Core Concepts of
Moscove, Simkin & Bagranoff
Developed by:
Marianne Bradford, Ph.D.
Bryant College
John Wiley & Sons, Inc .

Chapter 5
Transaction Processing: Additional Cycles,
Special Industries, and Accounting Software
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Introduction
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Additional Transaction Processing Cycles
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Transaction Processing in Special Industries
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Accounting and Enterprise Software
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Business Process Reengineering

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Many organizations have specialized information needs, apart from the typical AIS requirements.
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The focus of AISs is moving from transaction processing to capturing data around business processes.
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Two important transaction processing cycles common to many organizational entities are the production and financing cycles.

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The production cycle begins with a request for raw material and ends with the transfer of finished goods to warehouses.
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This cycle concerns the capture of data and the reporting of information associated with producing goods in manufacturing organizations.

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Track purchases and sales of inventories
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Monitor and control manufacturing costs
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Control inventory
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Control and coordinate the production process
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Provide input for budgets

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Provides important control information for the budget process.
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Can be characterized as job costing or process costing systems.
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A job costing information system keeps track of costs for each product or group of products, called a job.
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Process costing systems make use of averages to calculate the costs associated with goods in process and finished goods produced.

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Inventory control ensures that the production cycle processes inventory transactions appropriately so that the financial statements correctly state the value of the inventory and cost of goods sold accounts.
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The objective of JIT is to minimize inventories at all levels.
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The production AIS may be integrated with a computer integrated manufacturing (CIM) system.

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Material Requisition Form - directs stores to issue materials or parts to designated work centers or authorized persons
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Bill of Materials - shows the types and quantities of parts needed to make a single unit of product
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Master Production Schedule - shows the quantities of goods needed to meet sales demands

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Production order - incorporates data from sales orders or forecasts, operations lists and bills of materials in order to authorize the production of an order or batch
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Job Time Card - shows the distribution of labor costs to specific jobs or production orders

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Material requirements planning (MRP I) system monitors the acquisition and use of parts and subassemblies.
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Manufacturing resource planning (MRP II ) is a more complex version of MRP II which uses the information from the bill of materials and production schedule to coordinate the purchase and use of raw material inventories.

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Financial Statement Information
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Materials Price Lists - shows prices charged for raw materials
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Periodic Usage Reports - provides managerial information about how various production departments are using raw materials
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Inventory Reconciliation Reports - reconciles physical inventory with perpetual records

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Inventory Status Reports - allows purchasing and production managers to monitor inventory levels
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Production Cost Reports details the actual costs for each production operation, each cost element, and/or each separate job
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Manufacturing Status Reports - provide managers with information about the status of various jobs

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The financing process is where a company gets and uses financial resources, such as cash, other liquid assets and investments.
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The financing cycle includes the activities of borrowing cash or selling ownership shares.

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Effective cash management – organizations can make use of lockbox systems and electronic funds transfer (EFT).
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Minimizing cost of capital, or the cost of obtaining financial resources.
• Earn maximum return on investments by using financial planning models.
• Project cash flows

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Remittance Advices - accompanies a customer’s payment
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Deposit Slips - banks provide to document account deposits
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Checks - companies receive and issue checks
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Bank Statements - used to reconcile the cash balance in the company’s ledger against the cash balance in the bank account
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Stock Market Data
• Interest Data
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Financial Institution Profiles

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Financial Statement Information
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Cash Budget
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Investment Reports
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Debt and Interest Reports
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Financial Ratios
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Financial Planning Model Reports

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Vertical market refers to markets or industries that are distinct in terms of the services they provide or the goods they produce.
• These organizations may require more information than is typically output from a traditional AIS.
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Examples of specialized information needs include time and billing systems, activity based costing systems, and point-of-sale systems.

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Professional service
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Not-for-profit
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Health care
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Retail
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Construction
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Government
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Banking and Financial services
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Hospitality

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Most companies purchase accounting and enterprise software.
• Another option is to “e-source” the software by buying the services of an application service provider (ASP).
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Integrated accounting software programs process all types of accounting transactions.
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Packages today include Internet connectivity and enable small businesses to create Web sites and engage in electronic commerce .
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Middle to high-end accounting software packages are typically sold by a value-added reseller (VAR).

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Enterprise resource planning (ERP) systems are integrated programs do much more than process financial data.
• The capabilities of accounting software programs to process enterprise-wide data expand with the price and complexity of software.
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A valued feature of ERPs is the ability to interface with customers and suppliers. This is termed supply chain management.

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Accounting software has become more sophisticated and customized for specific industry information needs.
• Specialized accounting software may include:
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Customer relationship management to keep track of sales calls, seminars, and phone calls with prospective clients
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Source code that may be customized to fit a particular firm’s needs.

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Today, AISs are less concerned with accounting transactions and more concerned with business events.
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Business events include important activities that affect the business but are not captured by the financial accounting system.
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Business process reengineering (BPR) concerns redesigning business processes from scratch.

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