Accounting Information Systems: Essential Concepts and Applications Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-WingChapter 5: Computer-Based Transaction ProcessingSlides Authored by Somnath Bhattacharya, Ph.D.Florida Atlantic University

Transaction Processing SystemsA fundamental task in any AIS is to process transactions affecting the organizationTransaction processing systems(Ss) involve three stages:Data entryData and file processingOutput preparation

Benefits of Understanding Transaction Processing SystemsRecognize limitations in currently installed Transaction Processing Systems such as:inadequate data controlsinefficient processingout-of-date filesstored data that cannot be accessed quicklydata that is poorly classified and codedRecommend new or improved processing approaches and storage methods

Layout of Input-Process-Output Discussion

Data EntryMost transactions are initiated by business events triggered by various agents or by instructions within a computer programOther transactions are initiated by the passage of time, e.g., interest accrualsComputer-based systems employ an off-line or on-line approach to data entry

Off-line Data EntryOff-line refers to input devices not directly connected to the computer. Examples are key-to-tape, key-to-disk, and OCR readersData must be first captured on source documents and similar transactions are batched togetherBatched transactions are transcribed into machine-readable form using an off-line deviceTurnaround documents may be used as direct input into a system

On-line Data InputOn-line refers to devices that are directly and continuously connected to a computer systemIn on-line data entry, transaction data are entered into the computer directly as they occurCharacteristics of on-line data entry may include:nonexistence of source documents (telephones, face-to-face conversations)input of data using source data automation (scanners at POS terminals)origination of data by parties external to the firm (ATM machines, telephone touch-tone based transactions)capture of data at remote sites (remote job entry or remote batch processing)

Input DocumentsInput documents typically do the following:Authorize Subsequent TransactionsTrigger Desired ActionsReflect AccountabilityProvide Data for Output and Reference

On-line Data Entry designFour factors that can reduce the tendency for errors in on-line data entry are:Menus that clearly define alternative actionsDialogue prompts that display suggestions or questions to the userGraphical user interfaces that allow a user to make selectionsPreformatted screens that display formats for transaction documents. These can be associated with menu options

Advantages of On-line versus Off-line Data EntryOff-line data entry offers the advantages of economy and productivity On-line data entry offers the advantages of timeliness, flexibility, and simplicity

Options in Computer-Based Transaction ProcessingSource ofOptionsDifferentiationFigure 5-7

Source(s) of Transactions

Main Computer Site

Remote

Focus of Transaction Data

Batches of Events

Individual Events

Input Approach

Off-line

On-line

Timing of Processing

Periodic (delayed)

Immediate (real- time)

Mode of Processing

Sequential

Direct

Timing of Outputs

Spooled

Immediate

Users of Information

Currency not critical

Currency critical

Data Processing MethodsBatch data processing involves the processing of data in groups (or batches) of like transactions at periodic intervals. Used when transaction activity is low or periodicReal-time processing consists of processing each transaction as it arises and is captured

Batch Processing MethodIn batch processing, transaction data are stored in a transaction file until a master-file update is performed. The storing of transaction data in a transaction file may occur either through off-line or on-line entry of dataAdvantages of batch processing include:processing can be done in background modeprocessing is only performed when neededbatch processing leaves a good audit trailDisadvantages: the master-file is only as current as last processing run.If transactions are batched before entry, any errors in transaction data cannot be corrected at the time of entry. They must be corrected and reentered either through a separate run or during the next processing cycle

Real-time Processing MethodReal-time processing involves the processing of each transaction as it arises and is capturedData from each transaction are entered via an online device and posted directly and immediately to the affected record(s) in one or more master filesReal-time processing may be interactive in that it may involve direct interactions between humans and computerized systems

Real-time Processing MethodAdvantages of real-time processing include:This method keeps the master file more current than the batch runsErrors are caught at the time of data entryDrawbacks of real-time processing include:More complex and expensive than batch systemsHarder to auditControls and backup procedures are more elaborate in order to guard against unwarranted access and human error

Document FlowchartsFlowcharts are pictorial representations of transaction processing systems that portray flows of some typeA Document Flowchart emphasizes the hardcopy inputs and outputs and their flows through organizational unitsAuditors and accountants may use document flowcharts when analyzing a current system for weaknesses in controls and reports

Common Document Flowcharting Symbols - I

Common Document Flowcharting Symbols - II

A Sample Document FlowchartRequesting DepartmentCentral Supplies Department

System FlowchartsSystem Flowcharts depict the flows of data and processing steps in an AISThey use symbols that are industry conventions standardized by the American National Standards Institute (ANSI)Flowcharting symbols are grouped as input-output symbols, processing symbols, storage symbols, data and information flow symbols, and miscellaneous symbols

