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Introduction To Transaction Processing

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Introduction To Transaction Processing

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neffhbaculodmz
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LECTURE 2: Introduction to Transaction Processing

ACC 207: ACCOUNTING INFORMATION SYSTEM


BS Management Accounting
Learning Objectives:
1. Understand the broad objectives of transaction processing;
2. Recognize the types of transactions processed by each of the
three transaction cycles;
3. Know the basic accounting records used in transaction processing
system.
Learning Objectives:
6. Understand the differences between batch and real-time
processing and the impact of these technologies on transaction
processing.
7. Be familiar with data coding schemes used in accounting
information system.
Overview of Transaction Processing

▪ Financial transaction - An economic event that affects


the assets and equities of the firm, is reflected in its
accounts and is measured in monetary terms.
▪ Ex: Sale of goods and services, purchase of inventory,
discharge of financial obligations, receipt of cash on
account from customers.
Transaction Cycles

❑ These transaction cycles process most of the firm’s


economic activity:
▪ Expenditure cycle
▪ Conversion cycle
▪ Revenue cycle
The EXPENDITURE CYCLE
• In this cycle, the business activities begin with the acquisition of
materials, property and labor in exchange for cash.
• Most business to business transactions are based from credit
relationship between the trading parties.
• The actual disbursement of cash takes place at some point after
the receipt of goods and services.
• The system used includes: Purchase/accounts payable system,
Cash disbursement system, payroll system and fixed asset system.
Purchases/Accounts Payable (AP) system

• This system recognizes the need to acquire


physical inventory (such as raw materials) and
places an order with the vendor.
• When the goods are received, the purchases
system records the event by increasing inventory
an establishing an account payable to be paid at a
later date.
Cash disbursement system

• When the obligation created in the purchases


system becomes due, the cash disbursements
systems authorizes the payment, disburses the
funds to the vendor, and records the transaction by
reducing the cash and accounts payable accounts.
Payroll system

• The payroll system collects labor usage data for


each employee, computes the payroll, and
disburses paychecks to the employees.
• Conceptually, payroll is a special case purchases
and cash disbursement system.
• Because of accounting complexities associated with
payroll, most firms have a separate system for
payroll processing.
Fixed asset system

• This system maintains details about each piece of


equipment and other fixed assets.
• It provide a system for tracking for organizations’
physical assets.
The CONVERSION CYCLE

• This cycle comprises two major subsystem: the


production system and the cost accounting system.

• Production system – it involves planning, scheduling, and


control of the physical product through the
manufacturing process. This includes determining raw
materials requirements, authorizing the work to be
performed, released of raw materials into production
and directing the movement of the work in process
through its various stage in manufacturing.
The CONVERSION CYCLE

• Cost accounting system – it monitors the flow of cost


information including labor, overhead and raw
materials related to production.
• The information that this system produces is used
for inventory valuation, budgeting cost control,
performance reporting, and management decisions,
such as make-or-buy decisions.
The REVENUE CYCLE
• Firms sell their goods and services to customers
through the revenue cycle. This cycle includes
processing cash sales, credit sales, and the receipt
of cash following a credit sale.
• Revenue cycle transactions also have a physical
and a financial component, which are processed
separately. The primary subsystems of the revenue
cycle.
The REVENUE CYCLE
o Sales order processing – the majority of business
sales are made on credit and involve tasks such as
preparing sales order, granting credit, shipping
products (or rendering of a service) to the
customer, billing customers, and recording the
transaction in the accounts (accounts receivable,
inventory, expenses and sales).
The REVENUE CYCLE
o Cash receipts – for credit sales, some period of
time (days or weeks) passes between the point of
sale and the receipt of cash.
oCash receipts processing includes collecting cash,
depositing cash in the bank, and recording these
events in the accounts (accounts receivable and
cash).
THANK YOU! ☺

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