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C HAPTER 2
Overview of Business
Processes
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INTRODUCTION
Questions to be addressed in this chapterinclude: What are the basic business processes in which an
organization engages?
What decisions must be made to undertake theseprocesses? What information is required to make those decisions?
What role does the data processing cycle play inorganizing business processes and providinginformation to users?
What is the role of the information system andenterprise resource planning in modernorganizations?
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INFORMATION NEEDS AND
BUSINESS PROCESSES
Businesses engage in a variety of processes,including: Acquiring capital
Buying buildings and equipment
Hiring and training employees
Purchasing inventory
Doing advertising and marketing
Selling goods or services
Collecting payment from customers
Paying employees
Paying taxes
Paying vendors
Each activity
requires
different types
of decisions.
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INFORMATION NEEDS AND
BUSINESS PROCESSES
Businesses engage in a variety of processes,including: Acquiring capital
Buying buildings and equipment
Hiring and training employees
Purchasing inventory
Doing advertising and marketing
Selling goods or services
Collecting payment from customers
Paying employees
Paying taxes
Paying vendors
Each decision
requires
different types
of information.
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Types of information needed for decisions:
Some is financial
Some is nonfinancial
Some comes from internal sources
Some comes from external sources
An effective AIS needs to be able to
integrate information of different types andfrom different sources.
INFORMATION NEEDS AND
BUSINESS PROCESSES
By improving business processes leading to efficient
production, Toyota has become the largest automobile
manufacturer in the world, a title held by General Motors for
almost 100 years.
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INTERACTION WITH EXTERNAL AND
INTERNAL PARTIES
The AIS interacts with external parties,such as customers, vendors, creditors,and governmental agencies.
AIS
External
Parties
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INTERACTION WITH EXTERNAL AND
INTERNAL PARTIES
The AIS also interacts with internal partiessuch as employees and management.
AIS
Internal
Parties
External
Parties
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INTERACTION WITH EXTERNAL AND
INTERNAL PARTIES
The interaction is typically two way, in thatthe AIS sends information to and receivesinformation from these parties.
AIS
Internal
Parties
External
Parties
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A transaction is: An agreement between two entities to
exchange goods or services; OR
Any other event that can be measured ineconomic terms by an organization.
EXAMPLES:
Sell goods to customers Depreciate equipment
BUSINESS CYCLES
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The business transaction cycle is aprocess that:
Begins with capturing data about atransaction.
Ends with an information output, such asfinancial statements.
BUSINESS CYCLES
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Many business processes are paired ingive-get exchanges.
Basic exchanges can be grouped into five
major transaction cycles: Revenue cycle
Expenditure cycle
Production cycle Human resources/payroll cycle
Financing cycle
BUSINESS CYCLES
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Many business processes are paired ingive-get exchanges.
The basic exchanges can be grouped into
five major transaction cycles: Revenue cycle
Expenditure cycle
Production cycle Human resources/payroll cycle
Financing cycle
BUSINESS CYCLES
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The revenue cycle involves interactionswith your customers.
You sell goods or services and get cash.
REVENUE CYCLE
GiveGoods GetCash
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Many business processes are paired ingive-get exchanges.
The basic exchanges can be grouped into
five major transaction cycles: Revenue cycle
Expenditure cycle
Production cycle Human resources/payroll cycle
Financing cycle
BUSINESS CYCLES
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The expenditure cycle involvesinteractions with your suppliers.
You buy goods or services and pay cash.
EXPENDITURE CYCLE
GiveCash GetGoods
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Many business processes are paired ingive-get exchanges.
The basic exchanges can be grouped into
five major transaction cycles: Revenue cycle
Expenditure cycle
Production cycle Human resources/payroll cycle
Financing cycle
BUSINESS CYCLES
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In the production cycle, raw materials andlabor are transformed into finished goods.
PRODUCTION CYCLE
Give Raw
Materials &Labor
Get
FinishedGoods
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Many business processes are paired ingive-get exchanges.
The basic exchanges can be grouped into
five major transaction cycles: Revenue cycle
Expenditure cycle
Production cycle Human resources/payroll cycle
Financing cycle
BUSINESS CYCLES
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The human resources cycle involvesinteractions with your employees.
