Transaction Processing and ERP Systems Notes

Data Processing Cycle

The data processing cycle consists of four main stages:

  • Data Input: Capturing transaction data triggered by a business activity or event. Ensuring data accuracy and completeness and adherence to company policies (e.g., transaction approval).

    • Information collected includes:
      • Activity of interest (e.g., sale).
      • Resources affected (e.g., inventory and cash).
      • People involved (e.g., customer and employee).
    • Information is derived from source documents.
      • Paper source documents.
      • Turnaround documents.
      • Source data automation (data captured from machines, such as POS scanners).

  • Data Storage: Organizing data effectively is crucial.

    • Chart of Accounts: Coding schemas designed to meet management needs efficiently.
    • Transaction Journals: (e.g., Sales journal).
    • Subsidiary Ledgers: (e.g., Accounts receivable ledger).
    • General Ledger
    • Audit Trail: Enables tracing the path of a transaction.

    Example

    Verifying a Sales Journal entry to Accounts Receivable Subsidiary Ledger
    Checking \text{page 5 of the sales journal}, \text{it is possible to verify that } $15,511 \text{ represents the total credit sales recorded on October 15}

    Similarly, \text{the posting reference for the } $1,876.50 \text{ debit to the KDR Builders’ account in the subsidiary accounts receivable ledger also refers to page 5}

  • Coding Techniques:

    • Sequence Codes: Items numbered consecutively (e.g., prenumbered forms).
    • Block Codes: Blocks of numbers reserved for specific categories (e.g., product numbers starting with '2' for refrigerators).
    • Group Codes: Two or more subgroups of digits used to code items (e.g., car VINs).
    • Mnemonic Codes: Letters and numbers used to identify an item (e.g., DRY300W05 for a low-end (300), white (W) dryer made by Sears (05)).

  • Computer-Based Storage:

    • Master Files: Store static information.
    • Transaction Files: Store transaction data.
    • Data is organized into:
      • Entities
      • Attributes
      • Records
      • Fields
      • Values

  • Data Processing

    • Four main types (CRUD):
      • Creating new records.
      • Reading existing data.
      • Updating records.
      • Deleting data.
    • Processing can be:
      • Batch processed (e.g., at the end of the business day).
      • Real-time (processed as it occurs).

  • Information Output:

    • Data can be viewed:
      • Online (soft copy).
      • Printed (hard copy).
      • Types of output:
        • Documents (e.g., sales invoice).
        • Reports (e.g., monthly sales report).
        • Queries (e.g., "Which division had the most sales for the month?").

Cloud Accounting Solutions

Key benefits include:

  • Reduced infrastructure costs.
  • Increased capacity and scalability.
  • Refreshed aging infrastructure.
  • Support for new business opportunities.
  • Business continuity.
  • Increased collaboration.

Enterprise Resource Planning (ERP)

  • Definition: ERP is a software system used to manage day-to-day business activities, including accounting, procurement, project management, risk management, compliance, and supply chain operations.
  • A complete ERP suite includes enterprise performance management software for planning, budgeting, prediction, and financial reporting.
  • ERP systems integrate various business processes and facilitate data flow between them.
  • By collecting transactional data from multiple sources, ERP systems eliminate data duplication and ensure data integrity with a single source of truth.
  • Integrates activities across the entire organization, including:
    • Revenue Cycle
    • Expenditure Cycle
    • Production Cycle
    • H/R Payroll Cycle
    • General Ledger and Reporting System

Advantages of ERP Systems

  • Integrated, enterprise-wide view of the organization’s data, streamlining information flow.
  • Data captured once, eliminating redundant data entry.
  • Greater visibility and monitoring capabilities for management.
  • Improved data access and control through security settings.
  • Standardization of procedures and reports.
  • Improved customer service.
  • Increased productivity through automation.

Disadvantages of ERP Systems

  • High cost.
  • Significant implementation time.
  • Challenges in customizing or standardizing business processes.
  • Complexity.
  • User resistance to learning new systems.