PPT 2 Flashcards
an agreement between two entities to exchange goods or services or any other event that can be measured in economic terms by an organization.
transaction
It is a business event that has a monetary impact on an entity’s financial statements, and is recorded as an entry in its accounting records.
transaction
an information processing system for business transactions involving the collection, modification and retrieval of all transaction data.
Transaction Processing System
3 TYPES OF TRANSACTION CYCLES
- EXPENDITURE CYCLE
- CONVERSION CYCLE
- REVENUE CYCLE
Business activities begin with the acquisition
of materials, property, and labor in exchange for cash.
Expenditure Cycle
Expenditure Cycle Sub-systems:
- Purchases/ Accounts Payable (AP)
System - Cash Disbursements System
- Payroll System
- Fixed Asset System
Transforms (converts) input resources, such as raw materials, labor, and overhead, into finished products or services for sale. It exists conceptually in all organizations, including those in service and retail industries.
Conversion Cycle
Conversion Cycle Sub-systems:
- Production System
- Cost Accounting System
Involves processing cash sales, credit sales, and the receipt of cash following a credit sale. _______ transactions also have a physical and a financial component, which are processed separately.
Revenue Cycle
Revenue Cycle Sub-systems:
- Sales Order Processing System
- Cash Receipts
These are the original source documents, journal entries, and ledgers that describe the accounting transactions of a business.
Accounting Records
_______ support the production of financial statements.
Accounting records
Types of Accounting Records
- Manual System
- Digital Accounting Records
- A bookkeeping system where records are maintained by hand, without using a computer system. Instead, transactions are written in journals, from which the information is manually rolled up into a set of financial statements.
- These systems suffer from a high error rate, and are much slower than computerized systems.
- Most commonly found in small enterprises that have few transactions.
Manual System
A type of document:
Economic events result in the creation of some documents at the beginning (the source) of the transaction.
Source Documents
A type of document that are the result of transaction processing rather than the triggering mechanism for the process. These are the result of transaction processing rather than the triggering mechanism for the process example of this is payroll check.
Product Documents
Type of document that are product documents of one system that become source documents for another system. This is a computer-generated form that is sent to a third party, who
is supposed to fill in the document and return it to the issuer. The information on the form is then used
as the basis for data entry back into the computer system.
Turnaround Documents
a chronological record of financial transactions. The primary sources of data entry into journals are documents.
Journals
kind of journal that are used to record specific classes of transactions that occur in high volume.
(Examples of special journals are the cash receipts journal, cash disbursements journal, payroll journal, purchases journal, and sales journal)
Special Journal
this term is often used to denote certain types of special journals. For example, the payroll journal is often called the payroll _____.
For example, a receiving _____ is a log of all receipts of raw materials or merchandise ordered from vendors.
Register
Firms use this to record nonrecurring, infrequent, and dissimilar transactions. For example, depreciation and closing entries are typically recorded here.
General journals
a book of accounts that reflects the financial effects of the firm’s transactions after they are posted from the various journals and journal vouchers. _____ show activity by account type. A ______
indicates the increases, decreases, and current balance of each account
Ledgers
type of ledger that summarizes the activity for each of the organization’s financial accounts. Also, provides a single value for each control account, such as accounts payable, accounts receivable, and inventory. This highly summarized information is sufficient for financial reporting, but it is not useful for supporting daily business operations
General Ledgers
type of ledger that is a chart of specific accounts that are not included in the general ledger. The accounts in the ________ hold more specific information about the accounts that make up the general ledger.
Subsidiary Ledger
Refers to creating, transferring, managing, and storing financial information in an electronic format.
Digital Accounting Record
A Digital Computer Files that contains account data. The general ledger and subsidiary ledgers are examples of ____.
Master File
Digital Computer File: a temporary file of transaction records used to update data in a master file. It is used to hold data during transaction processing. The file is later used to update the master file and audit daily, weekly or monthly transactions (Examples: sales or purchase transactions, or employee details such as leave, disciplinary action, or career progression reports)
Transaction File
Digital Computer File:
- stores data that are used as standards for processing transactions. For example, the payroll program may refer to a tax table to calculate the proper amount of withholding taxes for payroll
transaction
Reference File
Digital Computer File:
contains records of past transactions that are retained for future reference and form an important part of the audit trail.
Archive file
The accounting records described previously provide an _______ for tracing account balances contained in the financial statements back to source documents and the economic events that created them. An _____ is of utmost importance in the conduct of a financial audit. The external auditor’s responsibility involves, in part, the review of selected accounts and transactions to determine their validity, accuracy, and completeness.
Audit trail
a step-by-step record by which accounting, trade details, or other financial data can be traced to their source. ____ are used to verify and track
many types of transactions, including accounting transactions and trades in brokerage accounts.
audit trail
An _______ could be as simple as a receipt for the purchase of an item. The receipt would have the date of the transaction, the price, the place where it was bought and who was involved in the transaction.
audit trail
A written description of a system can be wordy and difficult to follow. Experience shows that visual images (convey vital system information more effectively and efficiently than words. Accountants use system documentation routinely, as both systems designers and auditors. The ability to document systems in graphic form is therefore an important skill for accountants to master.