Employees are hired, trained, paid,evaluated, promoted, and terminated.
HUMAN RESOURCES/
PAYROLL CYCLE
Give
Cash GetLabor
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Many business processes are paired ingive-get exchanges.
The basic exchanges can be grouped into
five major transaction cycles: Revenue cycle
Expenditure cycle
Production cycle Human resources/payroll cycle
Financing cycle
BUSINESS CYCLES
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The financing cycle involves interactions withinvestors and creditors.
You raise capital (through stock or debt), repay
the capital, and pay a return on it (interest ordividends).
FINANCING CYCLE
Give
Cash Getcash
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Thousands of transactions can occurwithin any of these cycles.
But there are relatively few types oftransactions in a cycle.
BUSINESS CYCLES
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EXAMPLE: In the revenue cycle, the basicgive-get transaction is:
Give goods
Get cash
BUSINESS CYCLES
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Other transactions in the revenue cycle include:
BUSINESS CYCLES
Handle customer inquiries
Take customer orders
Approve credit sales Check inventory availability
Initiate back orders
Pick and pack orders
Ship goods Bill customers
Update sales and Accts Rec.for sales
Receive customer payments Update Accts Rec. for
collections
Handle sales returns,discounts, and bad debts
Prepare management reports
Send info to other cyclesNote that the last activity in any
cycle is to send information to other
cycles.
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Click on the buttons below if you wish tosee the transactions that occur in the othercycles:
BUSINESS CYCLES
Expenditure
Cycle
Human Res./
Payroll Cycle
Production
Cycle
Financing
Cycle
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Transactions in the expenditure cycle:
BUSINESS CYCLES
MAJOR GIVE-GET:
Give cash; get goods or
services OTHER TRANSACTIONS
Requisition goods and services
Process purchase orders tovendors
Receive goods and services Store goods
Receive vendor invoices
Update accounts payable forpurchase
Approve invoices for payment Pay vendors
Update accounts payable forpayment
Handle purchase returns,
discounts, and allowances
Prepare management reports
Send info to other cycles
Back
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Transactions in the HR/payroll cycle:
BUSINESS CYCLES
MAJOR GIVE-GET:
Give cash; get labor
OTHER TRANSACTIONS Recruit, hire, and train
employees
Evaluate and promoteemployees
Discharge employees
Update payroll records
Pay employees
Process timecard and
commission data Prepare and distribute
payroll
Calculate and disburse taxand benefit payments
Prepare management reports
Send info to other cycles
Back
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Transactions in the production cycle:
BUSINESS CYCLES
MAJOR GIVE-GET:
Give labor and raw materials;
Get finished goods OTHER TRANSACTIONS
Design products
Forecast, plan, and scheduleproduction
Requisition raw materials
Manufacture products
Store finished goods
Accumulate costs for
products Prepare management reports
Send info to other cycles
Back
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Transactions in the financing cycle:
BUSINESS CYCLES
MAJOR GIVE-GET:
Give cash; get cash
OTHER TRANSACTIONS Forecast cash needs
Sell securities to investors
Borrow money from lenders
Pay dividends to investorsand interest to lenders
Retire debt Prepare management reports
Send info to other cycles
Back
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Every transaction cycle: Relates to other cycles.
Interfaces with the general ledger and
reporting system, which generates informationfor management and external parties.
BUSINESS CYCLES
Finished Goods
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General Ledger
and ReportingSystem
Revenue
Cycle
Expenditure
CycleProduction
Cycle
Human Res./
Payroll CycleFinancing
Cycle
The Revenue Cycle Gets finished
goods from theproduction cycle.
Provides funds tothe financing cycle.
Provides data tothe general ledgerand reportingsystem.
Funds
Data
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General Ledger
and ReportingSystem
Revenue
Cycle
Expenditure
CycleProduction
Cycle
Human Res./
Payroll CycleFinancing
Cycle
The ExpenditureCycle Gets funds from
the financing cycle. Provides raw
materials to the
production cycle. Provides data to
the general ledgerand reportingsystem.
Fund
s
Raw
Mats.
Da
ta
Finished Goods
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General Ledger
and ReportingSystem
Revenue
Cycle
Expenditure
CycleProduction
Cycle
Human Res./
Payroll CycleFinancing
Cycle
The Production Cycle: Gets raw materials
from the expenditurecycle.
