ACCOUNTING INFORMATION SYSTEM

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ACCT321 ACCOUNTING INFORMATION SYSTEM

Module 2

Systems, Roles, And Development Methodologies

YANBU UNIVERSITY COLLEGE

Management Science Department

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.

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Data processing cycle (chapter 2)

Enterprise Resource Planning (ERP) (chapter 2)

Prepare and use data flow diagram (DFD) in the accounting information system (chapter 3)

Prepare and use flow chart in the information system (chapter 3)

Data hierarchy diagram (chapter 4)

Database terminology (chapter 4)

Relational database (chapter 4)

Outline

Slide 3

Data Processing Cycle

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Input

Process

Output

Storage

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?

2-5

Data Input—Capture

As a business activity occurs data is collected about:

Each activity of interest

The resources affected

The people who are participating

For example for sales transaction the following data will be collected:

Customer name and details, date, item sold, employee who make the sale, prices and delivery instruction.

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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

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Cust.

Org.

Turnaround Document

Source Data Automaton

Source data is captured

In machine-readable form

At the time of the business activity

E.g., ATM’s; POS

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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

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Data Storage

Types of AIS storage:

Paper-based

Ledgers

Journals

Computer-based storage

An entity is something about which information is stored such as employees, employees, inventory item and customer

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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

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A/R

$1000

Joe Smith $250

Patti Jones $750

A/P

$600

ACME Inc.$150

Jones, Inc $350

Journals

General

Infrequent or specialized transactions

Specialized

Repetitive transactions

E.g., sales transactions

2-12

Coding Techniques

Sequence

Items numbered consecutively

Block

Specific range of numbers are associated with a category

10000–199999 = Electric Range

Group

Positioning of digits in code provide meaning

Mnemonic

Letters and numbers

Easy to memorize

Code derived from description of item

Chart of accounts

Type of block coding

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Digit Position	Meaning
1–2	Product Line, size, and so on
3	Color
4–5	Year of Manufacture
6–7	Optional Features
1241000	12 = Dishwasher 4 = White 10 = 2010 00 = No Options

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

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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

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Transaction File

Master before Update

Updated Master File

Data Processing

Four Main Activities

Create new records

Read existing records

Update existing records

Delete records or data from records

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Data Output Types

Soft copy

Displayed on a screen

Hard copy

Printed on paper

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ERP Systems

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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

2-19

ERP Advantages

Integration of an organization’s data and financial information

Data is captured once and can be used many time

Greater management visibility, increased monitoring

Better access controls to designated employees

Standardizes business operating procedures

Improved customer service

More efficient manufacturing

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ERP Disadvantages

High cost

Time-consuming to implement

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

Complex

Some employees can be resistance to change

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Module 2 - Chapter 3

Systems Documentation Techniques

3-22

Learning Objectives

Prepare and use data flow diagrams to understand, evaluate, and document information systems.

Prepare and use flowcharts to understand, evaluate, and document information systems.

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What Is Documentation?

Set of documents and models

Narratives, data flow models, flowcharts

Describe who, what, why, when, and where of systems:

Input, process, storage, output, and controls

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Why Should You Learn Documentation?

You need to be able to read documentation in all its forms: narratives, diagrams, models.

You need to be able to evaluate the quality of systems, such as internal control based in part on documentation.

SAS 94 requires independent auditors to understand all internal control procedures.

Documentation assists in auditor understanding and documentation of their understanding

Sarbanes-Oxley states that management:

Is responsible for internal control system

Is responsible for assessing the effectiveness of the IC System

Both management and external auditors need to document and test IC System

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Data Flow Diagrams

Graphically describes the flow of data within a system

Four basic elements

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Entity

Process

Data Flow

Data Store

Entity

Represents a source of data or input into the system

Represents a destination of data or output from the system

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Data Flows

Movement of data among:

Entities (sources or destinations)

Processes

Data stores

Label should describe the information moving

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Process

Represents the transformation of data

Represents data at rest

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Data Store

Data Flow Diagram Levels

Context

Highest level (most general)

Purpose: show inputs and outputs into system

Characteristics: one process symbol only, no data stores

Level-0

Purpose: show all major activity steps of a system

Characteristics: processes are labeled 1.0, 2.0, and so on

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DFD Creation Guidelines

Understand the system

Ignore certain aspects of the system

Determine system boundaries

Develop a context DFD

Identify data flows

Group data flows

Number each process

Identify transformational processes

Group transformational processes

Identify all data stores

Identify all sources and destinations

Label all DFD elements

Subdivide DFD

3-31

Flowcharts

Use symbols to logically depict transaction processing and the flow of data through a system.

