OVERVIEW OF TRANSACT ION PROCESSING

2-1 ©2015 Pearson Education, Inc.

CHAPTER 2

OVERVIEW OF TRANSACT ION PROCESSING

AND ENTERPRISE RESOU RCE PLANNING SYSTEMS

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

2.1 Table 2-1 lists some of the documents used in the revenue, expenditure, and human resources cycle. What kinds of input or output documents or forms would you find in the production (also referred to as the conversion cycle)?

Students will not know the names of the documents but they should be able to identify the tasks about which information needs to be gathered. Here are some of those tasks

 Requests for items to be produced  Documents to plan production  Schedule of items to be produced  List of items produced, including quantity and quality  Form to allocate costs to products  Form to collect time spent on production jobs  Form requesting raw materials for production process  Documents showing how much raw materials are on hand  Documents showing how much raw materials went into production  List of production processes  List of items needed to produce each product  Documents to control movement of goods from one location to another

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Ch. 2: Overview of Transaction Processing and ERP Systems

©2015 Pearson Education, Inc.2-2 2.2 With respect to the data processing cycle, explain the phrase “garbage in, garbage out.” How can you prevent this from happening?

When garbage, defined as errors, and allowed into a system that error is processed and the resultant data stored. The stored data at some point will become output. Thus, the phrase garbage in, garbage out. Data errors are even more problematic in ERP systems because the error can affect many more applications than an error in a non-integrated database.

Companies go to great lengths to make sure that errors are not entered into a system. To

prevent data input errors:

 Data captured on source documents and keyed into the system are edited by the computer to detect and correct errors and critical data is sometimes double keyed. Companies use turnaround documents to avoid the keying process. Companies use source data automation devices to capture data electronically to avoid the keying and some of the editing process. Well-designed documents and screens improve accuracy and completeness by providing instructions or prompts about what data to collect, grouping logically related pieces of information close together, using check off boxes or pull-down menus to present the available options, and using appropriate shading and borders to clearly separate data items. Data input screens are preformatted to list all the data the user needs to enter. Prenumbered source documents are used or the system automatically assigns a sequential number to each new transaction. This simplifies verifying that all transactions have been recorded and that none of the documents has been misplaced. The system is programmed to make sure company policies are followed, such as approving or verifying a transaction. For example, the system can be programmed to check a customer’s credit limit and payment history, as well as inventory status, before confirming a sale to a customer.

Accounting Information Systems

©2015 Pearson Education, Inc..2-3 2.3 What kinds of documents are most likely to be turnaround documents? Do an Internet search to find the answer and to find example turnaround documents.

Documents that are commonly used as turnaround documents include the following:

 Utility bills  Meter cards for collecting readings from gas meters, photocopiers, water meters etc  Subscription renewal notices  Inventory stock cards  Invoices  Checks (banks encode account info on the bottom of checks)  Annual emissions inventory forms

(http://www.deq.state.ok.us/aqdnew/Emissions/TurnAroundDocs.htm)

Students will find many other turnaround documents.

Here are some URLs for turnaround document definitions and examples:

http://en.wikipedia.org/wiki/Turnaround_document

http://www.pcmag.com/encyclopedia_term/0,2542,t=turnaround+document&i=53248,00.asp

http://www.answers.com/topic/turnaround-document-1

Here are some turnaround document images (1 long URL):

http://images.google.com/images?q=turnaround+document&oe=utf-8&rls=org.mozilla:en-

US:official&client=firefox-a&um=1&ie=UTF-

8&ei=N7yBSpbAF4KiswO39JnwCA&sa=X&oi=image_result_group&ct=title&resnum=4

Ch. 2: Overview of Transaction Processing and ERP Systems

©2015 Pearson Education, Inc.2-4 2.4 The data processing cycle in Figure 2-1 is an example of a basic process found throughout nature. Relate the basic input/process/store/output model to the functions of the human body.

There are a number of ways to relate the input/process/store/output model to the human body. Here are a few of them

 Brain. We read, see, hear, and feel things. We process that input in order to understand what it is and how it relates to us. We store that data in our brains and then process it again in order to solve problems, make decisions, etc., which represent output. Stomach. We take food in as input. It is processed to produce energy to fuel all bodily functions. If we eat more food than the body needs at any one time it is stored as fat.The output is walking, talking, thinking – all functions fueled by the energy produced.Human waste is also an output of that process.

Students will come up with other examples of how the input/process/store/output model applies to the human body

2.5 Some individuals argue that accountants should focus on producing financial statements and leave the design and production of managerial reports to information systems specialists. What are the advantages and disadvantages of following this advice? To what extent should accountants be involved in producing reports that include more than just financial measures of performance? Why?

There are no advantages to accountants focusing only on financial information. Both the accountant and the organization would suffer if this occurred. Moreover, it would be very costly to have two systems rather than one that captures and processes operational facts at the same time as it captures and reports financial facts.

The main disadvantage of this is that accountants would ignore much relevant information about the organization’s activities. To the extent that such nonfinancial information (e.g., market share, customer satisfaction, measures of quality, etc.) is important to management, the value of the accounting function would decline. Moreover, accountants have been trained in how to design systems to maximize the reliability of the information produced.If relevant information is not produced by the AIS, there is danger that the information may be unreliable because the people responsible for its production have not been trained in, or adequately aware of, the potential threats to reliability and the best measures for dealing with those threats.