Gets labor from theHR/payroll cycle.
Provides finishedgoods to the revenuecycle.
Provides data to thegeneral ledger andreporting system.
Raw
Mats.
Data
Finished Goods
Labor
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General Ledger
and ReportingSystem
Revenue
Cycle
Expenditure
CycleProduction
Cycle
Human Res./
Payroll CycleFinancing
Cycle
The HR/PayrollCycle: Gets funds from
the financing cycle
Provides labor to
the productioncycle.
Provides data tothe general ledgerand reportingsystem.
Labor
Funds
Data
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General Ledger
and ReportingSystem
Revenue
Cycle
Expenditure
CycleProduction
Cycle
Human Res./
Payroll CycleFinancing
Cycle
The FinancingCycle: Gets funds from
the revenue cycle.
Provides funds tothe expenditure
and HR/payrollcycles.
Provides data tothe general ledgerand reportingsystem.
Funds
Data
Funds
Funds
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General Ledger
and ReportingSystem
Revenue
Cycle
Expenditure
CycleProduction
Cycle
Human Res./
Payroll CycleFinancing
Cycle
The General Ledgerand Reporting System:
Gets data from all ofthe cycles.
Provides informationfor internal and
external users.
Information for
Internal & External Users
Da
taDa
ta
Data
Data
Data
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Many accounting software packagesimplement the different transaction cyclesas separate modules.
Not every module is needed in everyorganization, e.g., retail companies dont havea production cycle.
Some companies may need extra modules. The implementation of each transaction cycle
can differ significantly across companies.
BUSINESS CYCLES
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However the cycles are implemented, it iscritical that the AIS be able to:
Accommodate the information needs of
managers. Integrate financial and nonfinancial data.
BUSINESS CYCLES
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Accountants play an important role in dataprocessing. They answer questions such as: What data should be entered and stored?
Who should be able to access the data? How should the data be organized, updated, stored,
accessed, and retrieved?
How can scheduled and unanticipated information
needs be met? To answer these questions, they must
understand data processing concepts.
TRANSACTION PROCESSING:
THE DATA PROCESSING CYCLE
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An important function of the AIS is toefficiently and effectively process the dataabout a companys transactions.
In manualsystems, data is entered into paperjournals and ledgers.
In computer-basedsystems, the series of
operations performed on data is referred to asthe data processing cycle.
TRANSACTION PROCESSING:
THE DATA PROCESSING CYCLE
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The data processing cycle consists of foursteps:
Data input
Data storage
Data processing
Information output
TRANSACTION PROCESSING:
THE DATA PROCESSING CYCLE
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The data processing cycle consists of foursteps:
Data input
Data storage
Data processing
Information output
TRANSACTION PROCESSING:
THE DATA PROCESSING CYCLE
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The first step in data processing is tocapture the data.
Usually triggered by a business activity.
Data is captured about:
The eventthat occurred.
The resources affected by the event.
The agents who participated.
DATA INPUT
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A number of actions can be taken toimprove the accuracy and efficiency ofdata input:
Turnaround documents.
DATA INPUT
EXAMPLE: The stub on your telephone bill that you tear off andreturn with your check when you pay the bill.
The customer account number is coded on the document, usuallyin machine-readable form, which reduces the probability of human
error in applying the check to the correct account.
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A number of actions can be taken toimprove the accuracy and efficiency ofdata input:
Turnaround documents.
Source data automation.
DATA INPUT
Capture data with minimal human intervention.
EXAMPLES: ATMs for banking.
Point-of-sale (POS) scanners in retail stores.
Automated gas pumps that accept your credit card.
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A number of actions can be taken toimprove the accuracy and efficiency ofdata input:
Turnaround documents. Source data automation.
Well-designed source documents and dataentry screens.
Using pre-numbered documents or havingthe system automatically assignsequential numbers to transactions.
DATA INPUT
What does it mean if a document number is missing in thesequence?
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A number of actions can be taken toimprove the accuracy and efficiency ofdata input:
Turnaround documents. Source data automation.
Well-designed source documents and dataentry screens.
Using pre-numbered documents or havingthe system automatically assignsequential numbers to transactions.
