Accounting File &
Transaction Processing
System
Source: Wilkinson
File Classifications (Master
Files)

Master files: These contain (semi) permanent
data (records) pertaining to entities (people,
places, and things). Accounting related
examples include:
•
General and Subsidiary ledgers
• General ledger master file
• Customer/Accounts Receivable master file
• Vendor/Accounts Payable master file
• Inventory master file
• Employee/Payroll master file
• Open WIP master file
• Standard cost master file
File Classification (Transaction
Files - I)



Transaction files: These contain records
pertaining to events currently being processed,
such as sales, receipts of goods, etc.
Transaction files capture detailed transaction
data. They are counterparts to general and
special journals in manual systems
Transaction data are periodically posted to
related master file(s) and are then either
purged or archived
File Classification (Transaction
Files - II)

Accounting related transaction files include:
• General/Special journal file (General ledger)
• Sales/Cash receipts file (Accounts receivable)
• Receiving/Purchases file, Cash disbursements file
(Inventory, Accounts payable)
• Inventory issuance file/shipment file/sales
file/adjustments file (Inventory)
• Payroll/Cash disbursements (Payroll)
Other File Classifications - I



Reference files: These contain tables or lists of data
needed for making calculations or for checking the
accuracy of input data. e.g., product price tables,
customer lists, etc.
History files: These are also called archive files since they
contain records pertaining to completed transactions such
as past sales
Open files: These record incomplete transactions.
Whereas transaction files are purged or archived at the
end of a given period, open files remain indefinitely open.
Only individual records from Open files get purged as the
transaction actually occurs or does not. e.g., Open sales
order file Sales transaction file
Other File Classifications - II


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Report files: These are derived from records
within master or transaction files. e.g., data
may be periodically extracted from the
Accounts Receivable master file to construct
an aging schedule
Backup file: This is a copy of a current file
generated so that the original file can be
recreated from it
Suspense file: This is a collection of those
records of a transaction file that appear to
contain erroneous or questionable data
Record-Key


Record keys: These are data elements within records that
serve as sort keys. e.g., customer-account number
Two types of keys often used in master and transaction
file records are a primary key and one or more secondary
keys
•
•
A Primary key (also called a record key) is the attribute that
uniquely identifies a specific record. They are usually of
numeric or alphanumeric modes, e.g., customer number
A Secondary key is an attribute other than the primary key
and represents an alternative way to sort or access records
in a file, e.g., customer last name
Transaction Processing
Systems


A fundamental task in any AIS is to
process transactions affecting the
organization
Transaction processing systems)
involve three stages:
• Data entry
• Data and file processing
• Output preparation
Benefits of Understanding
Transaction Processing Systems

Recognize limitations in currently installed
Transaction Processing Systems such as:
•
•
•
•
•

inadequate data controls
inefficient processing
out-of-date files
stored data that cannot be accessed quickly
data that is poorly classified and coded
Recommend new or improved processing
approaches and storage methods
Layout of Input-Process-Output
Discussion
Data Processing Model
Input
Online
May lead to
Realtime Processing
Process
Offline
Always Batched
Processing
May lead to
Batched Processing
Periodic
(Batched)
Direct
Updating
Output
Realtime
(Immediate)
Sequential
Updating
Sequential Updating
after Online Data Entry
Sequential Updating
from Batched
(Offline) Inputs
Data Entry



Most transactions are initiated by business
events triggered by various agents or by
instructions within a computer program
Other transactions are initiated by the
passage of time, e.g., interest accruals
Computer-based systems employ an offline or on-line approach to data entry
Off-line Data Entry




Off-line refers to input devices not directly
connected to the computer. Examples are
key-to-tape, key-to-disk, and OCR readers
Data must be first captured on source
documents and similar transactions are
batched together
Batched transactions are transcribed into
machine-readable form using an off-line device
Turnaround documents may be
used
as direct input into a system
On-line Data Input



