transaction processing and enterprise resource planning systems ( Topic 2 ) Flashcards
Data Processing Cycle
Every information systems data processing follows this process, process may happen immediately or at a later stage. Despire the diagram storage likely occurs at every stage,
- Data input
- Data processing
- Information Output
- Data Storage
Data Processing Cycle Determines
access to them?
- This often depends on the domain , as the user there will be specific requirements
How should data be organised, updated, stored, accessed and retrieved?
How can scheduled and unanticipated information needs be met?
Data Input—Capture
Data must be collected about three facets of each business activity as it occurs
- Each activity of interest. eg sales , purchase for a manufacturing organisation
- Resource(s) affected by each activity. Eg for sale – inventory is effected, revenue is effected
- People who participate in each activity. Eg sales – know who made the sale
the most frequent revenue cycle transaction is a sale, either for cash or on credit. S&S 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
Paper-Based Source Documents
Data is collected on source documents ( captures requirements )
source documents - Documents used to capture transaction data at its source – when the transaction takes place- historically used by businesses . Ex- amples include sales orders, purchase orders, and employee time cards.
• Examples
- Sales-order form
- Purchase requisition
• Data from paper-based documents will eventually need to be transferred to the AIS (digitised)
known as digitization – companies operate in different modes entirely digistesed and mixed
Turnaround documents
Turnaround documents - goal is to minimize data entry and therefore errors
Records of company data sent to an ex- ternal party and then returned to the system as input. Turn- around documents are in ma- chine-readable form to facilitate their subsequent processing as input records.
An example is a utility bill.
- Usually paper-based
- Are sent from organisation to customer typically used by utility providers
- Same document is
- Returned by customer to organisation
Source Data Automaton
The collection of transaction data in machine-readable form at the time and place of origin. Exam- ples are point-of-sale terminals and ATMs.
Preferred approach to reduce errors, is to capture Source Data
- In machine-readable form
- At the time of the business activity - e.g. ATMs; point-of-sale (POS)
Data Input—Accuracy and Control
- Data input screens usually list all the data the user needs to enter.
Well-designed source documents can ensure that data captured is
• Accurate - Provide instructions and prompts - Check boxes - Drop-down boxes • Complete - Internal control support - Pre-numbered documents - forms – they can be reconciled - Mandatory fields
this creates consistency and makes the process rodust – in an effort to reduce error and ensure data is complete
Data Storage
Types of AIS storage • Paper-based - Ledgers - Journals • Computer-based – speed , efficnecy
Ledgers
General
• Summary level data for each:
- Asset, liability, equity, revenue, and expense
Subsidiary
• Detailed data for a General Ledger (Control) Account that has individual sub-accounts, using systems with this provides scope as to ‘ where’ the asset has come from
- Accounts Receivable
- Accounts Payable
Cumulative accounting information is stored in general and subsidiary ledgers.
General ledger
contains summary-level data for every asset, liability, equity, revenue, and expense account.
Subsidiary ledger
subsidiary ledger contains detailed data for any general ledger account with many individual subaccounts.
control account
control account - A title given to a general ledger account that summarizes the total amounts recorded in a subsidiary ledger.
For example, the accounts receivable control account in the general ledger represents the total amount owed by all customers. The balances in the accounts receivable subsidiary ledger indicate the amount owed by each specific customer.
the sum of all subsidiary ledger account balances should equal the amount in the corresponding general ledger control account. Any discrepancy between them indicates that a recording error has occurred.
Journals
General
• Infrequent or specialized transactions
Specialised
• Repetitive transactions
- e.g. sales transactions
Coding Techniques
Coding is the systematic assignment of numbers or letters to items to classify and organize them.
This facilitates the data entry process – practicality
- Sequence
- Group
- Mnemonic
- Chart of accounts
Sequence
• Items numbered consecutively Block
• Specific range of numbers are associated with a category
- 10000–199999 = Electric Range
Group
Which are two or more subgroups of digits used to code items, are often used in conjunction with block codes.
• Positioning of digits in code provide meaning
Mnemonic
- Letters and numbers
- Easy to memorise
- Code derived from description of item
Chart of accounts
• Type of block coding
chart of accounts ( definition) - A listing of all the numbers assigned to bal- ance sheet and income state- ment accounts. The account numbers allow transaction data to be coded, classified, and entered into the proper accounts. They also facilitate financial statement and report preparation
The following guidelines result in a better coding system.