DATA INPUT
What does it mean if there are duplicate documentnumbers?
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A number of actions can be taken to improve theaccuracy and efficiency of data input: Turnaround documents.
Source data automation. Well-designed source documents and data entry
screens.
Using pre-numbered documents or having the system
automatically assign sequential numbers totransactions.
Verify transactions.
DATA INPUT
EXAMPLE: Check for inventory availability beforecompleting an online sales transaction.
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The data processing cycle consists of foursteps:
Data input
Data storageData storage
Data processing
Information output
TRANSACTION PROCESSING:
THE DATA PROCESSING CYCLE
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Data needs to be organized for easy andefficient access.
Lets start with some vocabulary termswith respect to data storage.
DATA STORAGE
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Ledger
DATA STORAGE
A ledgeris a file used to store cumulative
information about resources and agents. Wetypically use the word ledgerto describe the setof t-accounts. The t-account is where we keeptrack of the beginning balance, increases,
decreases, and ending balance for each asset,liability, owners equity, revenue, expense, gain,loss, and dividend account.
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Ledger Following is an example of a ledger account
for accounts receivable:
DATA STORAGE
ACCOUNT: Accounts
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Ledger
General ledger
DATA STORAGE
The general ledgeris the summary levelinformation for all accounts. Detail information isnot kept in this account.
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Ledger
General ledger
DATA STORAGE
Example: Suppose XYZ Co. has threecustomers. Anthony Adams owes XYZ $100. BillBrown owes $200. And Cory Campbell owesXYZ $300. The balance in accounts receivable in
the general ledger will be $600, but you will notbe able to tell how much individual customersowe by looking at that account. The detail isntthere.
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Ledger
General ledger
Subsidiary ledger
DATA STORAGE
The subsidiary ledgers contain the detailaccounts associated with the related generalledger account. The accounts receivable
subsidiary ledger will contain three separatet-accountsone for Anthony Adams, one for BillBrown, and one for Cory Campbell.
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Ledger
General ledger
Subsidiary ledger
DATA STORAGE
The related general ledger account is oftencalled a control account.
The sum of the subsidiary account balancesshould equal the balance in the controlaccount.
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Ledger
General ledger
Subsidiary ledger
Coding techniques
DATA STORAGE
With sequence codes, items (such as checks or invoices) arenumbered consecutively to ensure no gaps in the sequence.
The numbering helps ensure that: All items are accounted for.
There are no duplicated numbers, which would suggest errors orfraud.
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Ledger
General ledger
Subsidiary ledger
Coding techniques
DATA STORAGE
When block codes are used, blocks of numbers within anumerical sequence are reserved for a particular category.
EXAMPLE: The first three digits of a Social Security numbermake up a block code that indicates the state in which the
Social Security number was issued:
001003 New Hampshire
004007 Maine
008009 Vermont
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Ledger
General ledger
Subsidiary ledger
Coding techniques
DATA STORAGE
When group codes are used, two or more subgroups ofdigits are used to code an item.
EXAMPLE: The code in the upper, right-hand corner of manychecks is a group code organized as follows:
Digits 12 Bank number
Digit 3 Federal Reserve District
Digits 47 Branch office of Federal Reserve
Digits 89 State
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Ledger
General ledger
Subsidiary ledger
Coding techniques
DATA STORAGE
Group coding schemes are often used in assigning generalledger account numbers. The following guidelines should be
observed:
The code should be consistent with its intended use, so makesure you know what users need.
Provide enough digits to allow room for growth.
Keep it simple in order to:
Minimize costs
Facilitate memorization
Ensure employee acceptance
Make sure its consistent with:
The companys organization structure
Other divisions of the organization
The chart of accounts is a list of all general ledger accounts an organization uses.
Group coding is often used for these numbers e g :
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Ledger
General ledger
Subsidiary ledger
Coding techniques
Chart of accounts
DATA STORAGEGroup coding is often used for these numbers, e.g.:
The first section identifies the major account categories, such as asset, liability,revenue, etc.
The second section identifies the primary sub-account, such as current asset or
long-term investment. The third section identifies the specific account, such as accounts receivable or
inventory.
The fourth section identifies the subsidiary account, e.g., the specific customercode for an account receivable.