On-line refers to devices that are directly and continuously
connected to a computer system
In on-line data entry, transaction data are entered into the
computer directly as they occur
Characteristics of on-line data entry may include:
• nonexistence of source documents (telephones, faceto-face conversations)
• input of data using source data automation (scanners at
POS terminals)
• origination of data by parties external to the firm (ATM
machines, telephone touch-tone based transactions)
• capture of data at remote sites (remote job entry or
remote batch processing)
Input Documents

Input documents typically do the
following:
• Authorize Subsequent Transactions
• Trigger Desired Actions
• Reflect Accountability
• Provide Data for Output and Reference
On-line Data Entry design

Four factors that can reduce the tendency for errors
in on-line data entry are:
•
•
•
•
Menus that clearly define alternative actions
Dialogue prompts that display suggestions or
questions to the user
Graphical user interfaces that allow a user to make
selections
Preformatted screens that display formats for
transaction documents. These can be associated with
menu options
Advantages of On-line versus
Off-line Data Entry


Off-line data entry offers the advantages
of economy and productivity
On-line data entry offers the advantages
of timeliness, flexibility,
and simplicity
Options in Computer-Based
Transaction Processing
Source(s) of
Transactions
Focus of
Transaction
Data
Input
Approach
Timing of
Processing
Mode of
Processing
Timing of
Outputs
Users of
Information
Main
Computer Site
Batches of
Events
Remote
Off-line
On-line
Periodic
(delayed)
Sequential
Immediate
(real- time)
Direct
Spooled
Immediate
Currency not
critical
Currency
critical
Individual
Events
Data Processing Methods


Batch data processing involves the
processing of data in groups (or batches)
of like transactions at periodic intervals.
Used when transaction activity is low or
periodic
Real-time processing consists of
processing each transaction as it arises
and is captured
Batch Processing Method



In batch processing, transaction data are stored in a
transaction file until a master-file update is performed. The
storing of transaction data in a transaction file may occur
either through off-line or on-line entry of data
Advantages of batch processing include:
• processing can be done in background mode
• processing is only performed when needed
• batch processing leaves a good audit trail
Disadvantages:
• the master-file is only as current as last processing run.
• If transactions are batched before entry, any errors in
transaction data cannot be corrected at the time of
entry. They must be corrected and reentered either
through a separate run or during the next processing
cycle
Real-time Processing Method



Real-time processing involves the processing of
each transaction as it arises and is captured
Data from each transaction are entered via an
online device and posted directly and
immediately to the affected record(s) in one or
more master files
Real-time processing may be interactive in that it
may involve direct interactions between humans
and computerized systems
Real-time Processing Method

Advantages of real-time processing include:
• This method keeps the master file more current
•

than the batch runs
Errors are caught at the time of data entry
Drawbacks of real-time processing include:
• More complex and expensive than batch systems
• Harder to audit
• Controls and backup procedures are more
elaborate in order to guard against unwarranted
access and human error
Sequential vs. Direct Updating

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Sequential Updating from Batched/Online Inputs: To update a master file
sequentially within a computer-based application, the processing
program starts at the beginning master file record. It then reads every
record in the file, changing data in each record affected by a transaction
(see Figs. 5-6 and 5-7 & 5-8).
Sequential Updating requires sorting of the transaction file by the master
file sorting key (e.g., transactions originally sorted on transaction_no.
must now be resorted by master-file customer_no.).
Since all the records in a master file are read during the update,
sequential updating increases the processing time significantly if only a
few records are to be updated.
Direct Updating: Instead of processing a batch of transactions
sequentially against an entire master file, each transaction in the batch
can be posted directly to the affected records.
Direct Updating with batched transactions eliminates the sorting step.
Direct Updating is only feasible if the master files are stored on direct-access
storage.
DFD Showing Batched Sequential
Processing of Transactions
Source Documents
Origination of
Transactions
Batch Totals
Batch
Documents &
Compute
Totals
Prepare
Financial
Outputs
Subsidiary and
General ledgers
Updated
Financial Statement
Records
& other Outputs
Recipients
of
Outputs
Post Data to
Accounting
Records &
Verify Batch
Totals
Transaction Data
(Journals)
Batch of
Documents
Prepare Batch
Documents
for Sequential
Processing
Sorted Batch
of Documents
Enterprise Resource Planning