The code should:
- Be consistent with its intended use, which requires that the code designer determine de- sired system outputs prior to selecting the code.
- Allow for growth. For example, don’t use a three-digit employee code for a fast-growing company with 950 employees.
General journal
A general journal is used to record infrequent or nonroutine transactions, such as loan payments and end-of-period adjusting and closing entries.
Specialized journal
A specialized journal records large numbers of repetitive transactions such as sales, cash receipts, and cash disbursements.
Audit trail
A path that allows a transaction to be traced through a data processing sys- tem from point of origin to out- put or backwards from output to point of origin. It is used to check the accuracy and valid- ity of ledger postings and to trace changes in general ledger accounts from their beginning balance to their ending balance
Computer Based Storage
- Entity
- Attributes
- Fields
- Records
- Files
Entity
Entity - The item about which information is stored in a record.
- Person, place, or thing (noun) - employees, product, customers
- Something an organisation wishes to store data about ( of interest)
Attributes
Attributes
- he properties, identifying numbers, and char- acteristics of interest of an entity that is stored in a database
- Facts about the entity – describe the entity
Fields
Fields
- The portion of a data record where the data value for a particular attribute is stored.
- Where attributes are stored
Records
Records
- A set of fields whose data values describe specific at- tributes of an entity, such as all payroll data relating to a single employee.
- Group of related attributes about an entity , unique collection of data that represents the entity
File
File
- Group of related Records – together these files are known as a record
File Types
- Transaction
- Master
- Database
File type
-Transaction
A file that contains the individual business transactions that occur during a specific fiscal period. A transac- tion file is conceptually similar to a journal in a manual AIS.
• Contains records of a business from a specific period of time, apply transaction file to master file to get an updated file
File type
-Master
- A permanent file of records that stores cumulative data about an organization. As transactions take place, individual records within a master file are updated to keep them current.
• Permanent records
• Updated by transaction with the transaction file
File type
-Database
- A set of interrelated, centrally controlled data files that are stored with as little data redundancy as possible. A database consolidates records previously stored in separate files into a common pool and serves a variety of users and data processing applications.
• Set of interrelated files – group of files
Data Processing
-Four Main Activities ( CRUD)
- Create new data records.
- Read retrieve or view existing data records.
- Update existing stored data records.
4. Delete data or records. – stop stocking a product
Batch processing
Updating done periodically, such as daily,
Although batch processing is cheaper and more efficient, the data are current and accurate only immediately after processing. For that reason, batch processing is used only for applications, such as pay- roll, that do not need frequent updating and that naturally occur or are processed at fixed time periods
Information Output Types
Soft copy
• Displayed on a screen – shift towards with digitization
Hard copy
• Printed on paper
e.g. documents and reports
Documents
Documents are records of transaction or other company data. Some, such as checks and invoices, are transmitted to external parties. Others, such as receiving reports and purchase
Reports
Reports are used by employees to control operational activities and by managers to make decisions and to formulate business strategies. External users need reports to evaluate, company profitability, judge creditworthiness, or comply with regulatory requirements
Database query
A database query is used to provide the information needed to deal with problems and questions that need rapid action or answers. A user enters a request for a specific piece of information; it is retrieved, displayed, or analyzed as requested. Repetitive queries are often developed by information systems specialists
Enterprise Resource Planning (ERP)
Integrate an organisation’s information into one overall AIS
Enterprise resource planning (ERP) systems overcome these problems as they integrate all aspects of a company’s operations with a traditional AIS.