System Flowchart Symbols Input/Output

System Flowcharting Symbols Processing

System Flowcharting Symbols Storage

Systems Flowcharting Symbols Connectors

System Flowcharting Symbols Miscellaneous - I

System Flowcharting Symbols Miscellaneous - II

Structure ChartsA structure chart portrays the hierarchy of levels and interrelationships within a systemComputer programmers use high-level structure charts to determine the overall structure of program modules required to operationalize a systemLow-level structure charts, prepared during the detailed design phase, enable computer programmers to create source code sub-routines that help in the implementation of systemsSource code sub-routines are frequently written in Structured EnglishStructured English are English-like statements generated from low-level structured charts. These statements are then converted to detailed source programming code instructions

A High-Level Structure Chart for a Course Registration SystemFigure 5-11

Sequential vs. Direct UpdatingSequential Updating from Batched/Online Inputs: To update a master file sequentially within a computer-based application, the processing program starts at the beginning master file record. It then reads every record in the file, changing data in each record affected by a transaction (see Figs. 5-6 and 5-7 & 5-8).Sequential Updating requires sorting of the transaction file by the master file sorting key (e.g., transactions originally sorted on transaction_no. must now be resorted by master-file customer_no.).Since all the records in a master file are read during the update, sequential updating increases the processing time significantly if only a few records are to be updated.Direct Updating: Instead of processing a batch of transactions sequentially against an entire master file, each transaction in the batch can be posted directly to the affected records.Direct Updating with batched transactions eliminates the sorting step.Direct Updating is only feasible if the master files are stored on direct-access storage.

DFD Showing Batched Sequential Processing of TransactionsFigure 5-12

Enterprise Resource PlanningERP is a software with an integrated set of applications for enterprise-wide use in functional areas such as finance, accounting, human resource management, manufacturing, logistics, etc.ERP systems permit an integration of data and applications. Both financial and non-financial data can be integratedERP systems also facilitate access to data that are within the firm but outside the ERP systemStandardization of worldwide systems, consistent and accessible data, and on-line processing of data result in firm-wide data availability

File Management IssuesA File is a collection of related data stored together for future useAll computerized applications involving transaction processing typically employ one or more filesBecause of their involvement with transaction processing, and auditing of such processing, accountants need to be aware of file management issues

File Access - ISequential Access: This requires each record in a file to be scanned, beginning with the first record in the fileThe sequential access method is inefficient for finding individual records. However, it is very effective if a large number of records in a file need to be accessed

File Access - IIDirect Access: This denotes any method that involves the accessing of desired records in some way other than by an exhaustive search through all the records in a fileSignificant methods of Direct Access include:Indexed sequential fileRandomizationBinary searchesLinked listsInverted listsAll Direct Access methods require direct-access storage media such as magnetic disks and the use of PointersPointers are data elements whose values specify or point to the physical storage addresses where associated data are stored. In contrast to the other data elements of a record, a pointer provides direction rather than content

Indexed Sequential File - IThis type of file combines a sequential arrangement of records with an index that cross-references the primary key values of the recordsThe index enables individual records to be retrieved quickly, while the file retains the benefits of sequential processing

Indexed Sequential File - IIEmp. Name PointerAlbany6Carter1Finsbury3Goodrich4Jenkins9Petersen8Schneider2Sykes5Williamson 7Addr Emp. # Name1 500 Carter2 501 Schneider3 503 Finsbury4 504 Goodrich5 506 Sykes6 508 Albany7 509 Williamson8 512 Petersen9 513 Jenkins123Index FileData FileBinary Search

Individual Record Retrieval Using the ISAM MethodProduct # Pointer 1105010110020 7115015 12Product # Description1. 105010 Dye-12oz.2. 106950 Dye-16 oz.3. 107000 Dye-24 oz.4. 108020 Conc-1 gal.5.6.7. 110020 Conc-2 gal.8. 110410 Conc-4 gal.9. 114650 Conc-6 gal.10.11.12. 115015 Reagent13. 116000 AdditiveIndex FileData FileInverted list onProduct #

RandomizationThis is the access procedure in which computations are performed to generate addresses for individual records.These computational procedures are known as Hashing Schemes.When the records of a file are located throughout a direct access storage medium by means of a randomizing procedure, the file is described as a random file.A Hashing Scheme provides a random file with its major advantage: fast access.Hashing schemes are typically faster than the table lookup procedures required with indexed sequential files.

CodingAISs depend on coding to record, store, classify and retrieve financial data.Computer systems most often use numeric codes or alphanumeric codes for processing accounting transactions.Purposes of coding:uniquely identifies transactions and accountscompresses dataaids in classification processconveys special meanings

Coding SystemsMnemonic Codes give visible clues concerning the objects they representSequence Codes are the simplest type of coding scheme that assign numbers or letters in consecutive orderBlock Codes assign a series of numbers within a sequence to entities or events having common featuresGroup Codes reveal two or more dimensions or facets pertaining to an object

Design Considerations in Coding

Codes should serve some useful purposeCodes should be consistentCodes should be standardized throughout the organizationCodes should plan for future expansion

Accounting Information Systems: Essential Concepts and Applications Fourth Edition by Wilkinson, Cerullo,Raval, and Wong-On-WingCopyright 2000 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.