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    Business Activities AND Transaction Processing

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    Muhammad Syahir Mat Sharif
    This document provides an overview of business activities and transaction processing. It discusses how organizational structure helps allocate responsibility, authority, and accountability. It then covers key business activities like acquiring capital/inventory and selling products. It discusses centralized and distributed processing systems. The main sections cover capturing transaction data using standardized source documents, recording transactions in journals, and posting to ledgers to generate meaningful reports and financial statements for management decision making. It also discusses internal controls and how information technology has transformed accounting information systems.

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    Business Activities AND Transaction Processing

    Uploaded by

    Muhammad Syahir Mat Sharif
    51 views45 pages
    This document provides an overview of business activities and transaction processing. It discusses how organizational structure helps allocate responsibility, authority, and accountability. It then covers key business activities like acquiring capital/inventory and selling products. It discusses centralized and distributed processing systems. The main sections cover capturing transaction data using standardized source documents, recording transactions in journals, and posting to ledgers to generate meaningful reports and financial statements for management decision making. It also discusses internal controls and how information technology has transformed accounting information systems.

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    AIS lesson 2

    Original Title

    lect2 2013

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    This document provides an overview of business activities and transaction processing. It discusses how organizational structure helps allocate responsibility, authority, and accountability. It then covers key business activities like acquiring capital/inventory and selling products. It discusses centralized and distributed processing systems. The main sections cover capturing transaction data using standardized source documents, recording transactions in journals, and posting to ledgers to generate meaningful reports and financial statements for management decision making. It also discusses internal controls and how information technology has transformed accounting information systems.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    51 views45 pages

    Business Activities AND Transaction Processing

    Uploaded by

    Muhammad Syahir Mat Sharif
    This document provides an overview of business activities and transaction processing. It discusses how organizational structure helps allocate responsibility, authority, and accountability. It then covers key business activities like acquiring capital/inventory and selling products. It discusses centralized and distributed processing systems. The main sections cover capturing transaction data using standardized source documents, recording transactions in journals, and posting to ledgers to generate meaningful reports and financial statements for management decision making. It also discusses internal controls and how information technology has transformed accounting information systems.

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    of 45

    LECTURE 2

    BUSINESS ACTIVITIES AND TRANSACTION PROCESSING

    Organisation structure & AIS


    The structure of an organization helps to allocate 1. Responsibility roles defining 2. Authority define access control 3. Accountability whose accountable to which asset common method segment by business function Business AIS helps improve operation efficiency make better decisions , maximizing profit. NPO/NGO improve operations efficiency, maximize benefits derived from their resources Business activities Organizing capital, premises&equipment Acquisition,
    Recruiting employees, Acquiring inventory, Manufacturing products, Marketing&selling a product/service, cash collection, cash disbursement

    Organization of Computer Services Function in a Centralized System

    Organizational Structure for a Distributed Processing system

    Transactions Processing
    Manual TP: journal ledger summarize, produce meaningful information. Computerized TP : capture record posting data

    CAPTURING DATA
    Use source documents that are standardized, prenumbered because: 1. Easy to understand 2. Capture all the information that is needed. 3. Provide information on the responsible person who prepare and authorizing each source document. 4. Avoid repetition of any fixed information 5. Prenumbered easy to verify that all transactions are recorded, no documents have been misplaced. Example: Sales invoices, credit note, receipts, payment voucher

    Suggestion designing a form


    1. 2. 3. 4. 5. 6. simple and easy to understand name describing its function Have serial specific ID no. very important control Sufficient space provided for recording necessary information Related information should be grouped together If need multipart form create by filled out once, reduce repetitious writing 7. explanatory note provided in a suitable place if there is ambiguity 8. Related forms that has similar information are placed in the same position ease burden of completing the form 9. multipart form Routing instructions in an appropriate place. Eg: coloured paper where each copy is to be sent. 10. Information on the form follow a logical sequence

    RECORDING TRANSACTION
    1.
    made on a journal, Types of journal : Specialized journal Used for repetitive transactions and simplify the process of recording a large number of similar transactions exp. Sales journal, purchases journal, cash receipts journal and cash payment journal. General journal Records the transactions that cannot be categorized and recorded in any of the specialized journal ( non- routine transaction such as purchase or sale of asset, interest accruals and adjustment.