The structure of this chart is an important AIS issue, as it must contain sufficient
detail to meet the organizations needs.
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Ledger
General ledger
Subsidiary ledger
Coding techniques
Chart of accounts
DATA STORAGE Table 2-4 in your textbook contains the chart of accounts for
S&S. What is the account number for federal unemployment taxes
payable?
What is the account number for cost of goods sold?
What is the range of account numbers for expenses?
With this chart of accounts, can S&S easily distinguish the coststhey incur for automobile insurance from the costs for health
insurance?
In manual systems and some accounting packages, thefirst place that transactions are entered is the journal
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Ledger
General ledger
Subsidiary ledger
Coding techniques
Chart of accounts
Journals
DATA STORAGEfirst place that transactions are entered is the journal.
A general journal is used to record:
Non-routine transactions, such as loan payments
Summaries of routine transactions
Adjusting entries Closing entries
A special journal is used to record routine transactions. Themost common special journals are:
Cash receipts
Cash disbursements Credit sales
Credit purchases
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Ledger
General ledger
Subsidiary ledger
Coding techniques
Chart of accounts
Journals Audit trail
DATA STORAGE
An audit trail exists when there is sufficientdocumentation to allow the tracing of a
transaction from beginning to end or from the
end back to the beginning.
The inclusion of posting references anddocument numbers enable the tracing oftransactions through the journals and ledgers
and therefore facilitate the audit trail.
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Now that weve learned some storageterminology, lets return to the datastorage process.
When transaction data is captured on asource document, the next step is torecord the data in a journal.
A journal entry is made for eachtransaction showing the accounts andamounts to be credited.
DATA STORAGE
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If you took a principles of financial accounting class, youprobably worked with journals that looked something likethis:
DATA STORAGE
01/15/04 Accounts receivable 2,200
Sales revenue 2,200
01/18/04 Cash 1,800
Accounts receivable 1,800
01/21/04 Salaries expense 900
Cash 900
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You may not have gotten much experience withspecial journals, but in most real-worldsituations, journal entries really work like this. Entries are originally made in the general journal only
for: Non-routine transactions
Summaries of routine transactions
Routine transactions are originally entered in specialjournals. The most common special journals are:
Credit sales
Cash receipts
Credit purchases
Cash disbursements
DATA STORAGE
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Lets work through an example with aspecial journal. In this case well use thesales journal.
DATA STORAGE
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On December 1, a sale is made to LeeCo. for $800. Lee Co. was sent InvoiceNo. 201.
DATA STORAGE
Page 5
Date
Invoice
Number
Account
Debited
Account
Number Post Re f. Amount
12/01/04 201 Lee Co. 120-122 800.00
Sales Journal
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The general ledger account number for accountsreceivable is No. 120. Lee Co. was about the 122ndcustomer, so their subsidiary account number is 120-122.
DATA STORAGE
Page 5
Date
Invoice
Number
Account
Debited
Account
Number Post Re f. Amount
12/01/04 201 Lee Co. 120-122 800.00
Sales Journal
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The next sale on December 1 was madeto May Co. for $700.
DATA STORAGE
Page 5
Date
Invoice
Number
Account
Debited
Account
Number Post Ref. Amount
12/01/04 201 Lee Co. 120-122 800.00
12/01/04 202 May Co. 120-033 700.00
Sales Journal
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The third and final sale on December 1was made to DLK Co. for $900.
DATA STORAGE
Page 5
Date
Invoice
Number
Account
Debited
Account
Number Post Ref. Amount
12/01/04 201 Lee Co. 120-122 800.00
12/01/04 202 May Co. 120-033 700.00
12/01/04 203 DLK Co. 120-111 900.00
Sales Journal
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Suppose the company making these sales poststransactions at the end of each day. Consequently,at days end, they will post each individualtransaction to the accounts receivable subsidiary
ledger: An $800 increase in accounts receivable (debit) will be
posted to Lee Co.s subsidiary account (120-122).
A $700 debit will be posted to May Co.s subsidiary
account (120-033).
A $900 debit will be posted to DLK Co.s subsidiaryaccount (120-111).
DATA STORAGE
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Then a summary journal entry must be made tothe general journal. The sales for the period aretotaled. In this case, they add up to $2,400.
