Baylor University Chapter 1-3 Exam 1 ACC 3303 Mrs. Edison

financing cycle

, where companies sell shares in the company to investors and borrow money, and where investors are paid dividends and interest is paid on loans.

document

A record of a transaction or other company data. Examples include checks, invoices, receiving reports, and purchase requisitions.

query

A request for the database to provide the information needed to deal with a problem or answer a question. The information is retrieved, displayed or printed, and/or analyzed as requested.

record

A set of fields whose data values describe specific attributes of an entity, such as all payroll data relating to a single employee. An example is a row in a spreadsheet.

database

A set of interrelated, centrally controlled data files that are stored with as little data redundancy as possible. A database consolidates records previously stored in separate files into a common pool and serves a variety of users and data processing applications.

file

A set of logically related records, such as the payroll records of all employees.

accounting information system

A system that collects, records, stores, and processes data to produce information for decision makers. It includes people, procedures and instructions, data, software, information technology infrastructure, and internal controls and security measures.

general ledger and reporting system

Information-processing operations involved in updating the general ledger and preparing reports for both management and external parties.

sequence codes

Items are numbered consecutively so that gaps in the sequence code indicate missing items that should be investigated. Examples include prenumbered checks, invoices, and purchase orders.

documentation

Narratives, flowcharts, diagrams, and other written materials that explain how a system works.

transaction processing

Process of capturing transaction data, processing it, storing it for later use, and producing information output, such as a managerial report or a financial statement.

turnaround documents

Records of company data sent to an external party and then returned to the system as input. Turnaround documents are in machine-readable form to facilitate their subsequent processing as input records. An example is a utility bill.

process

The action that transforms data into other data or information.

data value

The actual value stored in a field. It describes a particular attribute of an entity. For example, the customer name field would contain "ZYX Company" if that company was a customer.

source data automation

The collection of transaction data in machine-readable form at the time and place of origin. Examples are point-of-sale terminals and ATMs.

online, real-time processing

The computer system processes data immediately after capture and provides updated information to users on a timely basis.

Information technology (IT)

The computers and other electronic devices used to store, retrieve, transmit, and manipulate data.

data source

The entity that produces or sends the data that is entered into a system.

data destination

The entity that receives data produced by a system.

data processing cycle

The four operations (data input, data storage, data processing, and information output) performed on data to generate meaningful and relevant information.

Entity

The item about which information is stored in a record. Examples include an employee, an inventory item, and a customer.

data flow

The movement of data among processes, stores, sources, and destinations.

group codes

Two or more subgroups of digits that are used to code an item. A group code is often used in conjunction with a block code.

internal control flowchart.

Used to describe, analyze, and evaluate internal controls, including identifying system strengths, weaknesses, and inefficiencies

Support activites

Value chain activities such as firm infrastructure, technology, purchasing, and human resources that enable primary activities to be performed efficiently and effectively.

primary activities

Value chain activities that produce, market, and deliver products and services to customers and provide post-delivery service and support.

narrative description

Written, step-by-step explanation of system components and how they interact.

Information is usually presented in one of three forms:

a document, a report, or a query response.

A business process

a set of related, coordinated, and structured activities and tasks that are performed by a person, a computer, or a machine, and that help accomplish a specific organizational goal.

System

a set of two or more interrelated components that interact to achieve a goal. Most systems are composed of smaller subsystems that support the larger system.

Goal congruence

a subsystem achieves its goals while contributing to the organization's overall goal.

Goal conflict

a subsystem's goals are inconsistent with the goals of another subsystem or with the system as a whole.

Data Store

the place or medium where system data is stored

expenditure cycle

where companies purchase inventory for resale or raw materials to use in producing products in exchange for cash or a future promise to pay cash

human resources/payroll cycle

where employees are hired, trained, compensated, evaluated, promoted, and terminated.