ERP is a software with an integrated set of applications
for enterprise-wide use in functional areas such as
finance, accounting, human resource management,
manufacturing, logistics, etc.
ERP systems permit an integration of data and
applications. Both financial and non-financial data can be
integrated
ERP systems also facilitate access to data that are within
the firm but outside the ERP system
Standardization of worldwide systems, consistent and
accessible data, and on-line processing of data result in
firm-wide data availability
File Management Issues

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
A File is a collection of related data stored
together for future use
All computerized applications involving
transaction processing typically employ one or
more files
Because of their involvement with transaction
processing, and auditing of such processing,
accountants need to be aware of file
management issues
File Access - I

Sequential Access: This requires each
record in a file to be scanned, beginning
with the first record in the file
• The sequential access method is inefficient
for finding individual records. However, it is
very effective if a large number of records in a
file need to be accessed
File Access - II

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Direct Access: This denotes any method that involves
the accessing of desired records in some way other than
by an exhaustive search through all the records in a file
Significant methods of Direct Access include:
•
•
•
•
•
Indexed sequential file
Randomization
Binary searches
Linked lists
Inverted lists
All Direct Access methods require direct-access storage
media such as magnetic disks and the use of Pointers
Pointers are data elements whose values specify or “point
to” the physical storage addresses where associated data
are stored. In contrast to the other data elements of a
record, a pointer provides direction rather than
content
Indexed Sequential File - I


This type of file combines a sequential
arrangement of records with an index
that cross-references the primary key
values of the records
The index enables individual records to
be retrieved quickly, while the file retains
the benefits of sequential processing
Indexed Sequential File - II
1
3
2
Index File
Data File
Emp. Name Pointer
Albany
6
Carter
1
Finsbury
3
Goodrich
4
Jenkins
9
Petersen
8
Schneider 2
Sykes
5
Williamson 7
Addr Emp. #
Binary Search
1
2
3
4
5
6
7
8
9
500
501
503
504
506
508
509
512
513
Name
Carter
Schneider
Finsbury
Goodrich
Sykes
Albany
Williamson
Petersen
Jenkins
Individual Record Retrieval
Using the ISAM Method
Data File
Index File
• Product #
Pointer
• 105010
• 110020
• 115015
Inverted list on
Product #
1
7
12
Product #
1. 105010
2. 106950
3. 107000
4. 108020
5.
6.
7. 110020
8. 110410
9. 114650
10.
11.
12. 115015
13. 116000
Description
Dye-12oz.
Dye-16 oz.
Dye-24 oz.
Conc-1 gal.
Conc-2 gal.
Conc-4 gal.
Conc-6 gal.
Reagent
Additive
Randomization

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
This is the access procedure in which computations are
performed to generate addresses for individual records.
These computational procedures are known as “Hashing
Schemes.”
When the records of a file are located throughout a direct
access storage medium by means of a randomizing
procedure, the file is described as a random file.
A Hashing Scheme provides a random file with its major
advantage: fast access.
Hashing schemes are typically faster than the table
lookup procedures required with indexed sequential files.
Coding
•
•
•
AISs depend on coding to record, store,
classify and retrieve financial data.
Computer systems most often use numeric
codes or alphanumeric codes for processing
accounting transactions.
Purposes of coding:
• uniquely identifies transactions and accounts
• compresses data
• aids in classification process
• conveys special meanings
Coding Systems
•
•
•
•
Mnemonic Codes give visible clues
concerning the objects they represent
Sequence Codes are the simplest type of
coding scheme that assign numbers or letters
in consecutive order
Block Codes assign a series of numbers
within a sequence to entities or events having
common features
Group Codes reveal two or more dimensions
or facets pertaining to an object
Design Considerations in
Coding
•
•
•
•
Codes should serve some useful purpose
Codes should be consistent
Codes should be standardized
throughout the organization
Codes should plan for future
expansion