Data Processing Cycle and Database for

Accounting

When you observe a chef making a dish, you can clearly see that he
has arranged a variety of components systematically in front of him.
The perfect arrangement of these components is required to cancel the
confusion and prepare the dish efficiently. Same is the case with
accountancy. Data processing is the carrying out systematic operations
on data, especially by a computer, to retrieve, store, transform, or
classify information.

Data Processing Cycle

To begin with, we know that information is the final product of data.

The quality of the final information obtained is directly related to data
used in the first place. Keeping in mind the end goal of database
design, let us comprehend the data processing cycle used in
accounting. Data Processing includes the procedure of gathering,
arranging, relating, translating and registering the data in such a way
as to give reasonable and valuable information in the decision making
the process of the administration.
Few crucial steps associated with the data processing cycle are data
occupying, inputting, computing and generating information
accessible to the user​. As a result, Data Processing cycle when seen
with regards to accounting needs multiple guidelines which are
mentioned below;

Source Documents

Usually, the initial step is to occupy accounting data from the

transaction(s) to make a report, known as a voucher (as expressed
before), that proves and reports an accounting exchange.

Input of Data

The accounting data comprised in vouchers is to be fed in PC’s

memory device. This is accomplished by utilizing a pre-planned Data
Entry Form. This form is planned in a way that it is like a physical
voucher document. Data entry form is made utilizing software and it is
designed to show up on the PC screen so that the data is entered.

Data storage

An appropriate data storage structure is needed to accommodate a

clear data record as demonstrated as follows;
 Code Name Type

The above clear record that is utilized for accumulating the input of
data regarding code of account, the name of the account and the
category type to which it belongs is demonstrated below;

Code Name Type

B1212 Capital Account 4

56654 Purchases Account 1

Speculatively, the category type 4 above points towards Liabilities and

the category type 1 point towards Expenses. The Data storage
structures (additionally called data tables) are made as a segment of
structuring database for accounting.

Manipulation of Data

The collected information is controlled for a fundamental change to

create final reports. Such changed information might be collected
independently and in this way utilized for creating final reports. On
the contrary, the changed information can be specifically exhibited in
the name of a report.

Output of Data

The accounting documents, for example, a ledger, a trial balance, and

so on are acquired in a pre-outlined format by getting to the changed
information. Since you learned about the manner in which data
content is collected in an organized way, we will examine how the
data structures are composed in consonance with the data content that
rises up out of accounting exchanges.

(Source: DataIreland)

Database for Accounting

An organization is built up to take over one or numerous ventures.

Normally in a situation with a single administration. Such cases of
organizations are banks, medical centers, producers, and so forth.
Every one of these organizations has diverse functions yet at the same
time, there are a few essentials or regular functions performed by
every one of the organization. One regular function of the organization
is ‘accounting’.

Computerized and PC based AIS need a firm data structure for

reserving the information of the transaction. Above all, the databases
are utilized for reserving accounting data. The guidelines of the
planning database (for accounting) starts with a reality (also
accounting reality) that is communicated using components of a
conceptual data model.

● Reality: It takes into consideration some part of real-world

circumstances, for which database is to be designed. In
particular, with regards to accounting, it is the accounting
reality that will be defined with the utmost precision.
● ER Design: This is a formal blueprint, with a pictures format,
in which Entity-Relationship (ER) Model ideas are utilized for
the portrayal of reality.
● Relational Data Model: It is authentic data model through
which ER configuration is changed between related data tables
 alongside the limitation in the form of rules that are indicated
to guarantee the consistency and respectability of accumulated
data.
● Standardization: Specifically, this is the procedure of refining a
database outline (that comprises interrelated data tables)
through which the likelihood of copy or repeated information
things are eliminated or disposed of.
● Refinement: Consequently, this is the result of the procedure of
standardization as said above. The final database configuration
is reached after the procedure of standardization is finished.

Solved Question for You

Q: How is the data manipulated?

Ans: The collected information is controlled for a fundamental change

to create final reports. Such changed information might be collected
independently and in this way utilized for creating final reports. On
the contrary, the changed information can be specifically exhibited in
the name of a report.
Designing Relational Database Schema
and Interaction with Databases

A database is a collection of interrelated data files or structures. It is

designed to meet the various information needs of the ​organization
and is integrated and shared. Thus, a relational database schema is an
arrangement of relation states in such a manner that every relational
database state fulfills the integrity constraints set on the relational
database schema. Let us now discuss RDBMS in detail.