DATA STORAGE
Page 5
Date
Invoice
Number
Account
Debited
Account
Number Post Ref. Amount
12/01/04 201 Lee Co. 120-122 800.00
12/01/04 202 May Co. 120-033 700.00
12/01/04 203 DLK Co. 120-111 900.00
TOTAL 2,400.00
120/502
Sales Journal
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The 120/502 that appears beneath the total indicatesthat a summary journal entry is made in the general
journal with a debit to accounts receivable (120) and acredit to sales (502).
DATA STORAGE
Page 5
Date
Invoice
Number
Account
Debited
Account
Number Post Ref. Amount
12/01/04 201 Lee Co. 120-122 800.00
12/01/04 202 May Co. 120-033 700.00
12/01/04 203 DLK Co. 120-111 900.00
TOTAL 2,400.00
120/502
Sales Journal
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The entries in the general journal are periodically (orautomatically) posted to the general ledger. The $2,400debit to accounts receivable will be posted to theaccounts receivable control account, and the $2,400
credit will be posted to the general ledger account forsales.
DATA STORAGE
12/01/04 Accounts rece ivable 2,400
Sales revenue 2,400
12/01/04 Cash 1,800
Accounts receivable 1,800
12/01/04 Salaries expense 900
Cash 900
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From time to time, the subsidiary accountbalances will be added up, and this sumwill be compared to the balance of the
control account. What does it mean if they arent equal?
DATA STORAGE
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Review so far: When routine transactions occur, they are recorded in
special journals.
When non-routine transactions occur, they are recorded inthe generaljournal.
Periodically, the transactions in the special journal aretotaled, and a summary entry is made in the general journal.
The individual line items in the special journal are posted tothe subsidiary ledger accounts.
The items in the general journal are posted to the general
ledger. Periodically, the balances in the general ledger control
accounts are compared to the sums of the balances in therelated subsidiary accounts.
DATA STORAGE
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Click the button below if you wish togo through a summary of theremaining steps in the accounting
cycle:
DATA STORAGE
See Remainder
Of
Accounting Cycle
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The rest of the story: As transactions occur, they are
recorded in journals and then posted to
ledgers. But thats not the end of the story.
At the end of each accounting period,
we complete the process by carrying outthe following steps.
DATA STORAGE
S O G
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Using the balances in the general ledger, prepare a trialbalance.
DATA STORAGE
Debit Credit
Cash 1,000
Accounts Receivable 250
Equipment 4,000
Accum. Deprec. 360Notes Payble 300
Common Stock 1,800
Retained Earnings 2,400
Sales Revenue 1,290
Salary expense 300
Rent expense 600
6,150 6,150
DATA STORAGE
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Prepare the end-of-period adjusting entries. Record in journal
Post to ledger
Make an adjusted trial balance.
Using the numbers in the adjusted trial balance,prepare an income statement.
Prepare closing entries.
Prepare:
Statement of stockholders equity Balance sheet
Statement of cash flows
DATA STORAGE
COMPUTER-BASED STORAGE
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Now lets move on to discussing somecomputer-based storage concepts, including: Entity
Attribute
Record Data Value
Field
File
Master File Transaction File
Database
COMPUTER BASED STORAGE
CONCEPTS
COMPUTER-BASED STORAGE
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An entity is something about which informationis stored.
In your universitys student information system,one entity is the student. The student information
system stores information about students. What are some other entities in your student
information system?
COMPUTER BASED STORAGE
CONCEPTS
COMPUTER-BASED STORAGE
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Attributes are characteristics of interest withrespect to the entity.
Some attributes that a student informationsystem typically stores about the student entity
are: Student ID number
Phone number
Address
What are some other attributes about studentsthat a university might store?
COMPUTER BASED STORAGE
CONCEPTS
COMPUTER-BASED STORAGE
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A field is the physical space where an attribute isstored.
The space where the student ID number isstored is the student ID field.
COMPUTER BASED STORAGE
CONCEPTS
Col. 19 Col. 1030 Col. 3140 Col. 4150
328469993 SIMPSON ALICE 4053721111328500732 ANDREWS BARRY 4057440236
529036409 FLANDERS CARLA 4057475863
COMPUTER-BASED STORAGE
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A record is the set of attributes stored for aparticular instance of an entity.
