Business Software

Packages

Accounting Software

Information System

Data Processing (DP) is the manipulation or transformation of such

symbols as numbers and letters for the purpose of increasing their

usefulness.

Transaction Processing (TP), is data processing applied in business

data.

The two terms can be used interchangeably.

What is Data Processing?

A firm’s data processing tasks are performed

by an accounting information system (AIS)

that gathers data describing the firm’s

activities, transforms the data into

information and makes the information

available to users both inside and outside the

firm.

Accounting Information System

The AIS performs four basic data processing tasks:

1. Data Gathering

2. Data Manipulation

3. Data Storage

4. Document Preparation

Data Processing Tasks

As the firm provides products and services to its environment, each

action is described by a data record. When the action involves an

environmental element, it is called a transaction, hence the term

transaction processing.

The data processing system gathers the data that describe each of the

firm’s internal actions and its environmental transactions.

Data Gathering

It is necesarry to manipulate the data to transform it into

information. Data manipulation operations include:

1. Classifying

2. Sorting

3. Calculating

4. Summarizing

Data Manipulation

In a small firm there can be hundreds of transactions and actions each

day; in a large firm there are thousands.

Each transaction is described by several data elements. All of this

data must be kept somewhere until it is needed., and that is the

purpose of data storage.

Data Storage

The AIS produces outputs for individuals and organizations both inside

and outside the firm. The output is triggered in two ways:

• By an action

Outputs are produced when something happens. An example

is the bill that is prepared each time a customer order is filled.

• By a time schedule

Outputs are produced at a particular time. An example is a

payroll check that is prepared each Friday.

Document Preparation

There are several characteristics of data processing that clearly

distinguish the AIS from other Computer Based Information

Systems:

1. Performs necessary tasks

2. Adheres to relatively standardized procedures

3. Handles detailed data

4. Has a primarily historical focus

5. Provides minimal problem-solving information

Characteristics of the AIS

A good example of an AIS is the one that is used by

distribution firms – firms that distribute products or

services to their customers.

We call the system the distribution system.

We will use data flow diagrams, or DFDs, to document the

system.

A Sample Accounting Information System

Major Subsystems of the Distribution

System

1. Systems That Fill Customer Orders

2. Systems That Order Replenishment Stock

3. Systems That Perform General Ledger Processes

Distribution

System

Customers

Suppliers

ManagementMaterials

Stockroom

System Overview

Sales Orders

Rejected Sales

order notices

Invoices

Statements

Payments by customers

Commitments

Purchase Orders

Shipments

Supplier invoices

Supplier statements

Payments to suppliers

Stock

Income Statement

Balance Sheet

Budget Reports

Other reports

1.

Fill

Orders

Customers

Suppliers

ManagementMaterials

Stockroom

3.

Maintain

General

Ledger

2.

Order

Replenis

hment

Stock

Sales Orders

Rejected Sales Order

Notices

Invoices

Payments by customers

Statements

Receivables

ledger dataInventory

ledger data

Payables

ledger data

Balance SheetIncome

Statement

Stock

Payments to suppliers

Supplier statements

Supplier invoices

Shipments

Purchase Orders

Commitments

Purchasing Data

Received Items

Other reports

Budget

reports

Four main systems that are involved in filling customer orders:

1. Order Entry System – enters customer orders into the system

2. Inventory System – maintains the inventory records

3. Billing System – prepares the customer invoices

4. Accounts Receivable System – collects the money from customers

Systems that Fill Customer Orders

1.1

Enter

Orders

Customers

1.2

Process

Inven-

tory

Accepted Orders

1.3

Process

Billing

Sales Orders

Rejected sales orders notices

Completed

Orders

Filled

items

Purchasing

Data

2

23

Received

Items

Inventory

Ledger Data

1.4

Process

Accounts

Receivable

Billed

Orders

3

Receivables

ledger data

Invoices

Statements

Payments

by

Customers

Systems That Order Replenishment Stock

This system is concerned with ordering replenishment stock from

suppliers. It is consists of two subsystems:

1. Purchasing System – issues purchase orders to suppliers for the

needed stock

2. Receiving System – receives the stock

3. Accounts Payable System – makes payment to suppliers

Suppliers

Materials

Stockroom

2.1

Purchas

e Orders

2.3

Process

Accounts

Payable

2.2

Receive

Ship-

ments

1

Purchasing data

Purchase Orders

Commitments

Stock

Shipments

Issued Purchase

Order Data

Filled Purchase

Orders

Incurred Obligations

Supplier

Invoices

Supplier Statements

Payment to Suppliers

3

Received Purchases

1

Received Items

Systems That Perform General Ledger

Processes

The general ledger system is the accounting system that combines

data from other accounting systems for the purpose of presenting a

composite financial picture of the firm’s operations.

Two subsystems are involved:

1. General Ledger Update Subsystem

- posts the records tthat describe the various actions and

transactions to the general ledger

2. Report Preparation Subsystem

- uses the contents of the general ledger to prepare manager’s

reports.

3.1

Update

General

Ledger

3.2

Prepare

Mngt

Reports

1 Receivables ledger data

1

2

Inventory ledger data

Payables ledger data

3.3 General Ledger

General ledger records

Updated general ledger record

Management report data

Management

Other reports

Budget reports

Balance Sheet

Income Statement

1.1.1

Edit

Order

Data

1.1.2

Compute

Credit

Check

1.1.5 Sales Order Edit Rejects

1.1.3

Log in

Orders

1.1.4

Mark

filled

orders

1.1.6 Customer Credit File

Customers

Sales Orders Edit Rejects

Rejected Sales

Order Notices

Accepted

Orders

Edited

OrdersCredit Data

Edited and checked orders1.2

1.1.8 Order Log

1.1.7 Sales Order Credit Rejects

Credit Rejects

1.3

Completed

Orders

Order Data

Date Filled