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Electronic Data Processing Systems. Chapter 6. Describe how application controls are used in data processing systems to ensure accuracy and integrity. Learning Objective 1. Paper-Based Input System. In some computerized accounting systems, inputs to the system are based on

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Chapter 6 l.jpg

Electronic Data

Processing Systems

Chapter 6


Learning objective 1 l.jpg

Describe how application

controls are used in data

processing systems to

ensure accuracy

and integrity.

Learning Objective 1


Paper based input system l.jpg

Paper-Based Input System

In some computerized accounting systems,

inputs to the system are based on

handwritten or typed source documents.

These documents are then collected and

forwarded to computer operations for

error checking and processing.


Preparation and completion of the source document l.jpg

Preparation and Completionof the Source Document

The source document, such as sales

orders, are prepared manually.

Errors can be minimized if the

source document is well designed

and easy to understand.


Transfer of source documents to data processing l.jpg

User’s departments

Data processing

Transfer of Source Documentsto Data Processing

Batch control totals and data transfer

registers controls data transfers.


Transfer of source documents to data processing6 l.jpg

Transfer of Source Documentsto Data Processing

Input document control form:

Document counts are a simple

form of batch control.

Batch totals may be taken for all or several

numeric fields in the original data file.

Data transfer log


Transfer of source documents to data processing7 l.jpg

Transfer of Source Documentsto Data Processing

Data entry

Key verification

Visual verification

Program data editing


Program data editing techniques l.jpg

Program Data Editing Techniques

Data editing routines may be applied

to each of the basic data structures.

Character

Fields

Records

Files


Program data editing techniques9 l.jpg

Program Data Editing Techniques

What is a table lookup?

It is an editing program that compares

the value of a field to the acceptable

values contained in a table file.


Program data editing techniques10 l.jpg

Program Data Editing Techniques

Limit test

Continuous operations auditing

Check digit

Valid code check


Paperless input systems l.jpg

Paperless Input Systems

In paperless input systems, sometimes called

online input systems, transactions are input

directly into the computer network.

Problem:

Possible loss of segregation

of duties and audit trail.


Paperless input systems12 l.jpg

Paperless Input Systems

Source

document

Preparation

Data entry

Performed by the same person


Paperless input systems13 l.jpg

Paperless Input Systems

Transaction logs or transaction registers

are created by logging all inputs to a

special file that automatically contains

tags to identify transactions.


Paperless input systems14 l.jpg

Paperless Input Systems

What is tagging?

It means that additional, audit-oriented

information is included with

original transaction data.


Paperless input systems15 l.jpg

Paperless Input Systems

Examples of paperless

input systems:

Online manual data entry systems

Automatic identification systems


Paperless input systems16 l.jpg

Paperless Input Systems

Transactions in paperless input systems

involving human intervention typically

proceed through two phases.

1. Data entry and data editing

2. Transfer to the host application system


Paperless input systems17 l.jpg

Paperless Input Systems

Completely Automated

Transaction Processing:

Networked vending machine (NVM)

Electronic data interchange (EDI)


Learning objectives 2 and 3 l.jpg

Characterize the various

types of electronic systems

used for processing.

Learning Objectives 2 and 3

Describe the basic functions

of a computerized

accounting application.


Paper based processing systems l.jpg

Paper-Based Processing Systems

Examples of Batch Processing:

Weekly time reports to produce paychecks

Groups of checks to update

accounts payable master files

Processing invoices to update an

accounts receivable master file


Paper based processing systems20 l.jpg

Paper-Based Processing Systems

Performing Batch Processing:

Sequential file updating

Random-access file updating


Batch processing with sequential file updating l.jpg

Batch Processing withSequential File Updating

Steps:

Preparing the transaction file

Updating the master file

Updating the general ledger

Preparing general ledger reports


Sequential file processing l.jpg

1

2

Invoices

Data

terminal

Process

input

3

Transaction

file

Batch

balance

A

Sequential File Processing


Sequential file processing23 l.jpg

Rejected

data

Control

report

Control

report

14

Reconcile

13

Control

procedure

Sequential File Processing

4

5

6

7

Transaction

file

Edit

program

Good data

file

Sort to

master file

sequence

A


Sequential file processing24 l.jpg

Control

data

10

Master file

update

Old

master

11

12

New

master

Transaction

file

Retain for

backup

15

Sequential File Processing

8

9

Sorted

transaction

file

Old master

file


Son father grandfather master files l.jpg

Father

Old

master

file

File

update

Next

file

update

Grandfather

Backup

master

file

Son

New

master

file

Son–Father–GrandfatherMaster Files


Updating the general ledger l.jpg

Updating the General Ledger

There are two major aspects to the operation

of a computerized general ledger system.

1. The direct processing of the general

ledger programs, most of which

takes place on a monthly basis

2. The processing in other computer

application systems to prepare the

inputs to the general ledger system


Journal voucher format l.jpg

Journal Voucher

Number

Month

Year

ID

Accounts

Debit

Credit

Received from:

Journal Voucher Format


General ledger file update l.jpg

General Ledger File Update

As they are released by the general ledger, journal

vouchers are used to build a journal voucher file.

This file is program data edited to check for the

proper journal and account numbers and to

determine whether the accounts are correctly

associated with their related journals.


