‫ نـبـض‬# abrarie

Overview of Transaction Processing.

- Types of information needed for decisions:

1. financial or nonfinancial.

2. comes from internal or external sources.

- interaction between AIS and external & internal parties is two-way, AIS sends information to and
receives information from these parties.

- transaction: agreement between two entities to exchange goods or services.

- event: something inside our company (compute depreciation).

- transaction cycle: process begin with capturing data about transaction & end with information output,
such as financial statements.

- five major transaction cycles: last activity in any cycle is to send info to other cycles.

1. Revenue cycle: interactions with customers (give goods/services, get cash).

Examples: 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 A/R
for sales, receive customer payments, update A/R for collections, handle sales returns & discounts &
bad debts, prepare management reports, send info to other cycles.

- revenue cycle gets finished goods from the production cycle, provides funds to the financing cycle,
and provides data to the general ledger and reporting system.

2. Expenditure cycle: interactions with suppliers (give cash, get goods/services).

Examples: requisition goods & services, process purchase orders to vendors, receive goods and
services, store goods, receive vendor invoices, update accounts payable for purchase, approve
invoices for payment, pay vendors, update accounts payable for payment, handle purchase returns &
discounts & allowances, prepare management reports, send info to other cycles.

- expenditure cycle gets funds from the financing cycle, provides raw materials to the production cycle,
and provides data to the general ledger and reporting system.

1
 ‫ نـبـض‬# abrarie

3. Production cycle: raw materials and labor transformed into finished goods (give raw materials &
labor, get finished goods).

Examples: design products, forecast & plan & schedule production, requisition raw materials,
manufacture products, store finished goods, accumulate costs for products, prepare management
reports, send info to other cycles.

- production cycle gets raw materials from the expenditure cycle, gets labor from HR/payroll cycle,
provides finished goods to the revenue cycle, and provides data to the general ledger and reporting
system.

4. Human resources/payroll cycle: interactions with employees. hired, trained, paid, evaluated,
promoted, and terminated (give cash, get labor).

Examples: recruit & hire & train employees, evaluate and promote employees, discharge employees,
update payroll records, pay employees, process timecard and commission data, prepare and distribute
payroll, calculate and disburse tax and benefit payments, prepare management reports, send info to
other cycles.

- HR/payroll cycle gets funds from the financing cycle, provides labor to the production cycle, provides
data to the general ledger and reporting system.

5. Financing cycle: interactions with investors and creditors. raise capital through stock or debt, repay
the capital, and pay a return on it interest or dividends (give cash, get cash).

Examples: forecast cash needs, sell securities to investors, borrow money from lenders, pay dividends
to investors and interest to lenders, retire debt, prepare management reports, send info to other cycles.

- financing cycle gets funds from the revenue cycle, provides funds to the expenditure and HR/payroll
cycles, provides data to the general ledger and reporting system.

- Every transaction cycle is relates to other cycles & interfaces with the general ledger and reporting
system, which generates information for management and external parties.

- the general ledger and reporting system (AIS cycle) gets data from all of the cycles and provides
information for internal and external users.

- not every module needed in every organization (retail company don’t have production cycle).

- manual systems: data is entered into paper journals and ledgers.

2
 ‫ نـبـض‬# abrarie

- computer-based systems: the series of operations performed on data is referred to as data

1. Data input: first we capture (collect) data about events, resources & agents, then input it.

- for accurate and efficient data, we take the following actions:

a) Turnaround documents: send bill include 2 parts, customer will cut it, keep part & another part will be
checked and send to company. They will enter data by scanner “guarantee accuracy”.

b) Source data automation. ‫ الكاشير يسوي سكان لألشياء اللي نشتريها‬, ‫نحاول ندخل المعلومات اوتوماتك قد ما نقدر‬

c) Well-designed source documents: simple design space for signature & use bar coding.

d) use pre-numbered documents.

e) Verify transactions. ‫نتأكد من وجود البضاعة قبل ما نسوي معاملة بيع‬

2. Data storage: Data needs to be organized for easy and efficient access. Manual:

a) ledger: file used to store cumulative information about resources and agents (set of t-accounts).

