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Chapter 2/ The Information System: An Accountant’s Perspective

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Summary Report

Transaction Processing System is an applications process financial transactions. A

financial transaction is an economic event that affects the asset & equities of the firm,
reflected in accounts, & is measured in monetary terms. To deal efficiently with the
transactions, business firms group similar types into transaction cycles. There are 3
transaction cycle namely, expenditure cycle, revenue cycle, & conversion cycle, this
cycles exists in profit/non-profit business.
There are 3 types of accounting record used in transaction cycles. Documents, journals,
& ledgers. Document provides evidence of an economic event & may be used to initiate
transaction processing. Three types of documents are source document, product
document, & turnaround document. Source documents are created at the beginning of
transaction, while product document is the result of transaction processing, lastly
turnaround document become source document for another system. Journals is a
record of a chronological event. It holds complete record of transaction. There are 2
kinds of journal, special journal & general journal. Special journals records most
frequently occurring transactions, as well as high volume while general journal records
non-recurring transactions. Ledger is a book of accounts that reflects the financial
effects of the firm’s transactions after they are posted from the various journals. There
are 2 kinds of ledgers also, general ledger which contains firm’s account information in
the form of summarized control accounts, another one is subsidiary ledger which
contains the detailed account information, it’s like a breakdown of general ledger.
For tracing transactions from source documents to the financial statements, these
records provide an audit trail. It provides record of changes that’ve been made to
database/file.
Accounting records in computer-based systems are represented by four different types
of magnetic files: master file which generally contains the original data, transaction files
which is temporary file of transaction records used to change/update data in master file,
reference file that stores data that are used as standards for processing transactions,
last is archive file that contains records of past transactions & retained for future
reference.
The ability to document systems in graphic form is thus an important skill for
accountants to master. So it’s important to have documentation techniques: data flow
diagrams, entity relationship diagrams, system flowcharts, program flowcharts, & record
layout diagrams. Data flow diagram (DFD) uses symbols to represent that pertain to a
system. Entity relationship (ER) diagrams are used to represent the relationship
between physical resources. System flowchart is the graphical representation of the
physical relationships among key elements of a system.
Computer-based accounting systems fall into two broad classes: batch systems and
real-time systems. Batch systems assemble transactions into groups for processing,
while real-time systems process transactions individually at the moment the event
occurs. When it comes to resources, batch processing has fewer resources than real-
time. Real-time processing in systems that handle large volumes of transactions each
day can create operational inefficiencies.
Finally, data coding schemes and their role in transaction processing and AIS as a
means of coordinating and managing a firm’s transactions. There’s numeric and
alphabetic coding schemes: sequential codes, block codes, group codes, alphabetic
codes, mnemonic codes, with their own advantages & disadvantages.
Summary of discussion:
Q: Among the 4 kinds of codes, which will be the most useful when it comes to
business?
A: It depends on company & its situation, example when a company has more sales, it
will be more useful to use the alphanumeric, there’s more combination than other
codes.
Q: Give a problem that batch processing may encounter.
A: There may be a problem with regards to time lapse.
Q: Give 1 advantage of real-time processing.
A: The process is easier, due to the fact that you just encode, no need to sort it.
Q: Do we need to learn the transaction cycle if we’re going to have a business?
A: Yes, so you will know when to spend, when to produce goods, and to know if you’re
profiting.
Q: Aside from the disadvantages ,in topic of computer-based vs manual-based, that
you’ve given what other disadvantages can you give to us.
A: Manual-based needs more time & man-power, while in computer-based it costs
millions, and when you commit mistake, it will be costly.