Electronic Data
Processing Systems
Chapter 6
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6–1
Learning Objective 1
Describe how application
controls are used in data
processing systems to
ensure accuracy
and integrity.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6–2
Paper-Based Input System
In some computerized accounting systems,
inputs to the system are based on
handwritten or typed source documents.
These documents are then collected and
forwarded to computer operations for
error checking and processing.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6–3
Preparation and Completion
of the Source Document
The source document, such as sales
orders, are prepared manually.
Errors can be minimized if the
source document is well designed
and easy to understand.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6–4
Transfer of Source Documents
to Data Processing
Batch control totals and data transfer
registers controls data transfers.
User’s departments
Data processing
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6–5
Transfer of Source Documents
to Data Processing
Document counts are a simple
form of batch control.
Batch totals may be taken for all or several
numeric fields in the original data file.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6–6
Transfer of Source Documents
to Data Processing
Data entry
Key verification
Visual verification
Program data editing
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6–7
Program Data Editing Techniques
Data editing routines may be applied
to each of the basic data structures.
Character
Fields
Records
Files
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6–8
Program Data Editing Techniques
What is a table lookup?
It is an editing program that compares
the value of a field to the acceptable
values contained in a table file.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6–9
Program Data Editing Techniques
Limit test
Continuous operations auditing
Check digit
Valid code check
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 10
Paperless Input Systems
In paperless input systems, sometimes called
online input systems, transactions are input
directly into the computer network.
Possible loss of segregation
of duties and audit trail.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 11
Paperless Input Systems
Source
document
Preparation
Data entry
Performed by the same person
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6 – 12
Paperless Input Systems
Transaction logs or transaction registers
are created by logging all inputs to a
special file that automatically contains
tags to identify transactions.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 13
Paperless Input Systems
What is tagging?
It means that additional, audit-oriented
information is included with
original transaction data.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 14
Paperless Input Systems
Online manual data entry systems
Automatic identification systems
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 15
Paperless Input Systems
Transactions in paperless input systems
involving human intervention typically
proceed through two phases.
1. Data entry and data editing
2. Transfer to the host application system
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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Paperless Input Systems
Networked vending machine (NVM)
Electronic data interchange (EDI)
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 17
Learning Objectives 2 and 3
Characterize the various
types of electronic systems
used for processing.
Describe the basic functions
of a computerized
accounting application.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 18
Paper-Based Processing Systems
Weekly time reports to produce paychecks
Groups of checks to update
accounts payable master files
Processing invoices to update an
accounts receivable master file
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 19
Paper-Based Processing Systems
Sequential file updating
Random-access file updating
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6 – 20
Batch Processing with
Sequential File Updating
Preparing the transaction file
Updating the master file
Updating the general ledger
Preparing general ledger reports
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 21
Sequential File Processing
Invoices
1
2
Data
terminal
Process
input
3
Transaction
file
Batch
balance
A
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Sequential File Processing
A
4
5
Transaction
file
Edit
program
Control
report
14
6
7
Good data
file
Sort to
master file
sequence
Rejected
data
Control
report
13
Reconcile
Control
procedure
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Sequential File Processing
8
Sorted
transaction
file
11
New
master
Control
data
10
9
Old master
file
Master file
update
12
Transaction
file
Old
master
Retain for
backup 15
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 24
Son–Father–Grandfather
Master Files
Old
Father master
file
File
update
Backup
Grandfather master
file
New
Son master
file
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Next
file
update
6 – 25
Updating the General Ledger
There are two major aspects to the operation
of a computerized general ledger system.
1. The direct processing of the general
ledger programs, most of which
takes place on a monthly basis
2. The processing in other computer
application systems to prepare the
inputs to the general ledger system
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 26
Journal Voucher Format
Journal Voucher
Number
Accounts
Month
Year
Debit
ID
Credit
Received from:
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General Ledger File Update
As they are released by the general ledger, journal
vouchers are used to build a journal voucher file.
This file is program data edited to check for the
proper journal and account numbers and to
determine whether the accounts are correctly
associated with their related journals.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 28
General Ledger File Update
Invalid data are reported as exceptions...
...and returned to their originating
sources for correction and reentry.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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General Ledger File Update
The current journal voucher transactions
are processed against the previous
month’s general ledger master file.