b) general ledger: summary level info for all accounts (detail info not kept). ‫يحطون التوتل بس‬

c) subsidiary ledgers: detail accounts associated with related general ledger account. ‫لكل كسمتر اكاونت‬

- related general ledger account is often called a “control” account.

d) Coding techniques: method of systematically assigning numbers or letters to data items to help
classify and organize them. 3 types:

- Sequence codes: items (such as checks or invoices) are numbered consecutively to ensure no gaps
in the sequence, all items are accounted & there are no duplicated numbers. 4 3 2 1 ‫يرقمون األشياء ورا بعض‬

- Block codes: blocks of numbers within numerical sequence reserved for particular category. ‫فتح الخط‬

- Group codes: two or more subgroups of digits are used to code an item. ‫لكل قروب يخلون كود عقب الكود يتفرع‬
112 ‫ اكاونت بيبل‬, 12 ‫ كرنت اليبلتي‬, 1 ‫ اليبلتي‬,

- Guidelines to design coding:

# The code should be consistent with its intended use, so make sure you know what users need.

# Provide enough digits to allow room for growth.

# Keep it simple in order to Minimize costs, Facilitate memorization, and Ensure employee acceptance.

# Make sure it’s consistent with company’s organization structure & company needs.
3
 ‫ نـبـض‬# abrarie

e) Chart of accounts: list of all general ledger accounts an organization uses (group coding is used).

f) Journals: first place that transactions are entered.

- general journal used to record non-routine transactions, summaries of routine transactions, adjusting
entries & closing entries.

- special journal: routine transactions (cash receipt, cash disbursement, credit sale, credit purchase).

g) Audit trail: exists when there is sufficient documentation (with posting references and document
numbers) to allow the tracing of transaction from beginning to end or from end back to beginning.

- transactions occur, recorded in journals, posted to ledgers, prepare trial balance, prepare the end-of-
period adjusting entries, make adjusted trial balance, prepare income statement, prepare closing
entries, Prepare statement of stockholders’ equity, B/S & statement of cash flows.

- some computer-based storage concepts:

1. Entity: something about which information is stored. ‫الطالب‬

2. Attribute: characteristics of interest with respect to the entity. ‫ العنوان‬, ‫ التلفونات‬, ‫االرقام الجامعية‬

3. Record: set of attributes stored for a particular instance of an entity. ‫معلومات عن طالب واحد بس‬

‫ا‬
4. Data Value: intersection of the row and column. ‫مثال بين عمود التلفونات وصف معلومات الطالب‬

5. Field: physical space where an attribute is stored. ‫عمود االرقام الجامعية‬

6. File: group of related records. ‫ ما يصير نخلي وياهم معلومات عن دكاترة‬, ‫فايل الطالب‬

7. Master File: file stores cumulative info about organization’s entities (similar to ledger, permanent file,
file exists across fiscal periods & changes made to file to reflect effects of new transactions) ⇨ update

8. Transaction File: file contains records of individual transactions that occur during fiscal period (similar
to journal, temporary file & file are usually maintained for one fiscal period) ⇨ record

9. Database: set of interrelated, centrally-coordinated files. ‫فايل الطالب مع الدكاتره مع الموظفين‬

3. Data processing: process after entering data in system. 4 types of file processing:

a) Updating data: record occurrence of event, the resources affected by event, and agents who
participated (recording sale to customer).

b) Changing data (customer address).

c) Adding data (add new customer).

d) Deleting data (remove old customer).

- Updating can be done through several approaches (to process data):

a) Batch processing: ‫بيانات الطالب الجدد‬

# group source documents into batches (invoice, checks, orders).

# enter data into system periodically.

# store data in temporary file.

# update all batches, update old master files & create new master file.

# print desired output.

b) On-line Batch Processing: ‫درجاتنا نهاية الكورس‬

# enter data into system as they occur.

# store data in temporary file.

# update all batches, update old master files & create new master file.

# print desired output.

c) On-line, Real-time Processing: ‫تسجيل المواد‬

# enter data into system as they occur.

# update all batches, update old master files & create new master file.

# print desired output.

4. Information output: source document at the beginning.

a) operational document: documents generated at the end of transaction processing activities.

b) reports: for internal users, external users, regular or on demand reports.

c) queries: user requests for specific pieces of information when a problem arise.