The ERP system collects, processes, and stores data and provides the informa- tion managers and external parties need to assess the compan
ERP modules ( functions )
• Financial
(general ledger and reporting system)—general ledger, accounts receivable, ac- counts payable, fixed assets, budgeting, cash management, and preparation of managerial reports and financial statements
• Human resources and payroll
human resources, payroll, employee benefits, training, time and attendance, benefits, and government reporting
• Order to cash
sales order entry, shipping, inventory, cash receipts, com- mission calculation
• Purchase to pay
purchasing, receipt and inspection of inventory, inventory and warehouse management, and cash disbursements
• Manufacturing
engineering, production scheduling, bill of materials, work-in-process, workflow management, quality control, cost management, and manu- facturing processes and projects
• Project management
costing, billing, time and expense, performance units, activity management
• Customer relationship management
sales and marketing, commissions, service, cus- tomer contact, and call center support
• System tools
tools for establishing master file data, specifying flow of information, ac- cess controls, and so on
ERP Advantages
• Integration of an organisation’s data and financial information
Storing all corporate information in a single database breaks down barriers between departments and streamlines the flow of information.
• Data is captured once
rather than multiple times, as it is entered into dif- ferent systems. Downloading data from one system to another is no longer needed.
• Greater management visibility, increased monitoring of all systems
Employees are more productive and efficient because they can quickly gather data from both inside and outside their own department.
• Better access controls
- as systems are integrated
An ERP can consolidate multiple permis- sions and security models into a single data access structure.
• Standardises business operating procedures, this brings further efficiency
This standardization can be especially valuable with mergers and acquisitions because an ERP system can replace the different systems with a single, unified system
• Improved customer service
- instead of dealing with three departments you deal with the entity as a whole
employees can quickly access orders, available in- ventory, shipping information, and past customer transaction details.
• More efficient manufacturing
receive new orders in real time, and the automation of manufactur- ing processes leads to increased productivity.
- Implements Industry Best Practices
- Overall reducing scope for error and creating efficency
ERP Disadvantages
Cost – expensive to deploy and liscencing
Time-consuming to select and implement , correlates with complexity of business
Changes to an organisation’s existing business processes can be disruptive, often has associated resistance
Complex - his comes from integrating many different business activities and systems, each having different processes, business rules, data semantics, authorization hierarchies, and decision centers.
Resistance to change Organizations that have multiple departments with separate resources, mis- sions, profit and loss, and chains of command may believe that a single system has few benefits. It also takes considerable training and experience to use an ERP system effec- tively, and employee resistance is a major reason why many ERP implementations do not succeed
Standardization of processes can jeopardize your competitive advantage , limiting scope to be unique
ERP mitigating risk
Reaping the potential benefits of ERP systems and mitigating their disadvantages requires conscious effort and involvement by top management. Top management’s commitment to and support for the necessary changes greatly increase the chances of success.
The importance of sound internal controls in an ERP cannot be overstated. The integrated nature of ERP systems means that unless every data item is validated and checked for ac- curacy at the time of initial entry, errors will automatically propagate throughout the system. Thus, data entry controls and access controls are essential.
What Is Documentation?
• Set of documents and models
- Narratives ( description of how the system works), data flow models, flowcharts
• Describe who, what, why, when and where of systems
- Input, process, storage, output, and controls
Narrative
Narratives – can however be cumbersome, or interpreted in differently then intended
Narrative description ( definition)- Written, step-by-step explanation of system components and how they interact
Why Should You Learn Documentation?
- At a minimum, you must be able to read documentation to determine how a system works.
- You may need to evaluate documentation to identify internal control strengths and weaknesses and recommend improvements as well as to determine if a proposed system meets the company’s needs.
- More skill is needed to prepare documentation that shows how an existing or proposed system operates.
You need to be able to read documentation in all its forms: narratives, diagrams and models.
You need to be able to evaluate the quality of systems such as internal control based in part on documentation.
Why learn documentation
Sarbanes-Oxley managemnet reposnsibilities
• is responsible for internal control system
• is responsible for assessing the effectiveness of the internal control (IC) System
• both management and external auditors need to document and test IC System.
- it a regulatory requirement for a business to document how a system works
ASA (ISA NZ) 315 Par.18 The auditor shall obtain an understanding of the information system, including the related business processes, relevant to financial reporting.
- Documentation assists in auditor understanding and documentation of their understanding.
- Documentation is easier to prepare and revise when a software package is used e.g. Microsoft Office Visio, SmartDraw, Edraw.
Documentation tools
Data flow diagram
Flowchart
- Document flowchart
- System flowchart
- Program flowchart
Business Process diagrams
Data Flow Diagrams
A graphical description of the flow of data within an organi- zation, including data sources/ destinations, data flows, trans- formation processes, and data storage.
