Accounting Information System

(AQ011-3-1-AIS)

OVERVIEW OF TRANSACTION
PROCESSING & ENTERPRISE
RESOURCE PLANNING SYSTEM
 Learning Objectives
• Describe the four major steps in the data processing
cycle.
– Describe the major activities in each cycle.
• Describe documents and procedures used to collected
and process 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 ERP systems to
process transactions and provide information.

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 Key Terms
• Data processing cycle • Entity
• Source documents • Attributes
• Turnaround documents • Field
• Source data automation • Record
• General ledger • Data value
• Control account • File
• Coding • Master file
• Sequence code • Transaction file
• Block code • Database
• Group code • Batch processing
• Mnemonic code • Online, real-time processing
• Chart of accounts • Document
• General ledger • Report
• Specialized journal • Query
• Audit trail • Enterprise resource planning
(ERP) system
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 Data Processing Cycle

Input Process Output

Storage

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 The Data Processing Cycle
Determines

• What data is stored?

• Who has access to the data?
• How is the data organized?
• How can unanticipated information needs
be met?

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 Data Input—Capture 捕获

• As a business activity occurs data is

collected about:
1. Each activity of interest
2. The resources affected
3. The people who are participating

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 Paper-Based Source Documents

• Data are collected on source

documents
– E.g., a sales-order form
– The data from paper-based
will eventually need to be
transferred to the AIS
• Turnaround
– Usually paper-based
– Are sent from organization
to customer
– Same document is Org. Cust.
returned by customer to
organization

Turnaround Document

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 Source Data Automaton

• Source data is captured

– In machine-readable form
– At the time of the business activity
• E.g., ATM’s; POS(point of sales)

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 Data Input—Accuracy and Control

• Well-designed source documents can

ensure that data captured is
– Accurate 准确
• Provide instructions and prompts
• Check boxes
• Drop-down boxes
– Control
• Internal control support
• Prenumbered documents (cheque, receipts)

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 Data Storage

• Types of AIS storage:

– Paper-based
• Ledgers
• Journals
– Computer-based

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 Ledgers
• General
– Summary level data for each:
• Asset, liability, equity,
revenue, and expense
• Subsidiary
– Detailed data for a General
Ledger (Control) Account that
has individual sub-accounts
• Accounts Receivable
• Accounts Payable

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 Journals

• General
– Infrequent 少 or specialized transactions
• Specialized
– Repetitive 重复 transactions
• E.g., sales transactions

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 Coding Techniques 技巧

• Sequence 顺序 Digit Position Meaning

– Items numbered consecutively
1–2 Product Line, size,
• Block
and so on
– Specific range of numbers are
associated with a category 3 Color
• 10000–199999 = Electric
Range 4–5 Year of Manufacture
• Group
– Positioning of digits in code 6–7 Optional Features
provide meaning
• Mnemonic
– Letters and numbers 1241000 12 = Dishwasher
4 = White
– Easy to memorize
10 = 2010
– Code derived from description of
item 00 = No Options
• Chart of accounts
– Type of block coding
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 Computer Based Storage
• Entity
– Person, place, or thing (Noun)
– Something an organization wishes to store data about
– Attributes
• Facts about the entity
– Fields
• Where attributes are stored
– Records
• Group of related attributes about an entity
– File
• Group of related Records

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 File Types
• Transaction
– Contains records of a
business from a specific
period of time
• Master
– Permanent records
– Updated by transaction
with the transaction file
• Database
– Set of interrelated files

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 Data Processing

• Four Main Activities

1. Create new records
2. Read existing records
3. Update existing records
4. Delete records or data from records

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 Data Output Types

• Soft copy
– Displayed on a screen
• Hard copy
– Printed on paper

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 ERP Systems

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 Enterprise Resource Planning
(ERP)
• Integrate an organization’s information into one overall AIS
• ERP modules:
– Financial
– Human resources and payroll
– Order to cash
– Purchase to pay
– Manufacturing
– Project management
– Customer relationship management
– System tools

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 ERP Advantages
• Integration of an organization’s data and financial
information
• Data is captured once
• Greater management visibility, increased
monitoring
• Better access controls
• Standardizes business operating procedures (SOP)
• Improved customer service
• More efficient manufacturing

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 ERP Disadvantages

• Cost
• Time-consuming to implement
• Changes to an organization’s existing
business processes can be disruptive
• Complex
• Resistance to change

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 Major Reasons for Adopting ERP

• Integrate financial information

• Integrate customer order information
• Standardize and speed up operations
processes
• Reduce inventory
• Standardize Human Resources
information
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 Potential Benefits of ERP

• Internal Benefits
– Integration of a single source of data
– Common data definition
– A real-time system
– Increased productivity
– Reduced operating costs
– Improved internal communication
– Foundation for future improvement

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 Potential Benefits of ERP

• External Benefits
– Improved customer service and order
fulfillment
– Improved communication with suppliers and
customers
– Enhanced competitive position 增强竞争地位
– Increased sales and profits

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 ERP Implementation Approaches

