentially or may be used in block or group coding
Advantages of Alphabetic Codes
Alphanumeric codes increases the number of codes possible
Disadvantages of Alphabetic Coding
There is difficulty rationalizing the meaning of codes that have been assigned and users tend to have difficulty sorting records that are coded alphabetically
Mnemonic Codes
Are alphabetic characters in the form of acronyms and other combinations that convey meaning
Advantages of Mnemonic Codes
Does not require the user to memorize the meaning of the code because the code conveys a high degree of information about the item being represented
Disadvantages of Mnemonic Codes
They have limited ability to represent items within a class. Ex. Accounts Receivable code is AR but does not say what is receivable
