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Accounting File & Transaction Processing System

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Accounting File & Transaction Processing System

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  1. Accounting File & Transaction Processing System Source: Wilkinson

  2. File Classifications (Master Files) • Master files: These contain (semi) permanent data (records) pertaining to entities (people, places, and things). Accounting related examples include: • General and Subsidiary ledgers • General ledger master file • Customer/Accounts Receivable master file • Vendor/Accounts Payable master file • Inventory master file • Employee/Payroll master file • Open WIP master file • Standard cost master file

  3. File Classification (Transaction Files - I) • Transaction files: These contain records pertaining to events currently being processed, such as sales, receipts of goods, etc. • Transaction files capture detailed transaction data. They are counterparts to general and special journals in manual systems • Transaction data are periodically posted to related master file(s) and are then either purged or archived

  4. File Classification (Transaction Files - II) • Accounting related transaction files include: • General/Special journal file (General ledger) • Sales/Cash receipts file (Accounts receivable) • Receiving/Purchases file, Cash disbursements file (Inventory, Accounts payable) • Inventory issuance file/shipment file/sales file/adjustments file (Inventory) • Payroll/Cash disbursements (Payroll)

  5. Other File Classifications - I • Reference files: These contain tables or lists of data needed for making calculations or for checking the accuracy of input data. e.g., product price tables, customer lists, etc. • History files: These are also called archive files since they contain records pertaining to completed transactions such as past sales • Open files: These record incomplete transactions. Whereas transaction files are purged or archived at the end of a given period, open files remain indefinitely open. Only individual records from Open files get purged as the transaction actually occurs or does not. e.g., Open sales order file Sales transaction file

  6. Other File Classifications - II • Report files: These are derived from records within master or transaction files. e.g., data may be periodically extracted from the Accounts Receivable master file to construct an aging schedule • Backup file: This is a copy of a current file generated so that the original file can be recreated from it • Suspense file: This is a collection of those records of a transaction file that appear to contain erroneous or questionable data

  7. Record-Key • Record keys: These are data elements within records that serve as sort keys. e.g., customer-account number • Two types of keys often used in master and transaction file records are a primary key and one or more secondary keys • A Primary key (also called a record key) is the attribute that uniquely identifies a specific record. They are usually of numeric or alphanumeric modes, e.g., customer number • A Secondary key is an attribute other than the primary key and represents an alternative way to sort or access records in a file, e.g., customer last name

  8. Transaction Processing Systems • A fundamental task in any AIS is to process transactions affecting the organization • Transaction processing systems) involve three stages: • Data entry • Data and file processing • Output preparation

  9. Benefits of Understanding Transaction Processing Systems • Recognize limitations in currently installed Transaction Processing Systems such as: • inadequate data controls • inefficient processing • out-of-date files • stored data that cannot be accessed quickly • data that is poorly classified and coded • Recommend new or improved processing approaches and storage methods

  10. Layout of Input-Process-Output Discussion

  11. Data Entry • Most transactions are initiated by business events triggered by various agents or by instructions within a computer program • Other transactions are initiated by the passage of time, e.g., interest accruals • Computer-based systems employ an off-line or on-line approach to data entry

  12. Off-line Data Entry • Off-line refers to input devices not directly connected to the computer. Examples are key-to-tape, key-to-disk, and OCR readers • Data must be first captured on source documents and similar transactions are batched together • Batched transactions are transcribed into machine-readable form using an off-line device • Turnarounddocumentsmay be used as direct input into a system

  13. On-line Data Input • On-line refers to devices that are directly and continuously connected to a computer system • In on-linedataentry, transaction data are entered into the computer directly as they occur • Characteristics 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)

  14. Input Documents • Input documents typically do the following: • Authorize Subsequent Transactions • Trigger Desired Actions • Reflect Accountability • Provide Data for Output and Reference

  15. On-line Data Entry design • Four factors that can reduce the tendency for errors in on-line data entry are: • Menus that clearly define alternative actions • Dialogue prompts that display suggestions or questions to the user • Graphical user interfaces that allow a user to make selections • Preformatted screens that display formats for transaction documents. These can be associated with menu options

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

  17. Options in Computer-Based Transaction Processing

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

  19. Batch Processing Method • In 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 data • Advantages of batch processing include: • processing can be done in background mode • processing is only performed when needed • batch processing leaves a good audit trail • Disadvantages: • 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

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

  21. Real-time Processing Method • Advantages ofreal-time processing include: • This method keeps the master file more current than the batch runs • Errors are caught at the time of data entry • Drawbacks of real-time processing include: • More complex and expensive than batch systems • Harder to audit • Controls and backup procedures are more elaborate in order to guard against unwarranted access and human error

  22. Sequential vs. Direct Updating • Sequential 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.

  23. Source Documents Origination of Transactions Batch of Documents Batch Documents & Compute Totals Batch Totals Prepare Batch Documents for Sequential Processing Prepare Financial Outputs Subsidiary and General ledgers Updated Records Post Data to Accounting Records & Verify Batch Totals Financial Statement & other Outputs Sorted Batch of Documents Recipients of Outputs Transaction Data (Journals) DFD Showing Batched Sequential Processing of Transactions

  24. Enterprise Resource Planning • ERP 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 integrated • ERP systems also facilitate access to data that are within the firm but outside the ERP system • Standardization of worldwide systems, consistent and accessible data, and on-line processing of data result in firm-wide data availability

  25. File Management Issues • A File is a collection of related data stored together for future use • All computerized applications involving transaction processing typically employ one or more files • Because of their involvement with transaction processing, and auditing of such processing, accountants need to be aware of file management issues

  26. File Access - I • Sequential Access: This requires each record in a file to be scanned, beginning with the first record in the file • The 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

  27. File Access - II • Direct 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 file • Significant methods of Direct Access include: • Indexed sequential file • Randomization • Binary searches • Linked lists • Inverted lists • All Direct Access methods require direct-access storage media such as magnetic disks and the use of Pointers • Pointers 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

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

  29. Indexed Sequential File - II Data File Index File Emp. Name Pointer Albany 6 Carter 1 Finsbury 3 Goodrich 4 Jenkins 9 Petersen 8 Schneider 2 Sykes 5 Williamson 7 Addr Emp. # Name 1 500 Carter 2 501 Schneider 3 503 Finsbury 4 504 Goodrich 5 506 Sykes 6 508 Albany 7 509 Williamson 8 512 Petersen 9 513 Jenkins 1 3 2 Binary Search

  30. Individual Record Retrieval Using the ISAM Method Data File Index File • Product # Pointer 1 • 105010 • 110020 7 • 115015 12 Product # Description 1. 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 Reagent 13. 116000 Additive Inverted list on Product #

  31. Randomization • This 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.

  32. Coding • AISs depend on coding to record, store, classify and retrieve financial data. • Computer systems most often usenumeric codes or alphanumeric codes for processing accounting transactions. • Purposes of coding: • uniquely identifies transactions and accounts • compresses data • aids in classification process • conveys special meanings

  33. Coding Systems • Mnemonic Codes give visible clues concerning the objects they represent • Sequence Codesarethe simplest type of coding scheme that assign numbers or letters in consecutive order • Block Codes assign a series of numbers within a sequence to entities or events having common features • Group Codes reveal two or more dimensions or facets pertaining to an object

  34. Design Considerations in Coding • Codes should serve some useful purpose • Codes should be consistent • Codes should be standardized throughout the organization • Codes should plan for future expansion