• The big bang – install a single ERP system

across the entire organization
• Franchising – Independent ERP systems
are installed in different units linked by
common processes, e.g., bookkeeping.
• Slam dunk – install one or several ERP
modules for phased implementation of key
business processes.
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 Major Phases of ERP Implementation (Kent
Sandoe, Enterprise Integration)

• Initiation 引发 – develop business case,

project scope, and implementation strategy
• Planning – establish implementation team,
determine goals and objectives, establish
metrics
• Analysis and process design – analyze
and improve existing processes, map new
processes to be adopted by the system
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 Major Phases of ERP Implementation (Kent
Sandoe, Enterprise Integration)

• Realization – install a base system,

customization, and test the system
• Transition – replace the formal system with
the new system, data conversion
• Operation – monitor and improve system
performance, provide continued training
and technical support

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 • Limitations of ERP technical capabilities
• Inconsistency 矛盾 with existing business
processes
• Costs – implementation 操作 (hardware,
software, training, consulting) and maintenance
• Impact on organizational structure (front office
vs. back office, product lines, etc.)
• Changes in employee responsibilities

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 Major Challenges to ERP Implementation

• Flexibility of software system upgrades

• Implementation 实作 timelines (time to work)
• Availability of internal technical knowledge and
resources
• Education and training
• Implementation strategy and execution (method
to work)
• Resistance to change
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 Benefits of ERP Implementation
(META Group Survey)

• Benefits are mostly in terms of cost containment rather

than revenue increase.
• 53 companies (out of 63) reported annual savings of
over $5 millions with the median annual saving of $1.6
million. Nine companies account for 73.4% of the
reported savings.
• The study found that much of the ERP value is in
indirect, non-quantifiable benefits.
• A number of companies surveyed had a negative net
present value.
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 ERP Implementation - Key Enablers
(APQC Best-Practice Report)

• The organization is prepared for the change.

• The executive leaders are active and visible in their
support.
• The initiative is seen as a business imperative by
the organization.
• The resources are available to conduct the project
completely.
• A good packaged system is used and not
customized.
• The user group is trained to use the software before
it is implemented.
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 ERP Implementation Practices
(APQC Best-Practice Report)

• Project Management
– Organizations link implementation teams to both the
technical (IS) and functional departments.
– They tightly control implementation processes
– They appropriately use consultants throughout the
implementation process
– They manage turnover of key implementation employees
– They have basic business reasons for implementation
– They align implementation with organizational strategies

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 ERP Implementation Practices
(APQC Best-Practice Report)

• Change Management
– Redesigned jobs call for higher levels of skills and
accountability
– Change management is viewed as more than just
increased training and communication
– Enterprise-wide systems drive redesigned changes.
– The executive sponsor is the change agent.
– Resistance from the work force (including
management) is the most significant obstacle.
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 ERP Implementation Practices
(APQC Best-Practice Report)

• Technology Excellence
– Organizations rely heavily on the ERP
package as the majority of their application
configuration.
– Organizations implement ERP packages on
time and within budget
– Organizations centralize support groups
within their IT departments

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 New Developments In ERP

• Availability of web-based and wireless ERP

systems
• Adoption of easy-to-install ERP systems
• Linkage to other software systems, e.g.,
supply chain management system, e-
commerce, customer relationship
management system
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 Evolution of ERP

362002.
Source: http://www.intelligententerprise.com/020903/514feat2_1.shtml, viewed September 19, 1-36
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 How Do ERP Systems Work?

Managers and
Stakeholders
Financial
Reporting Applications
Human
Sales and
Resource Applications
Delivery
Management
Applications
Applications
Sales Force Central
Manufacturing
Customers And Customer Database Back-office
Service Reps Applications Administrators Suppliers
And Workers

Service Human
Applications Resource Inventory
Management And Supply
Applications Applications

Employees

37 1-37
Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, Harvard Business Review, July-Aug. 1998.
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 An ERP Example: Before ERP

Orders
Parts
Sends report Customer
Demographic
Sales Dept. Files Customers

Checks for Parts

Calls back “Not in stock”
Accounting “We ordered the parts”
Files

Accounting
Invoices Sends report
Sends report accounting
Ships parts
Vendor
Warehouse
Order is placed
“We Need parts #XX”
with Vendor
Inventory
Purchasing Files
Files “We ordered the parts”
Purchasing
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 An ERP Example: After ERP

Orders
Parts Inventory Data
If no parts,
order is placed
Customers Sales Dept. through DB Accounting

Financial Data exchange;

Books invoice against PO

Order is submitted
to Purchasing. Database
Purchasing record Books inventory
order in DB against PO

Order is placed
with Vendor

Warehouse
Vendor Purchasing

Ships parts
And invoices accounting
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 Who are the main ERP vendors?

• Baan
• JD Edwards
• Oracle
• PeopleSoft
• SAP
("Systems, Applications & Products in
Data Processing“)
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 QUICK REVIEW QUESTIONS

1. What is ERP and how does it works in an organization.

2. In your opinion, is it feasible for ERP to operate in small
medium businesses.
3. How data processing cycle works?
4. Briefly explain the advantages and disadvantages of
ERP.
5. Accuracy and control is important in data input process.
Explain why both of this element is important in running
an information system.

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 Question and Answer Session

Q&A

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 What we will cover next

 System documentation techniques

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