Chapter 2

Overview of Transaction Processing and ERP Systems

2-1
Nicholas Kitch James S. Gajetela, MSIT(CAR)
 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.

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-2

 Data Processing Cycle

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-3

 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?

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-4

 Data Input—Capture

 As a business activity occurs data is collected about:

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

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-5

 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 returned by
customer to organization

Turnaround Document

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-6

 Source Data Automation

 Source data is captured

 In machine-readable form
 At the time of the business activity
 E.g., ATM’s; POS

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-7

 Data Input—Accuracy and Control

 Well-designed source documents can ensure that data captured is

 Accurate
 Provide instructions and prompts
 Check boxes
 Drop-down boxes
 Complete
 Internal control support
 Prenumbered documents

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-8

 Data Storage

 Types of AIS storage:

 Paper-based
 Ledgers
 Journals
 Computer-based

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-9

 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

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-10

 Journals

 General
 Infrequent or specialized transactions

 Specialized
 Repetitive transactions
 E.g., sales transactions

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-11

 Coding Techniques

 Sequence
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 provide meaning
6–7 Optional Features
 Mnemonic 1241000 12 = Dishwasher
 Letters and numbers
4 = White
 Easy to memorize
10 = 2010
 Code derived from description of item
00 = No Options
 Chart of accounts
 Type of block coding

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-12

 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

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-13

 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

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-14

 Data Processing

 Four Main Activities

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

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-15

 Data Output Types

 Soft copy
 Displayed on a screen

 Hard copy
 Printed on paper

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-16

 ERP Systems

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-17

 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

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-18

 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

 Improved customer service

 More efficient manufacturing

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-19

 ERP Disadvantages

 Cost

 Time-consuming to implement

 Changes to an organization’s existing business processes can be

disruptive

 Complex

 Resistance to change

Nicholas Kitch James S. Gajetela, MSIT(CAR) 2-20