RDBMS: Designing Relational Database Schema

The guidelines or rules to design the relational database schema

provide a step-by-step procedure. This procedure converts the ER
design into a Relational Data model design in order to form the
desired database. Following are the steps to convert the ER design into
a Relational Data model design:

1. Creation of relation for each substantial entity

For every strong or substantial entity type in ER schema, we need to

create a separate relation including all the simple characteristics of
that entity. This entity shall have a primary key.
We can choose either a key characteristic of the entity or a set of
simple characteristics that will unambiguously identify this entity as
the primary key of this relation.

For example, delivery vehicles entity is strong as it finds its primary

key in Registration No. which is its unique characteristic.

Learn more about Relational Database and Schema here in detail.

2. Creation of a separate relation for each weak entity type

Each weak entity needs to have an owner entity. It also has an

identifying ​relationship​ by which we can identify this weak entity
type. We need to create a separate relation for every weak entity
including its characteristics.

A ​combination​ of its unique characteristics and a primary key

characteristic of such owner relation form its primary key. Further, we
include the primary key of the owner entity as the foreign key in this
relation key of owner entity and the partial key of the weak entity.
3. Identification of entity types participating in binary 1: N relationship
type

We need to identify first the relation on n-side of relationship and

secondly on 1-side of this relationship. We include the primary key of
the second relation in the first relation as its foreign key.

For example, a single employee can pass a number of ​purchase

vouchers. It indicates that Purchase Vouchers entity participates in
AuthBy relationship on n-side whereas Employees entity is
participating in the same relationship on 1-side.

4. Identification of entity types participating in binary M: N relationship

type
We need to create a new relation for each binary M: N relationship
type to represent this relationship. This relation needs to include as
foreign keys, the primary keys of the relations representing the
participating entity types.

Interaction with Databases

The Structured Query Language or SQL makes it easy for the user to
interact with the database. It is a comprehensive database language
and contains statements for data definition, query, and update.

SQL also facilitates the ​migration​ of the users from one database
application to another database application. Data Query Language
(DQL) is a subset of SQL and is mostly in use to get the answer of
most of the basic queries. The basic set of queries consists of:

1. SELECT: We use this clause to specify the data or information

that we require to answer the query.
2. FROM: We use this ​clause​ to specify the source of data for
answering the query which can be a data table, an existing
query or a combination of both.
 3. WHERE: We use this clause to specify the conditions that we
apply to narrow down the choice of data in order to extract the
data information that is desirable in the SELECT clause.

Solved Example For You

Explain the queries that we need to consider while using the database
design given in Model-I and Model-II.

Ans.

We generally use ​MS ACCESS​ implementation to give the solution to

these queries. The queries and their solutions are as follows:

1. To recover all columns of data from a table, subject to a specific

condition

In order to project all the characteristic values of the selected tuples,

we need to specify an asterisk sign (*). It stands for all the
characteristics. For example, the query is to recover all the columns of
purchase vouchers passed by an employee whose employee id is
B002.

Solution:
SELECT *

FROM Purchase Vouchers

WHERE AuthBy= “B002”;

3. To recover selected columns of data from a table, subject to a

specific condition

For example, the query is to recover purchase vouchers with voucher

number, voucher date and authorized by columns where the vouchers
are dated 6 April 2018.

Solution:

SELECT Vno, Vdate, AuthBy

FROM Purchase Vouchers

WHERE Vdate = #4/6/2018#:

3. WHERE clause is unspecified

The absence of the WHERE clause indicates that we need to select the
tuples from a relation without applying any condition. For example,
the query is to find out the list of all the ​accounts​ that have been
credited under Model I.

Solution:

SELECT DISTINCT Credit As Code

FROM vouchers:

4. Unique characteristic names and renaming (aliasing):

The SQL allows the use of the same name for two or more
characteristics as long as such characteristics are in different relations.
Therefore, in a case where the use of a common characteristic with a
particular name across the relations persists, it is essential to qualify
the characteristic name with relation name in which it exists.