Using a pictorial representation is easier to understand and explain versus a detailed narrative.

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Flowchart Symbol Categories

Input/Output

Processing

Storage

Miscellaneous

3-33

Flow Chart Symbol Categories

(cont’d)

Types of Flowcharts

Document

Illustrates the flow of documents through an organization

Useful for analyzing internal control procedures

System

Logical representation of system inputs, processes, and outputs

Useful in systems analysis and design

Program

Represent the logical sequence of program logic

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Document Flowchart

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Document Flowchart (cont’d)

3-37

System Flowchart

3-38

Program Flowchart

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Module 2 - Chapter 4

Relational Databases

4-40

Learning Objectives

Explain the importance and advantages of databases.

Describe the difference between database systems and file-based legacy systems.

Explain the difference between logical and physical views of a database.

Explain fundamental concepts of database systems such as DBMS, schemas, the data dictionary, and DBMS languages.

Describe what a relational database is and how it organizes data.

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Data Hierarchy

Field

Attributes about an entity

Record

Related group of fields

File

Related group of records

Database

Related group of files

4-42

Advantages of Database Systems

Data Integration

Files are logically combined and made accessible to various systems.

Data Sharing

With data in one place it is more easily accessed by authorized users.

Minimizing Data Redundancy and Data Inconsistency

Eliminates the same data being stored in multiple files, thus reducing inconsistency in multiple versions of the same data.

Data Independence

Data is separate from the programs that access it. Changes can be made to the data without necessitating a change in the programs and vice versa.

Cross-Functional Analysis

Relationships between data from various organizational departments can be more easily combined.

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Database Terminology

Database Management System (DBMS)

Interface between software applications and the data in files.

Database Administrator (DBA)

Person responsible for maintaining the database

Data Dictionary

Information about the structure of the database

Field names, descriptions, uses

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Logical vs. Physical

Physical View

Depends on explicitly knowing:

How is the data actually arranged in a file

Where is the data stored on the computer

Logical View

A Schema separates storage of data from use of the data

Unnecessary to explicitly know how and where data is stored.

4-45

Schemas

Describe the logical structure of a database

Conceptual Level

Organization wide view of the data

External Level

Individual users view of the data

Each view is a subschema

Internal Level

Describes how data are stored and accessed

Description of: records, definitions, addresses, and indexes

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DBMS Languages

Data Definition Language (DDL)

Builds the data dictionary

Creates the database

Describes the subschema

Specifies record or field security constraints

Data Manipulation Language (DML)

Changes the content in the database

Updates, insertions, and deletions

Data Query Language (DQL)

Enables the retrieval, sorting, and display of data from the database

4-47

Relational Database

Relational data model represents the conceptual and external level schemas as if data are stored in tables.

Table

Each row, a tuple, contains data about one instance of an entity.

This is equivalent to a record

Each column contains data about one attribute of an entity.

This is equivalent to a field

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A Relational Table

4-49

Row (Record)

Column (Field)

Each row contains multiple attributes describing an instance of the entity. In this case, inventory.

Same type of data

Attributes

Primary Key

An attribute or combination of attributes that can be used to uniquely identify a specific row (record) in a table.

Foreign Key

An attribute in one table that is a primary key in another table.

Used to link the two tables

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Database Design Errors

If database is not designed properly data errors can occur.

Update Anomaly

Changes to existing data are not correctly recorded.

Due to multiple records with the same data attributes

Insert Anomaly

Unable to add a record to the database.

Delete Anomaly

Removing a record also removes unintended data from the database.

4-51

Data processing cycle (chapter 2)

Enterprise Resource Planning (ERP) (chapter 2)

Prepare and use data flow diagram (DFD) in the accounting information system (chapter 3)

Prepare and use flow chart in the information system (chapter 3)

Data hierarchy diagram (chapter 4)

Database terminology (chapter 4)

Relational database (chapter 4)

Summary

Slide 52

Slide 53

END OF LECTURE