The master file is updated and the current
period’s general ledger register is produced.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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General Ledger File Update
Computer processing of accounting data
is typically a two-step procedure.
What are these steps?
Preliminary reports are produced.
It is a run that produces the final
listings and financial schedules.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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General Ledger File Update
Preparing reports requires a link between
the general ledger accounts and the
report (s) in which they appear.
Line Coding
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Example of a Line Code
100601
0
100
Type of
report
(e.g., financial)
Account
number
(e.g., marketable
securities)
03
2
Line
location
on report
Report
number
(e.g., balance
sheet)
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Column
location
on
report
6 – 33
Batch Processing with
Random-Access File Updating
In many systems, indexes are maintained for
both the subsidiary and general ledger files.
Maintaining these indexes allows users
to quickly access a particular account.
Random-access file updating is simpler
than sequential-access updating.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 34
Batch Processing with
Random-Access File Updating
1. A record is read from the transaction file.
2. The key value of the transaction
record is used to randomly access
the related record in the master file.
3. The record in the master file is updated
in memory and then rewritten back
to the data file.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 35
Cash Receipts Application
New Invoice Application (Daily)
A
Open
item
accounts
receivable
Control
file
Billing
data
File
update
File control
summary
Review and
approve
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 36
Cash Receipts Application
System Balancing (Daily)
Control
file
B
C
D
Deposit
report
Activity
file
Bank
summary
file
Reconcile
System
balancing
Bank
statement
(Monthly)
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 37
Cash Receipts Application
Cash Remittance Processing (Daily)
Post office
A
Check
remittances
Cash receipts
total
Check
endorsement
Deposit
slip
D
Open item
accounts
receivable
Data entry
B
Activity
file
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
C
6 – 38
Cash Receipts Application
Cash Remittance Processing (Daily)
D
D
Deposit
register
Bank
summary
file
Data entry
Reconcile
Cash summary
report
D
Review
and
sign
Cash summary
report
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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Paperless Processing Systems
Batch processing
Real-time or
online real-time processing
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 40
Paperless Processing Systems
The main difference between paperless and
paper-based batch processing systems is
that journal vouchers are replaced by their
electronic equivalents, and the general ledger
is updated automatically in period batch runs.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 41
Paperless Processing Systems
A primary advantage of paperless
systems is that they make
possible real-time processing.
The processing of individual transactions
as opposed to groups of transactions
is called immediate, direct,
or real-time processing.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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Paperless Processing Systems
Online, real-time systems (OLRS) process
transactions immediately after they are input.
These systems can provide
immediate output to users.
What are some types of real-time
processing in OLRS?
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 43
Paperless Processing Systems
Inquiry/response systems
Data entry systems
File processing systems
Full processing systems
(transaction processing systems)
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 44
Paperless Processing Systems
Relative disadvantages of OLRS are:
 increased costs and complexity
of systems operations
 sensitivity to hardware and software errors
 they are more susceptible to processing errors
that arise from erroneous or fraudulent inputs.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 45
Real-Time Sales System
These systems utilize contemporary information
technology to maximize system performance.
POS (Point-of-Sale) system
Bar coding for automatic identification
EDI (Electronic Data Interchange) ordering system
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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Real-Time Point-of-Sale System
Sales
Customer
input via
Web
browser
Inventory
Accounts
receivable
General
ledger
Sales
slips
Processor
POS
terminals
Internet
Other
terminals
Reports
Reports
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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Transaction Processing in
Real-Time Sales Systems
Vendor
send customer
electronic
catalog
forecast
customer’s
sales order
receive and
translate
incoming order
EDI
Retailer
>
<
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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Transaction Processing in
Real-Time Sales Systems
Vendor
send
acknowledgement
send order to
inventory or
production
transmit advance
shipping notice
EDI
Retailer
>
>
ship goods
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
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The Output System
The output system can be paper-based,
paperless, or something in between.
Most paper-based, batch-oriented systems
with sequential file processing produce
very large volumes of output.
Online, real-time paperless systems
tend to produce very little output.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 50
The Output System
Output controls are designed to check that
processing results in valid output and
that outputs are properly distributed.
A separate EDP control group is often
established to monitor EDP operations.
Typically, an output distribution register is
maintained to control the disposition of reports.
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 51
End of Chapter 6
 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
6 – 52