a337 file design computerized and manual systems 3/27/08

A337

File DesignComputerized and Manual

Systems3/27/08

Topics for next five weeks:

• Basic discussion of how accounting information systems have evolved from manual to computerized systems

• Normalization of data - structure of databases - taking the data as “given”

• Discussion of Microsoft Access and other DBMS systems

• REA analysis (REAL) another tool for designing the structure of databases - but not taking the data as given.

Topics

• How do accounting systems work in a manual world– SUA

• First extension– Same basic structure, but automating the updating

process

• Second extension– Transaction entry from screen documents– ACCPAC, PeachTree, Great Plains

• Third extension– Integrated

accounting/management/finance/marketing software

Let’s look at the SUA

Let’s look at the SUA

Let’s look at the SUA

Let’s look at the SUA

First Extension

• Automating data entry– Ledgers should not be modified directly

• (only through data entry)

– There should be a “log” of all data entry– Access to data entry should be controlled

• Example - project 2b

First Extension

• This extension essentially just took the manual system and put it on computer

• There were no REAL changes in the structure.

• The journal/ledger structure might be affected.

Where would we go next?

Second Extension

• Focus is still on Accounting, but the transaction data that is captured and stored is expanded.

Traditional Accounting SystemJournals (where data is recorded)

SALES JOURNAL DECEMBER

Inv. or Subs. Subs. CreditCr. Memo Acct. Post Acct. Rec. Sales Returns Sales

Date Customer Number No. G/L 10200 G/L 30200 G/L 30100Dec. 4 Bertram Appliance 726 406 P 13,500.00 13,500.00Dec. 5 Hanover Hardware 727 408 P 6,700.00 6,700.00Dec. 11 Bertram Appliance 728 406 P 9,850.00 9,850.00Dec. 13 Hanover Hardware 729 408 P 1,716.00 1,716.00

Debit

What information is recorded??

PURCHASES JOURNAL DECEMBER

Vendor Debit CreditInvoice Purchases Other G/L A/P - G/L 20100 Purch. Ret.

Date Vendor No. G/L 30500 Acc# Amount Post Subs. A/C# Amount Post G/L 30600Dec. 11 Chicago Office Supply 2179 10800 8,268.00 253 8,268.00 PDec. 22 Super Electric Co. 18719 19,795.00 252 19,795.00 P

etcetera

Traditional Accounting System

• No information can be in the ledgers that was not recorded in the journals – the ledgers are a direct transcription

(posting) of the journals

• The accounting system ONLY contains transaction information (an exchange has occurred)

Traditional Accounting System

• Each customer, vendor, or other party that we engage in transactions with will probably have a file that details our interactions

• Once we engage in a transaction, the data is, of course recorded in a journal. Sometimes, even with traditional systems, we maintain additional information - but typically in a different place and there is no necessary reconciliation of the two sources of information.

How and where is the data stored

Traditional Accounting SystemWho has ownership/access to the data

• With a traditional system, data entry of accounting information is maintained by the bookkeeper or accountant.

• Sales data is maintained in the sales department

• Accounts receivable information is maintained in Accounts receivable perhaps.

• There are varying degrees of DBMS approaches

• One transaction cycle might involve interaction with all business cells, while others may not.

Event-driven database approach• Many events lead up to what ultimately becomes a

transaction– Example - sale

• Receipt of Purchase Order• Preparation of Sales Order Header• Accepting credit / approving transaction• Shipping the goods• Preparation of the invoice

– Information is added at each event. If we record events we have a more complete tracing of the transaction

How are databases different from traditional storage for accounting information?

• Event-driven system– Typically all of the document information is included

in the database (otherwise why would you have it on the document?)

• Who, What, When, Where from a document is recorded– Example from the SUA

How are databases different from traditional storage for accounting information?

Where

Who

What

When

How are databases different from traditional storage for accounting information?

Third Extension

• Enterprise - Resource - Planning (ERP) systems

• Sold/provided by large software vendors

ERPsEnterprise Resource Planning

software• What it is:

– Integrative Software Tool that incorporates:• Production• Accounting• Marketing• Human Resources• Financial Management

– Modules• Programs on top of a database structure• Frequently Oracle databases are used

Providers

• SAP – they were the leader

• Oracle – since they were the database leader they already

had the infrastructure

• JDEdwards• PeopleSoft

– started as a Human Resource Mgt company and then expanded from there.

• OTHERS...

Approaches

• In house– Large data requirements and personnel

commitment– Better control over features– Faster application

• Web driven– Lower cost– Security issues?

Advantages of ERPs

• Coordination and business process improvement– If everyone else in your industry has better

business processes than your company, what does that mean to you?…..

• Better information– You are more aware of how efficiently you

are operating.

Disadvantages of ERPs

• Cost– ERPs (especially In House) are quite expensive to

implement. There is also a LONG startup period (two to three years)

• People– Many people may not buy into it - and it doesn’t work

unless everyone (or most everyone) does.– Personnel to run the system are expensive and hard

to keep for In House systems

• It can overwhelm your business

What does it mean to auditors

• Should be viewed as both an opportunity and a threat to assurance services– Opportunity - consulting and implementation

services can provide additional revenues– Threat - data security is a big question mark

for ERPs

• Auditors cannot afford to be behind the technological curve here