General ledger file update29 l.jpg

...and returned to their originating

sources for correction and reentry.

General Ledger File Update

Invalid data are reported as exceptions...


General ledger file update30 l.jpg

General Ledger File Update

The current journal voucher transactions

are processed against the previous

month’s general ledger master file.

The master file is updated and the current

period’s general ledger register is produced.


General ledger file update31 l.jpg

Preliminary reports are produced.

Step 1

It is a run that produces the final

listings and financial schedules.

Step 2

General Ledger File Update

Computer processing of accounting data

is typically a two-step procedure.

What are these steps?


General ledger file update32 l.jpg

General Ledger File Update

Preparing reports requires a link between

the general ledger accounts and the

report (s) in which they appear.

Line Coding


Example of a line code l.jpg

100601

0

100

03

2

Type of

report

(e.g., financial)

Line

location

on report

Account

number

(e.g., marketable

securities)

Report

number

(e.g., balance

sheet)

Column

location

on

report

Example of a Line Code


Batch processing with random access file updating l.jpg

Batch Processing withRandom-Access File Updating

In many systems, indexes are maintained for

both the subsidiary and general ledger files.

Maintaining these indexes allows users

to quickly access a particular account.

Random-access file updating is simpler

than sequential-access updating.


Batch processing with random access file updating35 l.jpg

Batch Processing withRandom-Access File Updating

The following steps are used:

1. A record is read from the transaction file.

2. The key value of the transaction

record is used to randomly access

the related record in the master file.

3. The record in the master file is updated

in memory and then rewritten back

to the data file.


Cash receipts application l.jpg

Open

item

accounts

receivable

Billing

data

File control

summary

A

Control

file

File

update

Review and

approve

Cash Receipts Application

New Invoice Application (Daily)


Cash receipts application37 l.jpg

Deposit

report

C

D

Control

file

Activity

file

Bank

summary

file

Reconcile

Bank

statement

System

balancing

B

(Monthly)

Cash Receipts Application

System Balancing (Daily)


Cash receipts application38 l.jpg

Post office

Check

remittances

Cash receipts

total

A

D

Check

endorsement

Deposit

slip

Open item

accounts

receivable

Activity

file

Data entry

C

B

Cash Receipts Application

Cash Remittance Processing (Daily)


Cash receipts application39 l.jpg

D

Deposit

register

Bank

summary

file

D

Cash summary

report

Review

and

sign

Cash summary

report

D

Cash Receipts Application

Cash Remittance Processing (Daily)

Data entry

Reconcile


Paperless processing systems l.jpg

Paperless Processing Systems

Batch processing

Real-time or

online real-time processing


Paperless processing systems41 l.jpg

Paperless Processing Systems

The main difference between paperless and

paper-based batch processing systems is

that journal vouchers are replaced by their

electronic equivalents, and the general ledger

is updated automatically in period batch runs.


Paperless processing systems42 l.jpg

Paperless Processing Systems

A primary advantage of paperless

systems is that they make

possible real-time processing.

The processing of individual transactions

as opposed to groups of transactions

is called immediate, direct,

or real-time processing.


Paperless processing systems43 l.jpg

Paperless Processing Systems

Online, real-time systems (OLRS) process

transactions immediately after they are input.

These systems can provide

immediate output to users.

What are some types of real-time

processing in OLRS?


Paperless processing systems44 l.jpg

Paperless Processing Systems

Inquiry/response systems

Data entry systems

File processing systems

Full processing systems

(transaction processing systems)


Paperless processing systems45 l.jpg

Paperless Processing Systems

Relative disadvantages of OLRS are:

  • increased costs and complexity

    of systems operations

  • sensitivity to hardware and software errors

  • they are more susceptible to processing errors

    that arise from erroneous or fraudulent inputs.


Real time sales system l.jpg

Real-Time Sales System

These systems utilize contemporary information

technology to maximize system performance.

POS (Point-of-Sale) system

Bar coding for automatic identification

EDI (Electronic Data Interchange) ordering system


Real time point of sale system l.jpg

Sales

Inventory

Accounts

receivable

General

ledger

Sales

slips

Customer

input via

Web

browser

POS

terminals

Reports

Internet

Other

terminals

Reports

Real-Time Point-of-Sale System

Processor


Transaction processing in real time sales systems l.jpg

Vendor

EDI

Retailer

send customer

electronic

catalog

>

forecast

customer’s

sales order

receive and

translate

incoming order

<

Transaction Processing inReal-Time Sales Systems


Transaction processing in real time sales systems49 l.jpg

send order to

inventory or

production

transmit advance

shipping notice

>

ship goods

Transaction Processing inReal-Time Sales Systems

Vendor

EDI

Retailer

send

acknowledgement

>


The output system l.jpg

The Output System

The output system can be paper-based,

paperless, or something in between.

Most paper-based, batch-oriented systems

with sequential file processing produce

very large volumes of output.

Online, real-time paperless systems

tend to produce very little output.


The output system51 l.jpg

The Output System

Output controls are designed to check that

processing results in valid output and

that outputs are properly distributed.

A separate EDP control group is often

established to monitor EDP operations.

Typically, an output distribution register is

maintained to control the disposition of reports.


End of chapter 6 l.jpg

End of Chapter 6


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