The combination of attributes stored for BarryAndrews is Barrys record.
COMPUTER BASED STORAGE
CONCEPTS
Col. 19 Col. 1030 Col. 3140 Col. 4150
328469993 SIMPSON ALICE 4053721111328500732 ANDREWS BARRY 4057440236
529036409 FLANDERS CARLA 4057475863
COMPUTER-BASED STORAGE
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A data value is the intersection of the row andcolumn.
The data value for Barry Andrews phonenumber is 405-744-0236.
COMPUTER BASED STORAGE
CONCEPTS
Col. 19 Col. 1030 Col. 3140 Col. 4150
328469993 SIMPSON ALICE 4053721111328500732 ANDREWS BARRY 4057440236
529036409 FLANDERS CARLA 4057475863
COMPUTER-BASED STORAGE
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A file is a group of related records. The collection of records about all students at
the university might be called the student file. Ifthere were only three students and four
attributes stored for each student, the file mightappear as shown below:
CO U S S O G
CONCEPTS
Col. 19 Col. 1030 Col. 3140 Col. 4150
328469993 SIMPSON ALICE 4053721111328500732 ANDREWS BARRY 4057440236
529036409 FLANDERS CARLA 4057475863
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COMPUTER-BASED STORAGE
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A transactionfile is a file that containsrecords of individual transactions (events)that occur during a fiscal period.
It is conceptually similar to a journal in amanual AIS in that: The files are temporary.
The files are usually maintained for one fiscal
period.
CONCEPTS
COMPUTER-BASED STORAGE
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A database is a set of interrelated, centrally-coordinated files.
When files about students are integrated withfiles about classes and files about instructors,
we have a database.
CONCEPTS
Student
FileClass
File
Instructor
File
TRANSACTION PROCESSING:
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The data processing cycle consists of foursteps:
Data input
Data storage Data processingData processing
Information output
THE DATA PROCESSING CYCLE
DATA PROCESSING
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Once data about a business activity hasbeen collected and entered into a system,it must be processed.
DATA PROCESSING
DATA PROCESSING
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There are four different types of fileprocessing: Updating data to record the occurrence of an
event, the resources affected by the event, andthe agents who participated, e.g., recording asale to a customer.
Changing data, e.g., a customer address.
Adding data, e.g., a new customer.
Deleting data, e.g., removing an old customerthat has not purchased anything in 5 years.
DATA PROCESSING
DATA PROCESSING
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Updating can be done through severalapproaches: Batch processingBatch processing
DATA PROCESSING
DATA PROCESSING
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Batch processing: Source documents are grouped into batches,
and control totals are calculated.
Periodically, the batches are entered into thecomputer system, edited, sorted, and storedin 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 errorreports, transaction reports, and control totals.
DATA PROCESSING
DATA PROCESSING
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Updating can be done through severalapproaches: Batch processing
Online batch processingOnline batch processing
DATA PROCESSING
DATA PROCESSING
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Online batch processing: Transactions are entered into a computer
system as they occur and stored in atemporary file.
Periodically, the temporary transaction file isrun against the master file to update themaster file.
The output is printed or displayed.
DATA PROCESSING
DATA PROCESSING
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Updating can be done through severalapproaches: Batch processing
Online batch processing Online, real-time processingOnline, real-time processing
DATA PROCESSING
DATA PROCESSING
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Online, real-time processing Transactions are entered into a computer
system as they occur.
The master file is immediately updated withthe data from the transaction.
Output is printed or displayed.
DATA PROCESSING
DATA PROCESSING
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Updating can be done through severalapproaches: Batch processing
Online batch processing Online, real-time processing
If youre going through enrollment,which of these approaches would you
prefer that your university was using? Why?
DATA PROCESSING
TRANSACTION PROCESSING:
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The data processing cycle consists of foursteps:
Data input
Data storage Data processing
Information outputInformation output
THE DATA PROCESSING CYCLE
INFORMATION OUTPUT
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The final step in the information process isinformation output.
This output can be in the form of:
DocumentsDocuments
INFORMATION OUTPUT
Documents are records oftransactions or other company data.
EXAMPLE: Employee paychecks orpurchase orders for merchandise.
Documents generated at the end ofthe transaction processing activities
are known as operational documentsoperational documents(as opposed to source documents).
