Overview of Transaction Processing

and Enterprise Resource Planning

Systems
Chapter 2

Copyright © 2015 Pearson Education, Inc.

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

• Describe documents and procedures used to collect and process

transaction data.

• Describe the ways information is stored in computer-based

information systems.

• Discuss the types of information that an AIS can provide.

• Discuss how organizations use enterprise resource planning (ERP)

systems to process transactions and provide information.

Copyright © 2015 Pearson Education, Inc.

2-2
 Transaction Processing:
The Data Processing Cycle
• In manual (non-computer-based) systems, data
are entered into journals and ledgers maintained
on paper.
• In computer-based systems, data are entered
into computers and stored in files and databases.
Data Processing Cycle
• It is the operations performed on data to
generate meaningful and relevant information.
Copyright © 2015 Pearson Education, Inc.
 Data Processing Cycle

Copyright © 2015 Pearson Education, Inc.

2-4
 Data Input

Steps in Processing Input are:

• Capture transaction data triggered by a business
activity (event).
• Make sure captured data are accurate and
complete.
• Ensure company policies are followed (e.g.,
approval of transaction).

Copyright © 2015 Pearson Education, Inc.

2-5
 Data Input
Example: Revenue Cycle
• Date and time the sale occurred
• Employee who made the sale and the checkout clerk who processed
the sale
• Checkout register where the sale was processed
• Item(s) sold
• Quantity of each item sold
• List price and actual price of each item sold
• Total amount of the sale
• Delivery instructions
• For credit sales: customer name, customer bill-to and ship-to
addresses
Copyright © 2015 Pearson Education, Inc.
 Data Capture

• Information collected for an activity includes:

▫ Activity of interest (e.g., sale)
▫ Resources affected (e.g., inventory and cash)
▫ People who participated (e.g., customer and
employee)
• Information comes from source documents.

Copyright © 2015 Pearson Education, Inc.

2-7
 Data Inputs
Source Documents Turnaround Documents
• Starting point for collecting • Records of company data sent
accounting data
to an external party and then
• Documents used to capture
transaction data at its source – when
returned to the system as
the transaction takes place. input.
• These are human-readable and they • These are in machine-readable
can be completed by the user. form to facilitate their
• They provide an evidence of a subsequent processing as
transaction’s authenticity --- can serve
as a backup in the event that an AIS is input records.
damaged/destroyed/corrupted. • Example: utility bill
• Examples: sales orders, purchase
orders, employee time cards.

Copyright © 2015 Pearson Education, Inc.

 Learning Check
• Give an example of source documents.
• Give an example of turnaround documents.

Copyright © 2015 Pearson Education, Inc.

 Data Input: Source Documents

Copyright © 2015 Pearson Education, Inc.

1-10
 Data Input: Turnaround Documents

Copyright © 2015 Pearson Education, Inc.

1-11
 Source Data Automation
• These devices capture transaction data in
machine-readable form at the time and place of
their origin.
• Example include ATMs used by banks.

Copyright © 2015 Pearson Education, Inc.

 Data Storage
• Important to understand how data is organized
▫ Transaction journals (e.g., Sales)
▫ General ledger (e. g., Sales and A/R)
▫ Subsidiary ledgers (e.g., Accounts Receivable)

Note: With the above, one can trace the path of the
transaction (audit trail).

Copyright © 2015 Pearson Education, Inc.

2-14
 Data Storage: Journals
General Journal
• A journal used to record infrequent or nonroutine
transactions, such as loan payments and end-of-period
adjusting and closing entries.
Specialized Journal
• A journal used to record a large number of repetitive
transactions.

Copyright © 2015 Pearson Education, Inc.

 Data Storage: Ledgers
General Ledger
• A ledger that contains summary-level data for every
asset, liability, equity, revenue, and expense account of
the organization.
Subsidiary Ledger
• A ledger used to record detailed data for a general ledger
account with many individual subaccounts.
Control Account
• A title given to a general ledger account that summarizes
the total amounts recorded in a subsidiary ledger.
Copyright © 2015 Pearson Education, Inc.
 Audit trail for
Invoice #156 for
$1,876.50 sold to
KDR Builders

Copyright © 2015 Pearson Education, Inc. 2-17

 Data Storage: Audit Trail
Audit Trail
• A path that allows a transaction to be traced
through a data processing system from point of
origin to output or backwards from output to
point of origin.
• It is used to check the accuracy and validity of
ledger postings and to trace changes in general
ledger accounts from their beginning balance to
their ending balance.
Copyright © 2015 Pearson Education, Inc.
 Computer-Based Storage

Data is stored in master files or transaction files.

Copyright © 2015 Pearson Education, Inc. 2-19

 Database Concepts
Entity
• The item about which information is stored in a record.
Attributes
• The properties, identifying numbers, and characteristics of interest of an
entity that is stored in a database.
Field
• The portion of a data record where the data value for a particular attribute
is stored.
Record
• A set of fields whose data values describe specific attributes of an entity.
Data Value
• The actual value stored in a field. It describes a particular attribute of an
entity.
Copyright © 2015 Pearson Education, Inc.
 Database Concepts
File
• A set of logically related records.
Master File
• A permanent file of records that stores cumulative data about an
organization.
Transaction File
• A file that contains the individual business transactions that occur during a
specific fiscal period.
Database
• A set of interrelated, centrally controlled data files that are stored.

Copyright © 2015 Pearson Education, Inc.

 Data Processing
Four types of processing (CRUD):
• Creating new records (e.g., adding a customer)
• Reading existing data
• Updating previous record or data
• Deleting data

Data processing can be batch processed (e.g., post

records at the end of the business day) or in real-
time (process as it occurs).
Copyright © 2015 Pearson Education, Inc. 2-24
 Data Processing
Batch Processing
• Accumulating transaction records into groups or batches for
processing at a regular interval such as daily or weekly.

Online, Real-Time Processing

• The computer system processes data immediately after capture and
provides updated information to users on a timely basis.

Online Batch Processing

• The transaction data are entered and edited as they occur and stored
for later processing.

Copyright © 2015 Pearson Education, Inc.

 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?)

Copyright © 2015 Pearson Education, Inc. 2-26

 Information Output
Documents
• Records of transaction or other company data.

Reports
• Used by employees to control operational activities and by
managers to make decisions and to formulate business
strategies.

Query
• A request for the database to provide the information needed
to deal with a problem or answer a question.
Copyright © 2015 Pearson Education, Inc.
 Enterprise Resource Planning (ERP)
Systems
• Integrates activities from the entire organization
▫ Production
▫ Payroll
▫ Sales
▫ Purchasing
▫ Financial Reporting
• Companies can purchase the individual modules
that meet their specific needs.
• Facilitates information flow among the company’s
various business functions and manages
communications with outside stakeholders.
Copyright © 2015 Pearson Education, Inc. 2-28
Copyright © 2015 Pearson Education, Inc.
 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
Copyright © 2015 Pearson Education, Inc. 2-30
 Disadvantages of ERP System
• Costly
• Significant amount of time to implement
• Complex
• User resistance (learning new things is
sometimes hard for employees)

Copyright © 2015 Pearson Education, Inc. 2-31