Overview of Transaction

Processing and ERP

Systems

2-1
 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 collect
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.
2-2
Data Processing Cycle

Input Process Output

Storage

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?

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

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 Org. Cust.
 Same document is returned by
customer to organization

Turnaround Document

2-6
Source Data Automaton

 Source data is captured

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

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

2-8
Data Storage

 Types of AIS storage:

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

2-9
 Ledgers
 General
 Summary level data for each:
• Joe Smith
 Asset, liability, equity,
revenue, and expense
A/R $250
• Patti Jones
 Subsidiary $1000 $750
 Detailed data for a General
Ledger (Control) Account that
has individual sub-accounts
 Accounts Receivable • ACME Inc.
 Accounts Payable A/P $150
• Jones, Inc
$600 $350

2-10
 Journals

 General
 Infrequent or specialized transactions

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

2-11
 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

2-12
 File Types
 Transaction
 Contains records of a business from a
specific period of time

 Master
 Permanent records
Transaction
 Updated by transaction with the File

transaction file
Updated
 Database
 Set of interrelated files
Master
File
Master before
Update

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

2-14
 Data Output Types

 Soft copy
 Displayed on a screen

 Hard copy
 Printed on paper

2-15
ERP Systems

2-16
 Accounting software typically covers the management of areas such as
financial reporting, accounts payables and receivables,
banking, and recording of basic revenues/sales ERP solutions
include multiple modules with accounting being one of them.

 Other modules include supply chain, planning, inventory management,

warehouse management, production, HR, sales, purchasing, and
more.

 However, many people use the terms “accounting software” and “ERP
software” interchangeably.

2-17
 As the world grows more complex with faster turn times, customer
expectations for product personalization, and more data to manage than
ever before, software that supports the operational efficiency of core
business processes is essential.

 Companies also require relevant features that serve the dynamics of

industry-specific needs and challenges.

 This also applies to stand-alone accounting and financial management

software as they fulfill only limited needs when compared to an end-to-end
ERP solution.

 People sometimes erroneously use the terms accounting software and ERP
software interchangeably.

 In reality, accounting and financial reporting software is a subset of an

ERP system.
2-18
 Stand-alone accounting software can take care of the standard accounting
functions, banking, and limited reporting.

 However, the standard accounting packages that small and midsize

businesses have used for years, cannot forecast what’s in store for
tomorrow.

 The accounting and financial management features and capabilities that are
inherent in ERP solutions deliver a single source of real-time and fully
integrated information across different departments for better decision-
making. Real-time visibility across the enterprise provides insight into
purchasing, production, inventory movement and warehouse management.

2-19
 For example, accounting software, such as QuickBooks,
cannot scale with your company’s growth because it operates
on a proprietary database.
 Such stand-alone solutions weren’t built to connect company-
wide processes and deliver real-time visibility into the status
of those processes.
 As a result, you end up with silos of information that cannot
provide a transparent and complete picture of your business
operations.

2-20
 What is an ERP system?

 An ERP system combines financial management, supply chain, CRM, and in some
cases, industry-specific solutions into one broad system, helping businesses gain
full visibility and control, scale, and compete in an increasingly competitive
environment.

 ERP business software provides a single, comprehensive information system that

allows you to accurately process and analyze data across company-wide functions.

 ERP accounting software streamlines sales and inventory, detects process deficits,
and boosts productivity.

 So basically, ERP software has the features of accounting software, plus more.

 The key driver in selecting an ERP software for accounting is to enhance the overall
operational efficiency, scalability and transparency within the business.

2-21
 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

2-22
 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

2-23
 ERP Disadvantages

 Cost

 Time-consuming to implement

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

disruptive

 Complex

 Resistance to change

2-24