Accounting Information Systems:
Essential Concepts and Applications
Fourth Edition by Wilkinson, Cerullo, Raval,
and Wong-On-Wing
Chapter 5: Computer-Based
Transaction Processing
Slides Authored by Somnath Bhattacharya, Ph.D.
Florida Atlantic University
Transaction Processing
Systems
A fundamental task in any AIS is to
process transactions affecting the
organization
Transaction processing systems(Ss)
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out-of-date files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-ProcessOutput 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 off-line 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, face-to-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 of
Differentiation
Source(s) of
Transactions
Focus of
Transaction
Data
Input
Approach
Timing of
Processing
Mode of
Processing
Timing of
Outputs
Users of
Information
Figure 5-7
Options
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
Document Flowcharts
 Flowcharts are pictorial representations of
transaction processing systems that portray
flows of some type
A Document Flowchart emphasizes the
hardcopy inputs and outputs and their flows
through organizational units
Auditors and accountants may use document
flowcharts when analyzing a current system
for weaknesses in controls and reports
Common Document
Flowcharting Symbols - I
Punched Card
Floppy Disk
Keying operation
Manual Operation
Document
Multiple copies of
a specific document
Connector between
two points on a
flowchart
Journal or ledger
Common Document
Flowcharting Symbols - II
Permanent file of
documents
Envelope
Information flow
Document flow
Annotation for
additional
explanation
Adding machine
tape used for
batch control
A Sample Document
Flowchart
Requesting Department
12
Central Supplies Department
A
Goods Requisition
Form
1
Goods Requisition
Form
A
File
System Flowcharts
 System Flowcharts depict the flows of data
and processing steps in an AIS
They use symbols that are industry
conventions standardized by the American
National Standards Institute (ANSI)
Flowcharting symbols are grouped as
input-output symbols, processing symbols,
storage symbols, data and information
flow symbols, and miscellaneous symbols
System Flowchart
Symbols Input/Output
Keying Operation
Punch Card
Can also be output.
These are rarely
used nowadays.
Manual Input
Document
Also output as
reports
Display
Used when type of media is unknown
or for manual card files, ledgers, batch logs, etc.
General Purpose
Input-Output
File
System Flowcharting
Symbols Processing
Manual Operation
Auxiliary
Operation
Processing
Sorting
Collate
Also known as off-line process
System Flowcharting
Symbols Storage
Punched Card
Input/Output
Punched
Paper Tape
Document
Magnetic
Tape
Magnetic
Disk
Online Storage
Off-line
Storage
Systems Flowcharting
Symbols Connectors
Start/Stop
Terminal
Can also be an external
entity
A
Logic Flow
On-page
connector
Off-page
Connector
Telecommunication
Link
System Flowcharting
Symbols Miscellaneous - I
Data Preparation
Communication Link
Termination
Can also be an external entity
System Flowcharting
Symbols Miscellaneous - II
Bridge for
crossing flows
Batch total any total
Annotation for
additional
explanation
Goods; e.g.,
inventory
shipment
Structure Charts
 A structure chart portrays the hierarchy of levels and
interrelationships within a system
 Computer programmers use high-level structure charts
to determine the overall structure of program modules
required to operationalize a system
 Low-level structure charts, prepared during the detailed
design phase, enable computer programmers to create
source code sub-routines that help in the
implementation of systems
 Source code sub-routines are frequently written in
Structured English
 Structured English are English-like statements generated
from low-level structured charts. These statements are
then converted to detailed source programming code
instructions
A High-Level Structure Chart for
a Course Registration System
Class Registration
Processing System
Read Course
Schedules
Other Inputs
Get Course
Schedules
Other Files
Figure 5-11
Edit Course
Schedules
Process Course
Schedules
Update Course
Schedules
Other Files
Output Course
Schedules
Other Inputs
Output Registration
Reports
Output Course
Schedules
Other Reports
Sequential vs. Direct Updating
 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 directaccess storage.
DFD Showing Batched Sequential
Processing of Transactions
Source Documents
Origination of
Transactions
Batch
Documents &
Compute
Totals
Batch of
Documents
Batch Totals
Prepare
Financial
Outputs
Financial Statement
& other Outputs
Recipients
of
Outputs
Subsidiary and
General ledgers
Updated
Records
Prepare Batch
Documents
for Sequential
Processing
Post Data to
Accounting
Records &
Verify Batch
Totals
Sorted Batch
of Documents
Transaction Data
(Journals)
Figure 5-12
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
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
 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
Data File
Index File
1
3
2
Emp. Name Pointer
Albany
6
Carter
1
Finsbury
3
Goodrich
4
Jenkins
9
Petersen
8
Schneider 2
Sykes
5
Williamson 7
Binary Search
Addr Emp. #
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
 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
Accounting Information Systems:
Essential Concepts and Applications
Fourth Edition by Wilkinson, Cerullo,
Raval, and Wong-On-Wing
Copyright © 2000 John Wiley & Sons, Inc. All rights reserved.
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