    2.

    POSTING TRANSACTION
    Data in journals posted to ledgers groupings similar transactions types meaning full information to be obtained. 1. General ledger : Many accounts are recorded at summary level for the assets, liability, expenses and revenue. 2. Subsidiary ledger: Maintained for AR, AP & inventory (large number of transaction occurred). The summary recorded in special accounts (control account in GL), to help preserve the completeness. Posting process accounts in ledger would be arranged in a logical manner by assigning each account with a unique number or account code. The list of all the account names and codes chart of accounts A well-designed chart of accounts should accomplish the following: adequate description of each account distinction between account titles assistance in the preparation of required reports

    Information for decision making


    2nd function of AIS 1. financial statements: Statement of financial performance Income statement Statement of financial position (balance sheet) Statement of cash flows Statement of changes in equity 2. Management reports for management control purposes. For example: inventory levels to monitor low or high turnover of product decide on reorder level, marketing strategy profitability of each product to decide which product should be focus on performance of each salesperson for reward and incentives, training requirements daily cash balances and commitments short term cash management extent of back orders delaying customers orders is not good, should decide to change vendor

    Internal Control Issues


    Adequate internal controls are required to: facilitate the capture of reliable business data safeguard assets and business data enable the execution of management objectives Internal control principals include: documented procedures quality of personnel authority recording of transactions internal verification

    Impact of IT on AIS
    Manual system is a system composed of human resources. Computerized system is system composed of computer resources. Computer-based accounting system is accounting system used by both human and computer resources. Information technology (IT) is the processing of information using computer systems. Computers assist in processing high volumes of data at high speeds and the power of computers has increased because of improvement in technology.

    Transforming the Data into Information


    Functions for transforming data into information according to the general AIS model:
    1. 2. 3. 4. Data Collection Data Processing Data Management Information Generation

    1. Data Collection
    Capturing transaction data Recording data onto forms Validating and editing the data

    2. Data Processing
    Classifying Transcribing Sorting Batching Merging Calculating Summarizing Comparing

    3. Data Management
    Storing Retrieving Deleting

    4. Information Generation
    Compiling Arranging Formatting Presenting

    The Evolution of IS Models: The Flat-File Model

    Data Redundancy Problems


    Data Storage - excessive storage costs of paper documents and/or magnetic form Data Updating - changes or additions must be performed multiple times Currency of Information - potential problem of failing to update all affected files Task-Data Dependency - users inability to obtain additional information as needs change Data Integration - separate files are difficult to integrate across multiple users

    The Evolution of IS Models: The Database Model

    Information Systems for Business Transactions


    Supplier
    Old Process Purchasing Purchase Order Goods Goods New Process Purchase Order Purchasing Copy Of Purchase Order

    Supplier

    Receiving
    Receiving Documents Accounts Payable Payment Invoice Database

    Receiving

    Accounts Payable Payment

    ISSUE OF ACCOUNTING INDEPENDENCE


    Information reliability requires accounting independence.
    Accounting activities must be separate and independent of the functional areas maintaining resources. Accounting supports these functions with information but does not actively participate. Decisions makers in these functions require that such vital information be supplied by an independent source to ensure its integrity.

    Basic AIS Functions


    1. Collect and store data about the organizations business activities and transactions efficiently and effectively 2. Provide information useful for decision making 3. Provide adequate controls to ensure that data are recorded and processed accurately.

    1. Collect and store data


    Capture transaction data on source documents. Record transaction data in journals, which present a chronological record of what occurred. Post data from journals to ledgers, which sort data by account type.

    TRANSACTION PROCESSING
    Data Files

    Input

    Process
    Feedback Loop

    Output

    Control

    Sensor

    Capture Transaction Data on Source Documents


    Sales Order Purchase Order

    Source documents are special forms used to capture transaction data.