The revenue cycle,

where goods and services are sold for cash or a future promise to receive cash.

production or conversion cycle

where raw materials are transformed into finished goods

AIS to fulfill three important business functions:

Collect and store data about organizational activities, resources, and personnel. Organizations have a number of business processes, such as making a sale or purchasing raw materials, which are repeated frequently. Transform data into information so management can plan, execute, control, and evaluate activities, resources, and personnel. Decision making is discussed in detail later in this chapter. Provide adequate controls to safeguard the organization's assets and data.

value chain

Linking together of all the primary and support activities in a business. Value is added as a product passes through the chain.

document flowchart

Illustrates the flow of documents and data among areas of responsibility within an organization.

program flowchart

Illustrates the sequence of logical operations performed by a computer in executing a program.

AIS can add value to an organization

Improving the quality and reducing the costs of products or services Improving efficiency Sharing knowledge Improving the efficiency and efficiency of its supply chain Improving the internal control structure Improving decision making

The Value Chain

Inbound logistics Operations Outbound logistics Marketing and sales Service

transaction file

A file that contains the individual business transactions that occur during a specific fiscal period. A transaction file is conceptually similar to a journal in a manual AIS.

data flow diagram (DFD)

A graphical description of the flow of data within an organi-zation, including data sources/destinations, data flows, transformation processes, and data storage.

specialized journal

A journal used to record a large number of repetitive transactions such as credit sales, cash receipts, purchases, and cash disbursements.

general journal

A journal used to record infrequent or nonroutine transactions, such as loan payments and end-of-period adjusting and closing entries.

general ledger

A ledger that contains summary-level data for every asset, liability, equity, revenue, and expense account of the organization.

subsidiary ledger

A ledger used to record detailed data for a general ledger account with many individual subaccounts, such as accounts receivable, inventory, and accounts payable.

chart of accounts

A listing of all the numbers assigned to balance sheet and income statement accounts. The account numbers allow transaction data to be coded, classified, and entered into the proper accounts. They also facilitate financial statement and report preparation.

audit trail

A path that allows a transaction to be traced through a data processing system from point of origin to output or backwards from output to point of origin. It is used to check the accuracy and validity of ledger postings and to trace changes in general ledger accounts from their beginning balance to their ending balance.

master file

A permanent file of records that stores cumulative data about an organization. As transactions take place, individual records within a master file are updated to keep them current.

enterprise resource planning (ERP) system

A system that integrates all aspects of an organization's activities—such as accounting, finance, marketing, human resources, manufacturing, inventory management—into one system. An ERP system is modularized; companies can purchase the individual modules that meet their specific needs. An ERP facilitates information flow among the company's various business functions and manages communications with outside stakeholders.

control account

A title given to a general ledger account that summarizes the total amounts recorded in a subsidiary ledger. For example, the accounts receivable control account in the general ledger represents the total amount owed by all customers. The balances in the accounts receivable subsidiary ledger indicate the amount owed by each specific customer.

business process diagram

A visual way to describe the different steps or activities in a business process.

batch processing

Accumulating transaction records into groups or batches for processing at a regular interval such as daily or weekly. The records are usually sorted into some sequence (such as numerically or alphabetically) before processing.

An ERP system, with its centralized database, provides significant advantages:

An ERP provides an integrated, enterprise-wide, single view of the organization's data and financial situation. Storing all corporate information in a single database breaks down barriers between departments and streamlines the flow of information. Data input is captured or keyed once, rather than multiple times, as it is entered into different systems. Downloading data from one system to another is no longer needed. Management gains greater visibility into every area of the enterprise and greater monitoring capabilities. Employees are more productive and efficient because they can quickly gather data from both inside and outside their own department. The organization gains better access control. An ERP can consolidate multiple permissions and security models into a single data access structure. Procedures and reports are standardized across business units. This standardization can be especially valuable with mergers and acquisitions because an ERP system can replace the different systems with a single, unified system. Customer service improves because employees can quickly access orders, available inventory, shipping information, and past customer transaction details. Manufacturing plants receive new orders in real time, and the automation of manufacturing processes leads to increased productivity.

flowchart

An analytical technique that uses a standard set of symbols to describe pictorially some aspect of an IS in a clear, concise, and logical manner.

supply chain

An extended system that includes an organization's value chain as well as its suppliers, distributors, and customers.

Documentation tools are important on the following levels:

At a minimum, you must be able to read documentation to determine how a system works. You may need to evaluate documentation to identify internal control strengths and weaknesses and recommend improvements as well as to determine if a proposed system meets the company's needs. More skill is needed to prepare documentation that shows how an existing or proposed system operates.

