1.

8 Overview of Transaction
Processing and Enterprise Resource
Planning Systems

Chapter One Continued

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2-1
 Learning Objectives
• Describe the four parts of the data processing cycle and the major
activities in each.

• Describe the ways information is stored in computer-based

information systems.

• Discuss how organizations use enterprise resource planning (ERP)

systems to process transactions and provide information.
 Data Processing Cycle

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2-3
Data Input

Steps in Processing Input are:

• Capture transaction data triggered by a business
activity (event).
▫ Information comes from source documents.
• Make sure captured data are accurate and
complete.
• Ensure company policies are followed (e.g.,
approval of transaction).
 Source Documents
• Captures data at the source when the transaction
takes place
▫ Paper source documents
▫ Turnaround documents—a document that has been
output from a computer, some extra information
potentially added to it, and then returned to become
an input document. For example, meter cards that
are produced for collecting readings from gas meters,
photocopiers, water meters etc.
▫ Source data automation (captured data from
machines, e.g., Point of Sale scanners at grocery store)

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2-5
Data Storage
• Important to understand how data is organized
▫ Chart of accounts
 Coding schemas that are well thought out to
anticipate management needs are most efficient and
effective.
▫ General ledger
▫ Subsidiary ledgers (e.g., Accounts receivable)
▫ General journal
▫ Transaction/specialized journals (e.g., Sales)
Note: With the above, one can trace the path of the
transaction (audit trail).
 Audit trail for
Invoice #156 for
$1,876.50 sold to
KDR Builders

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 DATA
STORAGE
• General ledger
The general ledger is the summary level
information for all accounts (asset, liability,
equity, revenue, and expense). Detail
information is not kept in this account.

A/P A/R
$1000 $600
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n Education, Inc.
 DATA STORAGE
• General
Example:ledger
Suppose XYZ Co. has three
customers. Anthony Adams owes XYZ $100. Bill
Brown owes $200. And Cory Campbell owes
XYZ $300. The balance in accounts receivable in
the general ledger will be $600, but you will not
be able to tell how much individual customers
owe by looking at that account. The detail isn’t
there.

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DATA STORAGE
• General ledger
• Subsidiary ledger
The subsidiary ledgers contain the detail
accounts associated with the related general
ledger account. The accounts receivable
subsidiary ledger will contain three separate
t-accounts—one for Anthony Adams, one for Bill
Brown, and one for Cory Campbell.
DATA STORAGE
• General ledger
• Subsidiary ledger
The related general ledger account is often
called a “control” account.

The sum of the subsidiary account balances

should equal the balance in the control
account.
DATA STORAGE
• General ledger
• Joe Smith
• Subsidiary ledger A/P $250
▫ Detailed data for a • Patti Jones
General Ledger $1000 $750
(Control) Account
that has individual
sub-accounts e.g.:
 Accounts Payable • ACME
 Accounts
A/R Inc.$150
• Jones, Inc
Receivable $600 $450
DATA STORAGE
Journals
• General
▫ Infrequent or specialized transactions
▫ Used to record:
 Non-routine transactions, such as loan payments
 Summaries of routine transactions
 Adjusting entries
 Closing entries
DATA STORAGE
Journals
• Specialized
▫ Repetitive transactions
 E.g., sales transactions
▫ Used to record routine transactions.
▫ The most common special journals are:
 Cash receipts
 Cash disbursements
 Credit sales
 Credit purchases
COMPUTER-BASED STORAGE CONCEPTS
• Data is stored in master files or transaction files.

• A master file is a file that stores cumulative

information about an organization’s entities.
• It is conceptually similar to a ledger in a manual
AIS in that:
▫ The file is permanent.
▫ The file exists across fiscal periods.
▫ Changes are made to the file to reflect the effects
of new transactions.
COMPUTER-BASED STORAGE CONCEPTS
• A transaction file is a file that contains
records of individual transactions (events) that
occur during a fiscal period.
• It is conceptually similar to a journal in a
manual AIS in that:
▫ The files are temporary.
▫ The files are usually maintained for one fiscal
period.
COMPUTER-BASED STORAGE CONCEPTS
• Transaction
▫ Contains records of a
business from a specific Transaction

period of time File

• Master Updated
▫ Permanent records Master
▫ Updated by transaction File
with the transaction file Master
before

• Database Update

▫ Set of interrelated files

DATA PROCESSING
• Batch processing:
▫ Source documents are grouped into batches, and
control totals are calculated.
▫ Periodically, the batches are entered into the
computer system, edited, sorted, and stored in 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 error
reports, transaction reports, and control totals.
DATA PROCESSING
• Online, batch processing:
▫ Transactions are entered into a computer system
as they occur and stored in a temporary file.
▫ Periodically, the temporary transaction file is run
against the master file to update the master file.
▫ The output is printed or displayed.
DATA PROCESSING
• Online, real-time processing
▫ Transactions are entered into a computer system
as they occur.
▫ The master file is immediately updated with the
data from the transaction.
▫ Output is printed or displayed.
 Information Output
The data stored in the database files can be viewed
• Online (soft copy)
• Printed out (hard copy)
▫ Document (e.g., sales invoice)
▫ Report (e.g., monthly sales report)
▫ Query (question for specific information in a
database, e.g., What division had the most sales
for the month?)

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Enterprise Resource Planning (ERP)
Systems
• Integrates activities from the entire organization
▫ Production
▫ Payroll
▫ Sales
▫ Purchasing
▫ Financial Reporting
Advantages of ERP System
• Integrated enterprise-wide allowing for better flow
of the information as it’s stored in a centralized
database and can be accessed by various
departments which also improves customer service.
• Data captured once (i.e., no longer need sales to
enter data about a customer and then accounting to
enter same customer data for invoicing)
• Improve access of control of the data through
security settings
• Standardization of procedures and reports
Disadvantages of ERP System
• Costly
• Significant amount of time to implement
• Changes to an organization’s existing business
processes can be disruptive
• Complex
• User resistance (learning new things is
sometimes hard for employees)