    Sales Invoice

    Capture Transaction Data on Source Documents


    Control over data collection is improved by prenumbering each source document. Accuracy and efficiency in recording transaction data can be further improved if source documents are properly designed.

    System - Inputs
    Input documents can be categorized into three types . . .
    Source Documents

    Product Documents
    Turn-around Documents

    Creation of a Source Document


    Order Data Collectio n 1 Source 1 Document 2 3

    Sales Order
    Customer

    Sales System

    A Product Document
    Order Data Collectio n Source 1 Document 2 3 Sales Order

    Customer

    Bill

    Remittance Advice Product Document

    Sales System

    A Turnaround Document
    Order Data Collection

    Source 1 Document

    3 Sales Order

    Customer

    Bill Remittance Advice Product Document

    Sales System

    Cheque 1

    2 Remittance Advice

    Cash Receipts System

    Revenue Cycle
    Source Document Function

    Sales Order
    Delivery Ticket Deposit Slip Credit Memo

    Record Customer Order


    Record Delivery to Customer Record Amounts Deposited Support Adjustments to Customer A/cs

    Remittance Advice Receive Cash

    General Ledger & Reporting System


    General Ledger and Reporting System Journal Voucher Record entry posted to general ledger.

    Expenditure Cycle
    Source Document
    Purchase Requisition Purchase Order

    Function
    Request that purchasing department order goods. Request goods from vendors.

    Receiving Report
    Cheques

    Record receipt of merchandise.


    Pay for items.

    Human Resource Cycle


    Source Document
    W4 forms Time cards Job time tickets

    Function
    Collect employee withholding data. Record time worked by employees. Record time spent on specific jobs.

    Data Files

    Input

    Process
    Feedback Loop

    Output

    Control

    Sensor

    Data Processing
    Updating previously stored information about the resources affected by the event and agents who participated in the activity.

    Batch vs Online
    batch processing
    Periodic updating of the data stored A system whereby business transactions are accumulated over a period of time and prepared for processing as a single unit or batch.

    on-line (real-time) processing.


    A system whereby each transaction is processed immediately, without the delay of accumulating transactions into a batch. Always current. Immediate updating as each transaction occurs

    Control Posting
    can be achieved through audit trail An audit trail provides a means to check the accuracy and validity of ledger postings.

    Data Files

    Input

    Process
    Feedback Loop

    Output

    Control

    Sensor

    Storage
    Ledgers and files provide storage of data in both manual and computerized systems.
    The General Ledger The Accounts Payable Ledger The Accounts Receivable Ledger

    A ledger is a book of financial accounts, which reflect the financial effects of the firms transactions after they are posted from the various journals.

    Flow of Information From the Economic Event to the General Ledger


    Order
    Sales Order Journal Entry

    Sales Journal

    Customer
    Post Post

    AR Sub Ledger
    Periodically reconcile subsidiary ledger to General Ledger

    General Ledger

    File
    A file is an organized collection of data.
    Files may be in Manual or Computer (magnetic)

    A transaction file is a collection of transaction input data - normally temporary in nature. A master file is a collection of data that are of a more permanent or continuing interest A reference (table) file contains data that are necessary to support data processing

    2. PROVIDE USEFUL INFORMATION


    Information is provided in the form of reports that fall into two main categories:
    financial statements managerial reports

    3. PROVIDE ADEQUATE CONTROL


    Ensure that the information produced by the system is reliable. Safeguard organizational assets. Ensure that business activities are performed efficiently and in accordance with managements objectives.

    Internal Control Considerations


    1. Provide for adequate documentation of all business activities.
    allows management to verify that assigned responsibilities were completed correctly.

    2. Design the AIS for effective segregation of duties.


    refers to dividing responsibility for different portions of a transaction among several people.

    Segregation of Duties

    Authorization

    Recording

    Custody

    Group Presentation for next week


    1. Find one accounting package that available in Malaysian market 2. Explain background (history, developer, distributor) of that package 3. Explain modules that available in that software.

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