CHAPTER 2: Overview of Business Processes The HR/Payroll Cycle: Facilitate memorization Online batch processing: INFORMATION NEEDS AND

AND BUSINESS PROCESSES Gets funds from the financing cycle Ensure employee acceptance Transactions are entered into a Businesses engage in a variety of processes, including: Provides labor to the production cycle. Make sure its consistent with: computer system as they occur and Provides data to the general ledger and reporting The companys organization stored in a temporary file. Acquiring capital Buying buildings and system. structure Periodically, the temporary equipment The Financing Cycle: Other divisions of the transaction file is run against the Hiring and training Purchasing inventory Gets funds from the revenue cycle. organization master file to update the master file. employees Provides funds to the expenditure and HR/payroll Chart of accounts- a list of all general ledger The output is printed or displayed. Doing advertising & Selling goods or cycles. accounts an organization uses. Online, real-time processing marketing services Provides data to the general ledger and reporting Journalsthe first place that transactions are Transactions are entered into a Collecting payment from Paying employees system. entered in manual systems and some accounting computer system as they occur. customers The General Ledger and Reporting System: packages The master file is immediately Paying taxes Paying vendors Gets data from all of the cycles. A general journal is used to record: updated with the data from the Each activity requires different types of decisions Provides information for internal and external Non-routine transactions, such as transaction. Each decision requires different types of information users. loan payments Output is printed or displayed. Types of information needed for decisions: TRANSACTION PROCESSING: THE DATA PROCESSING CYCLE Summaries of routine transactions Changing data Some are financial An important function of the AIS is to efficiently and Adjusting entries Adding data Some are nonfinancial effectively process the data about a companys Closing entries Deleting data Some come from internal sources transactions. A special journal is used to record routine 4. INFORMATION OUTPUT Some come from external sources In manual systems, data is entered into paper transactions. The most common special The final step in the information process is information An effective AIS needs to be able to integrate journals and ledgers. journals: output. information of different types and from different In computer-based systems, the series of Cash receipts This output can be in the form of: sources. operations performed on data is referred to as the Cash disbursements Documents- are records of transactions or other INTERACTION WITH EXTERNAL AND INTERNAL PARTIES data processing cycle. Credit sales company data. The data processing cycle consists of four steps: Credit purchases Documents generated at the end of the 1. DATA INPUT Audit trail- An audit trail exists when there is transaction processing activities are known as sufficient documentation to allow the tracing of a operational documents (as opposed to source First step in data processing - capture the data transaction from beginning to end or from the end documents). Data is captured about: back to the beginning. They can be printed or stored as electronic The event that occurred. The inclusion of posting references and images. The resources affected by the event. document numbers enable the tracing of Reports- Reports are used by employees to The agents who participated. BUSINESS CYCLES transactions through the journals and control operational activities and by managers to A number of actions can be taken to improve the A transaction is: ledgers and therefore facilitate the audit trail make decisions and design strategies. accuracy and efficiency of data input: An agreement between two entities to exchange COMPUTER-BASED STORAGE CONCEPTS They may be produced: Turnaround documents. goods or services; OR An entity is something about which information is On a regular basis Source data automation Any other event that can be measured in stored. On an exception basis Well-designed source documents and data entry economic terms by an organization. Attributes are characteristics of interest with respect to On demand screens. The business transaction cycle is a process that: the entity. Organizations should periodically reassess Using pre-numbered documents or having the Begins with capturing data about a transaction. A field is the physical space where an attribute is stored. whether each report is needed. system automatically assign sequential numbers to Ends with an information output A record is the set of attributes stored for a particular Queries transactions. five major transaction cycles: instance of an entity. User requests for specific pieces of Verify transactions. 