They can be printed or stored aselectronic images.
INFORMATION OUTPUT
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The final step in the information process isinformation output.
This output can be in the form of:
Documents
ReportsReports
INFORMATION OUTPUT
Reports are used by employees tocontrol operational activities and by
managers to make decisions anddesign strategies.
They may be produced: On a regular basis
On an exception basis
On demand Organizations should periodicallyreassess whether each report isneeded.
INFORMATION OUTPUT
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The final step in the information process isinformation output.
This output can be in the form of:
Documents
Reports
QueriesQueries
INFORMATION OUTPUT
Queries are user requests for specificpieces of information.
They may be requested: Periodically
One time
They can be displayed: On the monitor, called soft copy.
On the screen, called hard copy.
INFORMATION OUTPUT
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Output can serve a variety of purposes: Financial statements can be provided to both
external and internal parties.
Some outputs are specifically for internal use: For planning purposesFor planning purposes
INFORMATION OUTPUT
Examples of outputs for planningpurposes include:
Budgets Budgets are an entitys formal expression of
goals in financial terms.
Sales forecasts
INFORMATION OUTPUT
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Output can serve a variety of purposes: Financial statements can be provided to both
external and internal parties.
Some outputs are specifically for internal use: For planning purposes
For management of day-to-day operationsFor management of day-to-day operations
INFORMATION OUTPUT
Example: Delivery schedules
INFORMATION OUTPUT
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Output can serve a variety of purposes: Financial statements can be provided to both
external and internal parties.
Some outputs are specifically for internal use: For planning purposes
For management of day-to-day operations
For control purposesFor control purposes
INFORMATION OUTPUT Performance reports are outputs that are
used for control purposes.
These reports compare an organizationsstandard or expected performance withits actual outcomes.
Management by exception is an approach
to utilizing performance reports thatfocuses on investigating and acting ononly those variances that are significant.
INFORMATION OUTPUT
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Output can serve a variety of purposes: Financial statements can be provided to both
external and internal parties.
Some outputs are specifically for internal use: For planning purposes
For management of day-to-day operations
For control purposes
For evaluation purposesFor evaluation purposes
INFORMATION OUTPUT
These outputs might include: Surveys of customer satisfaction.
Reports on employee error rates.
INFORMATION OUTPUT
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Behavioral implications of managerialreports:
YOU GET WHAT YOU MEASURE!
INFORMATION OUTPUT
INFORMATION OUTPUT
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Suppose an instructor wants to improve studentlearning. He decides to encourage better attendance by
grading students on attendance (i.e., measuring it). The result will be better student attendance, i.e., you
get what you measure. The improved attendance may or may not improve
learning outcomes. Students may be getting better grades when
attendance is measured, but not learning more.
Some students may in fact reduce their studyingbecause they believe they can use the attendancescore to boost their grade. This behavior would be adysfunctional result of the measurement.
INFORMATION OUTPUT
INFORMATION OUTPUT
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Budgets can cause dysfunctional behavior. EXAMPLE: In order to stay within budget, the IT
department did not buy a security package for its
system.
A hacker broke in and devastated some of theirdata files.
Critical security measures were foregone in orderto meet budgetary goals.
The resulting costs far outweighed the savings.
INFORMATION OUTPUT
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INFORMATION OUTPUT
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The saying goes, Not many people sitaround and have a roast goose fall in their
lap.
In other words, if you want a roast goose,you have to aim.
With financial results, youre also unlikely toachieve when you dont aim.
Just be careful where you aim!
INFORMATION OUTPUT
ROLE OF THE AIS
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The traditional AIS captured financial data. Non-financial data was captured in other,
sometimes-redundant systems
Enterprise resource planning (ERP) systemsare designed to integrate all aspects of a
companys operations (including both
financial and non-financial information) with
the traditional functions of an AIS.
ROLE OF THE AIS
SUMMARY
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Weve learned about the basic business processesin which an organization engages, the decisions
that need to be made, and the information required
to make those decisions.
Weve reviewed the data processing cycle and itsrole in organizing business processes and
providing information to users.
Finally, weve touched on the role of the
information systems in modern organizations andintroduced the notion of enterprise resource
planning systems
SUMMARY