The code should:

Be consistent with its intended use, which requires that the code designer determine desired system outputs prior to selecting the code. Allow for growth. For example, don't use a three-digit employee code for a fast-growing company with 950 employees. Be as simple as possible to minimize costs, facilitate memorization and interpretation, and ensure employee acceptance. Be consistent with the company's organizational structure and across the company's divisions.

block code

Blocks of numbers that are reserved for specific categories of data, thereby helping to organize the data. An example is a chart of accounts.

ERP systems also have significant disadvantages:

Cost. ERP hardware, software, and consulting costs range from $50 to $500 million for a Fortune 500 company and upgrades can cost $50 million to $100 million. Midsized companies spend between $10 and $20 million. Amount of time required. It can take years to select and fully implement an ERP system, depending on business size, number of modules to be implemented, degree of customization, the scope of the change, and how well the customer takes ownership of the project. As a result, ERP implementations have a very high risk of project failure. Changes to business processes. Unless a company wants to spend time and money customizing modules, they must adapt to standardized business processes as opposed to adapting the ERP package to existing company processes. The failure to map current business processes to existing ERP software is a main cause of ERP project failures. Complexity. This comes from integrating many different business activities and systems, each having different processes, business rules, data semantics, authorization hierarchies, and decision centers. Resistance. Organizations that have multiple departments with separate resources, missions, profit and loss, and chains of command may believe that a single system has few benefits. It also takes considerable training and experience to use an ERP system effectively, and employee resistance is a major reason why many ERP implementations do not succeed. It is not easy to convince employees to change how they do their jobs, train them in new procedures, master the new system, and persuade them to share sensitive information. Resistance, and the blurring of company boundaries, can cause problems with employee morale, accountability, and lines of responsibility.

The four different types of data processing activities, referred to as CRUD

Creating Reading Updating Delete

System flowchart

Depicts the relationships among system input, processing, storage, and output.

Type of Flowcharts

Document flowcharts internal control flowchart System flowchart program flowchart Business Process Diagram

source documents

Documents used to capture transaction data at its source - when the transaction takes place. Examples include sales orders, purchase orders, and employee time cards.

Data must be collected about three facets of each business activity:

Each activity of interest The resource(s) affected by each activity The people who participate in each activity

Context diagram

Highest-level DFD; a summary-level view of a system, showing the data processing system, its input(s) and output(s), and their sources and destinations.

mnemonic code

Letters and numbers that are interspersed to identify an item. The mnemonic code is derived from the description of the item and is usually easy to memorize.

reports

System output, organized in a meaningful fashion, that is used by employees to control operational activities, by managers to make decisions and design strategies, and by investors and creditors to understand a company's business activities.

six components of an AIS:

The people who use the system The procedures and instructions used to collect, process, and store data The data about the organization and its business activities The software used to process the data The information technology infrastructure, including the computers, peripheral devices, and network communications devices used in the AIS The internal controls and security measures that safeguard AIS data

field

The portion of a data record where the data value for a particular attribute is stored. For example, in a spreadsheet each row might represent a customer and each column is an attribute of the customer. Each cell in a spreadsheet is a field.

attributes \

The properties, identifying numbers, and characteristics of interest of an entity that is stored in a database. Examples are employee number, pay rate, name, and address.

coding

The systematic assignment of numbers or letters to items to classify and organize them.

predictive analysis.

The use of data warehouses and complex algorithms to forecast future events, based on historical trends and calculated probabilities.

give-get exchange

Transactions that happen a great many times, such as giving up cash to get inventory from a supplier and giving employees a paycheck in exchange for their labor.

A transaction

an agreement between two entities to exchange goods or services or any other event that can be measured in economic terms by an organization.

Data

are facts that are collected, recorded, stored, and processed by an information system.

The value of information

benefit produced by the information minus the cost of producing it.

Flowcharting symbols are divided into four categories

input/output system Processing symbols storage symbols flow and miscellaneous symbols

Information

is data that have been organized and processed to provide meaning and improve the decision-making process.

Information overload

occurs when those limits are passed, resulting in a decline in decision-making quality and an increase in the cost of providing that information