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Electronic Data Processing Systems

Chapter 10. Electronic Data Processing Systems. Learning Objective 1. Describe how application controls are used in data processing systems to ensure accuracy and integrity. Paper-Based Input System. The source document , such as sales orders, are prepared manually.

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Electronic Data Processing Systems

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  1. Chapter 10 Electronic Data Processing Systems

  2. Learning Objective 1 Describe how application controls are used in data processing systems to ensure accuracy and integrity.

  3. Paper-Based Input System • The source document, such as sales orders, are prepared manually. • Batch control totals and data transfer registers are fundamental controls over data transfer between user departments and data processing. • Submission of input data should be accompanied by the completion of an inputdocument control form.

  4. Paper-Based Input System • After the source documents are received by data processing, they are manually key-transcribed using a data terminal or personal computer, and then stored on disk. • What is key verification? • What is program data editing?

  5. Paper-Based Input System • Data editing routines may be applied to each of the basic data structures. • character • Fields • records • files • What is a table lookup?

  6. Paper-Based Input System • What is a limit test? • What is continuous operations auditing? • What is a check digit?

  7. Paperless Input Systems • In paperless systems, source documentpreparation and data entry are performed by the same person. • Sometimes no person is directly involved. • The loss of paper-based internal controls can be compensated for by using transaction logs.

  8. 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. • What is tagging?

  9. Paperless Input Systems • There are many types of paperless input systems in which users enter transactions directly into the computer. • What are some examples? • on-line manual data entry systems • automatic identification systems

  10. Paperless Input Systems • Transactions in paperless input systems involving human intervention typically proceed through two phases. • What are these phases? • Data entry and data editing • Transfer to the host application system

  11. Paperless Input Systems • In some systems, transactions are processed from beginning to end without any human intervention: completely automated transaction processing. • What are some examples of this technology? • networked vending machine (NVM) • electronic data interchange (EDI)

  12. Learning Objectives 2 & 3 Characterize the various types of electronic systems used for processing. Describe the basic functions of a computerized accounting application.

  13. Paper-Based Processing Systems • In batch-oriented processing systems, transactions are entered into the computer in batches. • These batches are then processed periodically. • What are some examples of batch processing?

  14. Paper-Based Processing Systems • processing weekly time reports to produce paychecks • processing groups of checks to update accounts payable master files • processing invoices to update an accounts receivable master file • Batch processingcan be performed with sequential or random-access file updating.

  15. Batch Processing with Sequential File Updating • Processing in a sequential file updating system usually involves the following steps: • preparing the transaction file • updating the master file • updating the general ledger • preparing general ledger reports

  16. Sequential File Processing Invoices Data Terminal Process Input Transaction File Batch Balance A

  17. Sequential File Processing Transaction File Good Data File A Sort to Master File Sequence Edit Program Rejected Data Control Report Control Report Reconcile Control Procedure

  18. Sequential File Processing Control Data Sorted Transaction File Old Master File Master File Update Old Master New Master Transaction File Retain for Backup

  19. Son–Father–Grandfather Master Files Old Master File File Update Next File Update Father Backup Master File New Master File Grandfather Son

  20. Updating the General Ledger • A general ledger system is the cornerstone of an accounting system. • There are two major aspects to the operation of a computerized general ledger system. • What are these two aspects? • The direct processing of the general ledger programs, most of which takes place on a monthly basis

  21. Updating the General Ledger • The processing in other computer application systems to prepare the inputs to the general ledger system • One of the tasks to be undertaken in designing a general ledger system is the creation of a pro forma set of journal entries.

  22. Journal Voucher Format Journal Voucher Number Month Year ID Accounts Debit Credit Received from:

  23. General Ledger File Update • Computer processing of accounting data is typically a two-step procedure. • What are these steps? • The first step produces preliminary reports. • The second step is a run that produces the final listings and financial schedules.

  24. General Ledger File Update • Preparing reports requires a link between the general ledger accounts and the report(s) in which they appear. • This process is called line coding.

  25. Example of a Line Code 100601 0 100 03 2 Line Location on Report Type of Report (e.g., financial) Account Number (e.g., marketable securities) Report Number (e.g., balance sheet) Column Location on Report

  26. Batch Processing with Random-Access File Updating • In many systems, indexes are maintained for both the subsidiary and general ledger files. • Maintaining these indexes serves the primary need of allowing users to quickly access a particular account. • Random-access file updating is simpler than sequential-access updating.

  27. Batch Processing with Random-Access File Updating • With random-access updating, it is not necessary to sort the transaction file into the same order as the master file. • There is no need to generate a new master file. • Individual records are read one by one from the transaction file and used to update the related records in the master file in place.

  28. Batch Processing with Random-Access File Updating • The following steps are used: • A record is read from the transaction file. • The key value of the transaction record is used to randomly access the related record in the master file. • The record in the master file is updated in memory and then rewritten back to the data file.

  29. Cash Receipts Application New Invoice Application (Daily) Open Item Accounts Receivable Billing Data A File Control Summary Control File File Update Review and Approve

  30. Cash Receipts Application Cash Remittance Processing (Daily) Post Office Check Remittances Cash Receipts Total A D Check Endorsement Deposit Slip Open Item Accounts Receivable Activity File Data Entry C B

  31. Cash Receipts Application Cash Remittance Processing (Daily) D Deposit Register Bank Summary File Data Entry D Reconcile Cash Summary Report Review and Sign D Cash Summary Report

  32. Cash Receipts Application System Balancing (Daily) Deposit Report C D Control File Activity File Bank Summary File Reconcile (Monthly) Bank Statement System Balancing B

  33. Paperless Processing Systems • In paperless processing systems, either batch or real-time processing is possible. • With real-time processing, sometimes called on-line real-time processing, transactions are processed as they are input into the system.

  34. Paperless Processing Systems • Batch processing in paperless systems is similar to batch processing in paper-based systems. • The main difference is that journal vouchers are replaced by their electronic equivalents, and the general ledger is updated automatically in period batch runs.

  35. 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.

  36. Paperless Processing Systems • On-line, real-time systems (OLRS) process transactions immediately after they are input. • What are some types of real-time processing in OLRS?

  37. Paperless Processing Systems • inquiry/response systems • data entry systems • file processing systems • full processing systems or transaction processing systems

  38. Paperless Processing Systems • The relative disadvantages of OLRS stem from the increased costs and complexity of systems operations. • OLRS are more sensitive to hardware and software errors. • They are more susceptible to processing errors that arise from erroneous or fraudulent inputs.

  39. 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. • On-line, real-time paperless systems tend to produce very little output.

  40. 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.

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