For example, the query is to recover a list of accounts and the amounts
credited due to bank ​receipts​. The Bank A/c Code is 420.

Solution:
Model I

SELECT Narration, Credit As Code, Amount

FROM Vouchers

WHERE Debit LIKE “420*”;

Entity Relationship (ER) Model

The entity-relationship (ER) data model is created out of the activity

of utilizing commercially accessible DBMS to model application
database. Prior, business systems depended on the various leveled and
network approach. The entity-relationship model is a speculation of
these models. It contains an ER Diagram which is crucial for the
overall ease and speculation on the ER Model.

Browse more Topics Under Structuring Database For Accounting

● Data Processing Cycle and Database for Accounting
● Designing Relational Database Schema and Interaction with
Databases
● Entity Relationship (ER) Model
 ● Relational Databases and Schemas
● Illustration of Accounting Database

ER Model and ER Diagram

ER Model permits the portrayal of explicit limitations and

relationships. This model of the database comprises of entities,
attributes, identifiers and relationship which are a way to express a
reality for which database is to be made. The database structure,
utilizing the ER Model, is typically demonstrated pictorially by the
means of entity-relationship, i.e. ER diagram.

The entities and the relationships between them are demonstrated by

using the ER symbols (part of ER diagram) to show various kinds of
entities, attributes, identifiers, and relationships. The symbols, which
are utilized for the purpose of an ER diagram, are institutionalized and
are as per the following

ER Diagram

Entity Type as Rectangular Box

Weak entity Type as double lined Rectangular Box

Relationship Type as diamond-shaped Box

Identifying relationship Type as double

lined diamond shaped Box

Attribute names enclosed in ovals and

attached to their entity type by straight lines.

 Key attribute names enclosed in ovals and

attached to their entity type by straight lines.

Multi-valued attributes by double ovals

Derived attributes by dashed line Ovals

Total participation of E2 in R
 Cardinality Ratio 1 : N

for E1 : E2 in R

​What is​ Relational Database Schema​??

Learn here.

Entity

Entities are the fundamental units utilized in modeling classes of

concrete or conceptual objects. An entity is an object that is important
to a business. Objects of the same kinds are described by a similar
arrangement of attributes or properties. As such, we can state that the
autonomous presence of a thing is known as an entity.

Most importantly, two objects are commonly recognizable and this

fact is demonstrated in the entity set by giving them exceptional
identifiers. In this way, an entity implies an object having a physical
presence (e.g., individual, office, furniture, and so forth.) or
conceptual presence (e.g., organization).

We have examined the accounting reality above. It has five entities –

accounts, vouchers, employees, account types, and proof or support
reports. In other words, the accounting information is collected
through these entities.

Learn about​ Data processing cycle and

Database of Accounting​ here.

Attributes and Identifiers

The properties that portray or further depict an element are called its
traits. Each question must be independently recognized as a substance.
Recognizing and ordering the items into an element can be
troublesome in light of the fact that a question can have a place with
various substances in the meantime or at least two elements might be
comparative.
In such cases, they should be additionally depicted so every element is
recognized and independently distinguished. Substances are
recognized and displayed utilizing their qualities or properties.

An affiliation exists between various qualities of an element. A

relationship between two properties demonstrates that the estimations
of the related characteristics are associated. This correspondence
between qualities of a substance is a property of the data that is
utilized in displaying the question. Therefore, we recognize the
affiliations that exist among the traits of a substance, called a
relationship.

Think about the representatives of the firm. The firm keeps up certain
data, for example, name, date of birth, address, assignment, name, and
relationship of wards, about every representative. In any case, this data
can coordinate with the data of some other representative. Along these
lines, one of a kind data like worker distinguishing proof number or
code is fundamental about every one of them by which they can be
recognized. This one of a kind number is known as an identifier.

Entity Types and Entity Sets

(i) Composite versus Basic (or atomic) Attributes
The composite attributes can be diversified into sub-parts to speak to
demonstrate some more basic attributes with free implications. The
straightforward traits can’t be additionally sub-partitioned. For
instance, Name of a man that is regularly subdivided into First Name,
Middle Name, and Last Name is a composite trait. The tallness of a
man is a straightforward quality as it is without further sub-division.