Documentation Techniques
Five (5) Documentation Techniques:
- Data Flow Diagram (DFD)
- Entity Relationship Diagram (ERD)
- System Flowcharts
- Program Flowcharts
- Record Layout Diagrams
Uses symbols to represent the entities, processes, data flows, and data stores that pertain to a system.
____ are used to represent systems at different levels of detail from very general to highly detailed.
Data Flow Diagram (DFD)
______ provide a straightforward, efficient way for organizations to understand, perfect, and implement new processes or systems.
data flow diagrams
A documentation technique used to represent the relationship between business entities.
Entity Relationship
Diagrams
An entity may be:
● a physical resource (automobile, cash, or inventory),
● an event (customer order, purchase inventory, or receive payment), or
● an agent (salesperson, customer, or vendor).
______ are commonly used in conjunction with a data flow diagram to display the contents of a data store. They help us to visualize how data is connected in a general way, and are particularly useful for constructing a relational database.
Entity Relationship Diagram (ERD)
The graphical representation of the
physical relationships among key
elements of a system.
System Flowcharts
_____ also describe the
physical computer media being
employed in the system, such as
magnetic tape, magnetic disks, and
terminals.
System Flowcharts
Shows the data flow while writing a program or algorithm.
It allows the user to explain the process quickly as they collaborate with others. These programming flowcharts also analyze the logic behind the program to process the code of the programming.
Program Flow Chart
Note:
The _______ can serve in different ways. For example, they can analyze the codes, visualize and work on them. They can also help figure out the application’s structure to realize how a user navigates in a tool.
programming flowcharts
Used to reveal the internal structure of digital records in a flat-file or database table.
Record Layout Diagram
The _____ usually shows the name, data type, and length of each attribute (or field) in the record. Detailed data structure information is needed for such tasks as identifying certain types of system failures, analyzing error reports, and
designing tests of computers.
layout diagram
This kind of layout can be applied to spreadsheet or database records, or different kinds of data sets and presentations in various technologies.
Record Layout Diagram
2 TRANSACTION PROCESSING
MODELS
-Batch Processing
-Real-time Processing
THIS INVOLVES GATHERING
TRANSACTIONS INTO GROUPS OR BATCHES AND THEN PROCESSING THE ENTIRE BATCH AS A SINGLE EVENT.
BATCH PROCESSING
SYSTEMS PROCESS INDIVIDUAL TRANSACTIONS CONTINUOUSLY AS
THEY OCCUR.
REAL-TIME PROCESSING
4 Difference between Batch & Real-time System
- Information Time Frame
- Resources
- Operational Efficiency
- Efficiency versus Effectiveness
This involves creating simple numeric or alphabetic codes to represent complex economic phenomena that facilitate efficient data processing.
DATA CODING
SCHEMES
_______ involves creating simple numeric or alphabetic codes to represent complex economic phenomena that facilitate efficient data processing.
DATA CODING
SCHEMES
(5) Numeric and Alphabetic Coding Schemes
- Sequential Codes
- Block Codes
- Group Codes
- Alphabetic Codes
- Mnemonic Codes
Represent items in some sequential order (ascending or descending). A common application of numeric ____ is the pre numbering of source documents.
Sequential Codes
Advantages and Disadvantages of Sequential code
ADVANTAGES.
• Sequential coding supports the reconciliation of a batch of transactions, such as sales orders, at the end of processing.
DISADVANTAGES.
• Sequential codes carry no information content beyond their order in the sequence. For instance, a sequential code assigned to a raw material inventory item tells us nothing about the attributes of the item (type, size, material, warehouse location, etc.).
• Sequential coding schemes are difficult to change.
A variation on sequential coding that partly remedies the disadvantages just described. 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 _____ is the construction of a chart of accounts.
Block Codes
Advantage and Disadvantage of Block
ADVANTAGES.
• Sequential coding supports the reconciliation of a batch of transactions, such as sales orders, at the end of
processing.
DISADVANTAGES.
• The information content of the block code is not readily apparent (clearly visible/ understood)
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.
Group Codes
Alphabetic characters in the form of
acronyms and other combinations that convey meaning. For example, a student enrolling in college courses
may enter the following course codes on the registration form.
Mnemonic Codes
Advantage and Disadvantage of Mnemonic codes
ADVANTAGES.
• Does not require the user to memorize meaning; the code itself conveys a high degree of information about the item that is being represented.
DISADVANTAGES.
• Have limited ability to represent items within a class.
TYPES OF DOCUMENTS UNDER MANUAL SYSTEM
-Source Documents
-Product Documents
-Turnaround Documents
The primary sources of data entry into journals are ____
documents.
