databases and accounting systems

7/29/2019 Databases and Accounting Systems

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DATABASES ANDACCOUNTING SYSTEMS


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Database Accounting Systems

Most accounting students learn the mechanics of

accounting using the tools of manual double entry

bookkeeping such as journals and ledgers

Businesses saw the advantages of relational

databases for all their information processing

needs.

Consolidate data and data-handling operations


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Events-based Theories of Accounting

Over the past thirty years, researchers such as

William McCarthy and George Sorter have

developed and refined various events-based

approaches to accounting theory. Provides a solid theoretical underpinning for

accountants increasing use of relational databases

to perform accounting tasks

Objectives: Accountants should strive to store allrelevant attributes of economic events in a readily

accessible form


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Double Entry Bookkeeping vs.

Database Accounting

Double-entry bookkeeping provided an excellent

method for recording transactions

Developed 500 years ago

High cost of gathering information

Recording transactions was a time-consuming task

Quickly identify essential elements of transactions

Capture and store key attributes of transactions in a highly

aggregated form

Cost of information gathering a affordable levels

Debit-credit balancing check provided an important internal

control feature


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Double Entry Bookkeeping vs.

Database Accounting

Computerized transaction processing

Easily captures a wide variety of information

Bar code readers

Reduces cost of acquiring and storing multiple attributesof each economic event


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Case study

Most sales transactions begin when customer sends

a purchase order. If the firm receiving the purchase

order has the goods in stock and finds the

customers credit to be acceptable, the firm ships theordered goods and invoices the customer.


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Double-entry bookkeeping system

General Journal Entry

Date Account Debit Credit

Date Accounts Receivable Amount

Sales AmountExplanation

Transaction due

Names of the accounts debited

Names of the accounts credited

Transaction amount

Explanation of the transaction


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Double-entry bookkeeping system

Specialized journals and subsidiary ledgers

Sales journal

Subsidiary ledger

Account code

Customers name


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Database accounting system

Store many more attributes of the sales transaction

than a journal entry can store.

Data is stored in an atomic form

Store multiple attributes in multiple tables

Establish a primary key

One or more fields in a table that provides a unique identifier

for each row in the table


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Advantages of database accounting

systems

Reduce data storage costs

Stores data only once

Eliminate data redundancy

Eliminate data inconsistencies Avoid duplicate processing

Ease add, delete update data maintenance tasks

Make data independent of applications Centralize data management

Centralize data security


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Advantages of database accounting

systems

Ease report modifications and updates

Provided ad hoc query capabilities

Facilitate cross-functional data analysis

Permit multiple users simultaneous data access


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Disadvantages of Database

Accounting Systems

Greater hardware requirements

The database software itself

Employing a database administrator

System operation becomes critical

Incorrect data entry corrupts many users work

Territorial disputes over data ownership may arise


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Centralization of data and security

control

Increases risk

Contingency plans

Back-up

Recovery

Security


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Business Activity Classifications

Service Firms

Simplest form of business activity

No need to track inventory

Merchandising Firms

Buy and sell Track revenues , inventory, sales and expenses

Cost of goods

Manufacturing Firms

Production of goods

Purchase of raw materials and labor

Incurring other manufacturing costs

Processing raw materials, labor and other cost into goods

Selling the finished goods


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Transaction cycles

Revenue cycle

Purchase cycle

Payroll cycle

Production cycle


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Accounting Information Systems and

Database Systems

Events accounting

Storing data about an economic event

REA Accounting Model

Aggregations of data


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Database Management systems

Provide software to:

Store

Retrieve

Modify

Pre-DBMS Data Acquisition and Reporting

Flat Files (1960s)

Programs were written in Common Business OrientedLanguage (COBOL)


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Functions of Database Management

System

Efficient data maintenance

User-accessible catalog

Concurrency control

Transaction support

Recovery services

Security and authorization services

Integrity facilities


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Advantages of DBMS

Subschema

A pseudo table that appears to the user to be the real

table

Data independence Hide the details of physical storage


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Relational DBMS

Late 1960s and early 1970s

Dr. E.F. Codd

Data model

Abstract representation of database system

Description of data

Methods of accessing the data

Hierarchical model

Network model

Relational model - Logical and physical characteristics of the

database are distinct


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Database objects

Formal term Less formal term Data processing term

Relation Table File

Tuple Row Record

Attribute Column field


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Database objects

Entries must be single valued

Each attribute has a distinct name

Every entry in a column contains a value for that

column only and values are of the same data type

Order of the rows are unimportant

Order of columns are unimportant

Each row is unique

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