(ii) Single-esteemed versus Multi-esteemed Attributes

A trait with a solitary esteem for an element is single-esteemed rather

than those which various qualities. For instance, the stature of a man is
single-esteemed quality while the capabilities of that individual area
multi-esteemed property.

(iii) Stored versus Determined Attributes

At least two properties might be connected in such a route, to the point

that at least one winds up essential while alternate moves toward
becoming reliant on that essential property. For instance, the date of
birth of a man is a putaway property while the age of that individual is
inferred quality.

(iv) Null Values

The absence of an information thing is spoken to by an extraordinary
esteem called the invalid esteem. There are three circumstances which
may require the utilization of invalid qualities

● When a specific ascribe does not have any significant bearing

to a substance;
● Value of a quality is obscure, in spite of the fact that it exists;
● Unknown since it doesn’t exist.

(v) Complex Attributes

The composite and multi-esteemed qualities might be settled (or

assembled) to constitute complex ones. The enclosure () is utilized for
demonstrating a gathering of segments of composite qualities. The
props {} are utilized for demonstrating the multi-esteemed qualities.

Relationships

A connection among elements is known as a relationship. The

relationship set is utilized in the information displaying to speak to a
relationship between element sets. This affiliation may have certain
properties spoken to by the traits of the relationship set. A gathering of
connections of a similar kind is known as a relationship set.

A relationship that includes N substances is called N-ary relationship.

A relationship is a paired relationship if the number of entities sets
engaged with the relationship is two. Enrolment is a case of a parallel
relationship including two particular substance sets like between the
understudy and course.

The examination is a case of a twofold relationship which

demonstrates the connection between an understudy and move
number. Similarly, processing is a case of a ternary relationship which
speaks to the relationship including an understudy utilizing a specific
figuring framework to do the calculations for a given course.

Similarly, at whatever point a characteristic charge or credit of one

element compose voucher alludes to another element compose
Accounts, there exists a connection between these substances as
vouchers and Accounts. Vouchers and records are connected in two
different ways, Vouchers contain the charge and furthermore the
credit accounts. A relationship compose characterizes the relationship
of substance compose and a relationship occasion is a relationship of
element examples.

The sections of a connection hold the estimation of the credits that we

wish to connect with every substance case, and each is marked with a
particular property name at the highest point of the segment. This
name, obviously, gives a remarkable reflection to the whole section or
to a specific estimation of a tuple in the connection.

Learn about ​Designing Relational Database​ here in detail.

Solved Question for You

Q: What is a weak entity?

Ans: A weak entity is one which does not have an identifier of its
own. A weak entity type is identified with respect to its relationship
because it cannot be identified without own owner entity. Let us
consider a voucher.

A voucher may be accompanied by a set of support documents, such

as bills, detail of expenses, issued by other parties to the transaction.
Such support documents are weak entity type which is used to keep
track of support documents attached to each voucher via N-
relationship.

Relational Databases and Schemas

A database is a collection of interrelated data files or structures. It is

designed to meet the various information needs of the ​organization​.
Also, it is integrated and shared. Thus, a relational database schema is
an ​arrangement​ of relation states in such a manner that every relational
database state fulfills the integrity constraints set on a relational
database schema.

Relational Database and Schemas

As we know that a relational database ​schema​ is an arrangement of

integrity constraints. Thus, in the context of relational database
schema following points deserve a particular consideration:

1. A specific characteristic, that bears the same real-world

concept, may appear in more than one ​relationship​ with the
same or a different name. For example, in Employees relation,
Employee Id (EmpId) is represented in Vouchers as AuthBy
and PrepBy.
 2. The specific real-​world​ concept that appears more than once in
a relationship should be represented by different names. For
example, an employee is represented as subordinate or junior
by using EmpId and as a superior or senior by using SuperId, in
the employee’s relation.
3. The integrity constraints that are specified on database schema
shall apply to every database state of that schema.

Learn more about ​the Entity-Relationship Model here in detail​.