Data Flow Diagrams
-data source
The entity that produces or sends the data that is entered into a system.
Data Flow Diagrams
-data destination
The entity that receives data produced by
Data Flow Diagram Levels
- context
- level 0
- level 1
DFD
-Context
context diagram - highest-level DFD; a summary-level view of a system, showing the data processing system, its input(s) and output(s), and their sources and destinations
- Highest level (most general)
- Purpose: show inputs and outputs into system
- Characteristics: one process symbol only, no data stores.
DFD
-Level 0
because there are zero meaningful decimal points—1.0, 2.0, etc
- Purpose: show all major activity steps of a system
- Characteristics: processes are labeled 1.0, 2.0 and so on.
DFD
-Level 1
pay employees) to create a Level 1 DFD (it has one mean- ingful decimal place—2.1, 2.2, etc.
- Purpose: show one major activity divided into sub-activities
- Characteristics: processes are labeled 1.1, 1.2 and so on.
data flow
- The movement of data among processes, stores, sources, and destinations
process
The action that transforms data into other data or information.
data store
data store is a repository of data. DFDs do not show the physical storage medium (such as a server or paper) used to store the data
DFD Creation Guidelines
- Understand the system.
- Ignore certain aspects of the system.
- Determine system boundaries.
- Develop a context DFD.
- Identify data flows.
- Group data flows
- Identify transformational processes.
- Group transformational processes.
- Identify all data stores.
- Identify all sources and destinations.
- Label all DFD elements.
- Subdivide DFD.
- Give each process a sequential number.
- Repeat the process.
- Prepare a final copy.
Flowcharts
- Input/output symbols show input to or output from a system.
- Processing symbols show data processing, either electronically or by hand.
- Storage symbols show where data is stored.
- Flow and miscellaneous symbols indicate the flow of data, where flowcharts begin or end, where decisions are made, and how to add explanatory notes to flowcharts.
Use symbols to logically depict transaction processing and the flow of data through a system.
Using a pictorial representation is easier to understand and explain versus a detailed narrative.
Flowcharts vs DFD
Flowcharts and DFD are different in terms of aim, as the aim of dfd is to show flows of data and information in the organisations while the flowchart shows medium/how the dataand information is being shared
Dfd follows on the why data is flowing not how, as there is only 4 symbols that used
Flowchart
-Storage examples
- Storage Cabinet for documents
- Disk Drive for realtime processing
- Magnetic Drive for batch processing
Document flowchart
- Illustrates the flow of documents through an organisation
- Useful for analysing internal control procedures.
internal control flowchart - used to describe, analyze, and evalu- ate internal controls, including identifying system strengths, weaknesses, and inefficiencies.
System flowchart
Depicts the relationships among system input, processing, storage, and output.
• Logical representation of system inputs, processes and outputs
• Useful in systems analysis and design.
Program flowchart
illustrates the sequence of logical opera- tions performed by a computer in executing a program.
• Represent the logical sequence of program logic.
Guidelines for drawing Flowcharts
-Understand the system you are trying to represent.
- Identify business processes, documents, data flows, and data processing procedures.
- Organize the flowchart so as it reads from top to bottom and left to right.
- Clearly label all symbols.
- Use page connectors (if it cannot fit on a single page).
- Edit/Review/Refine to make it easy to read and understand.
Business Process Diagrams
- Is a visual way to represent the activities in a business process.
- Intent is that all business users can easily understand the process from a standard notation (BPMN: Business Process Modeling Notation).
- Can show the organizational unit performing the activity.
Offers greater flexibility compared to DFD
For example, there are many activities in the revenue cycle. Among them are receiving an order, checking customer credit, verifying inventory availability, and confirming customer order acceptance. Likewise, there are multiple activities involved in the expenditure cycle. Among them are shipping the goods ordered, billing the customer, and col- lecting customer payments. All of these activities can be shown on a BPD to give the reader an easily understood pictorial view of what takes place in a business process.
Guidelines for drawing Business process diagrams
- Identify and understand the business process.
- Decide the level of detail (summary or detailed).
- Organize diagram using as many rows needed to explain the business process.
- Enter each process on the diagram showing where it begins and ends.
- Draw a rough sketch, refine, and finalize.
