overview of transaction processing and enterprise resource planning systems

Copyright © 2015 Pearson Education, Inc.

Overview of Transaction Processing and Enterprise Resource Planning Systems

Chapter 2

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Learning Objectives• Describe the four parts of the data processing

cycle and the major activities in each. • Describe the ways information is stored in

computer-based information systems. • Discuss how organizations use enterprise

resource planning (ERP) systems to process transactions and provide information.

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Data Processing Cycle

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Data Input

Steps in Processing Input are:•Capture transaction data triggered by a

business activity (event).▫Information comes from source documents.

•Make sure captured data are accurate and complete.

•Ensure company policies are followed (e.g., approval of transaction).

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Source Documents

•Captures data at the source when the transaction takes place▫Paper source documents▫Turnaround documents▫Source data automation (captured data

from machines, e.g., Point of Sale scanners at grocery store)

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Data Storage

• Important to understand how data is organized ▫Chart of accounts

Coding schemas that are well thought out to anticipate management needs are most efficient and effective.

▫General ledger▫Subsidiary ledgers (e.g., Accounts receivable)▫General journal▫Transaction/specialized journals (e.g., Sales)Note: With the above, one can trace the path of the transaction (audit trail).

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Audit trail for Invoice #156 for $1,876.50 sold to KDR Builders

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DATA STORAGE•General ledger

The general ledger is the summary level information for all accounts (asset, liability, equity, revenue, and expense). Detail information is not kept in this account.

A/P$100

0

A/R$600


DATA STORAGE

•General ledgerExample: Suppose XYZ Co. has three customers. Anthony Adams owes XYZ $100. Bill Brown owes $200. And Cory Campbell owes XYZ $300. The balance in accounts receivable in the general ledger will be $600, but you will not be able to tell how much individual customers owe by looking at that account. The detail isn’t there.


DATA STORAGE

•General ledger•Subsidiary ledger

The subsidiary ledgers contain the detail accounts associated with the related general ledger account. The accounts receivable subsidiary ledger will contain three separate t-accounts—one for Anthony Adams, one for Bill Brown, and one for Cory Campbell.


DATA STORAGE

•General ledger•Subsidiary ledger

The related general ledger account is often called a “control” account.

The sum of the subsidiary account balances should equal the balance in the control account.


DATA STORAGE•General ledger•Subsidiary

ledger▫Detailed data for a

General Ledger (Control) Account that has individual sub-accounts e.g.: Accounts Payable Accounts

Receivable

• Joe Smith $250

• Patti Jones $750

A/P$100

0

• ACME Inc.$150

• Jones, Inc $450

A/R$600


Journals•General

▫Infrequent or specialized transactions▫Used to record:

Non-routine transactions, such as loan payments

Summaries of routine transactions Adjusting entries Closing entries

DATA STORAGE


Journals•Specialized

▫Repetitive transactions E.g., sales transactions

▫Used to record routine transactions. ▫The most common special journals are:

Cash receipts Cash disbursements Credit sales Credit purchases

DATA STORAGE


COMPUTER-BASED STORAGE CONCEPTS•Data is stored in master files or

transaction files.

•A master file is a file that stores cumulative information about an organization’s entities.

•It is conceptually similar to a ledger in a manual AIS in that:▫The file is permanent.▫The file exists across fiscal periods.▫Changes are made to the file to reflect the

effects of new transactions.


COMPUTER-BASED STORAGE CONCEPTS•A transaction file is a file that contains

records of individual transactions (events) that occur during a fiscal period.

•It is conceptually similar to a journal in a manual AIS in that:▫The files are temporary.▫The files are usually maintained for one

fiscal period.


COMPUTER-BASED STORAGE CONCEPTS• Transaction

▫Contains records of a business from a specific period of time

• Master▫Permanent records▫Updated by

transaction with the transaction file

• Database▫Set of interrelated

files

Transaction File

Master before Update

Updated

Master File


DATA PROCESSING•Batch processing:

▫Source documents are grouped into batches, and control totals are calculated.

▫Periodically, the batches are entered into the computer system, edited, sorted, and stored in a temporary file.

▫The temporary transaction file is run against the master file to update the master file.

▫Output is printed or displayed, along with error reports, transaction reports, and control totals.


DATA PROCESSING•Online, batch processing:

▫Transactions are entered into a computer system as they occur and stored in a temporary file.

▫Periodically, the temporary transaction file is run against the master file to update the master file.

▫The output is printed or displayed.


DATA PROCESSING•Online, real-time processing

▫Transactions are entered into a computer system as they occur.

▫The master file is immediately updated with the data from the transaction.

▫Output is printed or displayed.


Information Output

The data stored in the database files can be viewed•Online (soft copy)•Printed out (hard copy)

▫Document (e.g., sales invoice)▫Report (e.g., monthly sales report)▫Query (question for specific information in

a database, e.g., What division had the most sales for the month?)

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Enterprise Resource Planning (ERP) Systems

•Integrates activities from the entire organization ▫Production▫Payroll▫Sales ▫Purchasing▫Financial Reporting

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Advantages of ERP System

• Integrated enterprise-wide allowing for better flow of the information as it’s stored in a centralized database and can be accessed by various departments which also improves customer service.

• Data captured once (i.e., no longer need sales to enter data about a customer and then accounting to enter same customer data for invoicing)

• Improve access of control of the data through security settings

• Standardization of procedures and reports

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Disadvantages of ERP System

•Costly•Significant amount of time to implement•Changes to an organization’s existing

business processes can be disruptive•Complex•User resistance (learning new things is

sometimes hard for employees)

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overview of transaction processing and enterprise resource planning systems

Documents

pearson education

data inputsteps

data storageimportant

data processing cycle

capture transaction

source documentscaptures

sure captured data

general ledger control