Image Source: stackoverflow

Browse more Topics Under Structuring Database For Accounting

● Data Processing Cycle and Database for Accounting
 ● Designing Relational Database Schema and Interaction with
Databases
● Entity Relationship (ER) Model
● Relational Databases and Schemas
● Illustration of Accounting Database

Constraints and Database Schemas

Domain constraint, Key constraint, Entity integrity constraint, and

Referential integrity constraint are the four different constraints of the
relational databases. Let us now discuss them in detail.
1. Domain constraint: The value of each characteristic of a
relationship needs to be an indivisible value and we need to
draw it out of the possible values corresponding to its domain.
Thus, the value of a characteristic needs to adjust to the data
type corresponding to the ​domain​.
2. Key constraints and Null values: Each data record that relates
to a tuple of a relation in a table needs to be distinct. Thus, this
implies that no two rows or tuples in relation or table can have
 the same combination of values for their entire data item. Every
relation has a super key by default and depicts uniqueness
constraints. It is a ​combination​ of all the characteristics.
Sometimes a relation can have more than just one key. Each
such key is a candidate key. Out of these, we need to define
one of the keys as the Primary Key.
3. Entity integrity constraint: This constraint states that primary
key value cannot be null as it defines the individual tuple in a
relation. A null ​value​ indicates the failure to identify such
tuples and thus it means that they are duplicates.
4. Referential integrity constraint: It is specified to maintain the
consistency among the tuples of two or more relations.

Solved Example For You

Explain the operations and constraint violations?

Ans. Updates and retrieval are the two categories of operations on the
relational model. The basic types of updates are:

1. Insert: We use this operation in order to add a new tuple in a

relation. It is capable of violating any of the four constraints.
 2. Delete: We perform this operation in order to remove or delete
a tuple in a relation. Under this operation, we can remove a
particular data record from a table. It can only violate the
referential integrity constraint.
3. Modify: This operation causes a change in the values of some
characteristic of existing tuples or ​accounting​ data tables.

Retrieval constraints do not cause a violation of integrity constraints.

Illustration of Accounting Database

A database is a shared collection of inter-related data tables which

meet the various informational needs of an ​organization​. Thus, an
accounting database stores the accounting data. It is a collection of
accounting data which is inter-related to depict the various aspects of
the accounting information system.

Illustration of Accounting Database

Following is an example of Accounting Database for maintaining data

relating to the accounting transactions, source documents, accounts,
and employees.
Date Transactions Amount (₹)

2018

Apr. 01 Commenced ​business​ with cash 600000

Apr. 03 Deposited cash into bank 500000

 Apr. 05 Purchased goods and paid by cheque no. 756431 120000

Apr. 07 Salary paid in advance by cheque no. 756432 10000

Apr. 09 Purchased goods for cash 60000

Image source: stackexchange

Employees
 Emp​_I
Fname Minit LName Address PhoneNo Super_Id
d

A001 Anil K Madhuri

Raveen
B001 Akshay S A001
a

T001 Aamir K Juhi A001

T002 Salman K Nagma B001

Vouchers

VDat
Vno Debit Amount Credit Narration AuthBy PrepBy
e

2018
 Commenced
73100 Apr. 11000
01 600000 business with A001 B001
1 01 1
cash

73200 Apr. 73100 Deposited​ cash

02 500000 A001 T001
1 03 1 into bank

Purchased
81100 Apr. 73200 goods and paid
03 120000 A001 B001
1 05 1 by cheque no.
756431

Salary paid in
81200 Apr. 73200 advance by
04 10000 A001 B001
2 07 1 cheque no.
756432

81100 Apr. 73100 Purchased

05 60000 A001 T001
1 09 1 goods for cash

Support

Vno Sno Name

 02 1 Cash deposit receipt

Purchase invoice
03 1
no….dated….

03 2 Delivery challan

04 1 Salary ​receipt​ for April 2018

Purchase invoice
05 1
no….dated….

Learn more about ​the Relational Database and Schema here​.

Accounts

Code Name Type

110001 Capital ​account 4

731001 Cash account 3

 732001 Bank​ account 3

811001 Purchases 1

811003 Carriage inwards 1

812002 Salary 1

811001 Wages 1

Account Type

Cat_Id Category

1 Expenditure

2 Income

3 Assets
 4 Liabilities

Solved Example for You

What is a modified version of the Accounting Database?

Ans. An effort to fit the ​Debit​ and Credit vouchers results in the
addition of a new column Sno to Vouchers table of accounting
database. This results in the data redundancy. ER Model is a
conceptual model. We need to transform it into a representational data
model so that we can form a database design for the implementation
and operation upon while using the DBMS.