1. REVENUE CYCLE A data value is the intersection of the row and column. information 2. DATA STORAGE The revenue cycle involves interactions with A file is a group of related records. They may be requested: Data needs to be organized for easy and efficient your customers. A master file is a file that stores cumulative information Periodically access. You sell goods or services and get cash. about an organizations entities. One time Ledger- a file used to store cumulative information 2. EXPENDITURE CYCLE It is conceptually similar to a ledger in a manual They can be displayed: about resources and agents. We typically use the The expenditure cycle involves interactions AIS in that: On the monitor, called soft copy. word ledger to describe the set of t-accounts. with your suppliers. The file is permanent. On the screen, called hard copy. General ledger- the summary level information for You buy goods or services and pay cash The file exists across fiscal periods. Output can serve a variety of purposes: all accounts. Detail information is not kept in this 3. PRODUCTION CYCLE Changes are made to the file to reflect the Financial statements can be provided to both account the production cycle, raw materials and labor effects of new transactions. external and internal parties. Subsidiary ledger- contains the detail accounts are transformed into finished goods A transaction file is a file that contains records of Some outputs are specifically for internal use: associated with the related general ledger account. 4. HUMAN RESOURCES/PAYROLL CYCLE individual transactions (events) that occur during a fiscal For planning purposes The related general ledger account is often called a The human resources cycle involves period. Budgets- an entitys formal expression of control account. interactions with your employees. It is conceptually similar to a journal in a manual goals in financial terms. The sum of the subsidiary account balances should Employees are hired, trained, paid, evaluated, AIS in that: Sales forecasts equal the balance in the control account. promoted, and terminated. The files are temporary. For management of day-to-day operations Coding techniques- a method of systematically 5. FINANCING CYCLE The files are usually maintained for one fiscal Delivery schedules assigning numbers or letters to data items to help The financing cycle involves interactions with period. For control purposes classify and organize them. There are many types of investors and creditors. A database is a set of interrelated, centrally-coordinated Performance reports are outputs that codes including: You raise capital (through stock or debt), files. are used for control purposes. Sequence codes- items (such as checks or invoices) 3. repay the capital, and pay a return on it DATA PROCESSING These reports compare an organizations are numbered consecutively to ensure no gaps in (interest or dividends). standard or expected performance with There are four different types of file processing: the sequence. The numbering helps ensure that: RELATION WITH OTHER CYCLES its actual outcomes. Updating data to record the occurrence of an All items are accounted for. The Revenue Cycle Management by exception is an event, the resources affected by the event, and There are no duplicated numbers, which Gets finished goods from the production cycle. approach to utilizing performance the agents who participated would suggest errors or fraud. Provides funds to the financing cycle. reports that focuses on investigating and Updating can be done through several Block codes- blocks of numbers within a numerical Provides data to the general ledger and reporting acting on only those variances that are approaches: sequence are reserved for a particular category. system. significant. Batch processing: Group codes-two or more subgroups of digits are The Expenditure Cycle For evaluation purposes Source documents are grouped into used to code an item. Gets funds from the financing cycle. Surveys of customer satisfaction. batches, and control totals are Group coding schemes are often used in Provides raw materials to the production cycle. Reports on employee error rates calculated. assigning general ledger account numbers. Provides data to the general ledger and reporting Periodically, the batches are entered ROLE OF THE AIS The following guidelines should be observed: system. The traditional AIS captured financial data. into the computer system, edited, The code should be consistent with The Production Cycle: Non-financial data was captured in other, sorted, and stored in a temporary file. its intended use, so make sure you Gets raw materials from the expenditure cycle. sometimes-redundant systems The temporary transaction file is run know what users need. Gets labor from the HR/payroll cycle. Enterprise resource planning (ERP) systems are designed against the master file to update the Provide enough digits to allow room Provides finished goods to the revenue cycle. to integrate all aspects of a companys operations master file. for growth. Provides data to the general ledger and reporting (including both financial and non-financial information) Output is printed or displayed, along Keep it simple in order to: system. with the traditional functions of an AIS. with error reports, transaction Minimize costs reports, and control totals.