MIDLANDS STATE UNIVERSITY
FACULTY OF BUSINESS SCIENCES
DEPARTMENT OF ACCOUNTING SCIENCES
MODULE OUTLINE: ACCOUNTING SYSTEMS IN A COMPUTER
ENVIRONMENT (ACC 142)
MODULE AIM
This module aims to introduce students to the contemporary issues in information system
technology together with a theoretical and practical understanding of information systems in
support of the accountant. This module aims to expose students to the information technology
environment. Students will acquire the fundamental principles of information systems as a user
and manager.
MODULE OBJECTIVES
By the end of the study, candidates should have mastery of the following areas and must be
able to:
a) Explain the primary information flows within the business environment and discuss the
fundamental objectives of all information systems
b) Discuss the relationship between traditional information systems and computer-based
systems
c) Understand business tasks in transaction cycles and show how different technologies
influence changes in business operations.
d) Understand the concert of doing business via the internet
e) Explain the concepts of evolving computer technologies such as, Artificial intelligence
and Block Chain Technology
MODULE ASSESSMENT
Coursework being assignments and inclass tests constituting 30% of the final exam mark. The
final examination constitutes 70% of the final exam mark. The exam will be made up of theory
questions which will test knowledge and application.
MODULE CONTENT
A. The Information Environment
1. Information defined
1.1 Basic flow of Information
1.2 The value of information
2. Understanding a system
2.1 Multiple components and Relatedness
2.2 General system theory -Subsystem and purpose
3. A frame work for Information system
3.1 The accounting information system
3.2 The management information system
4. The evolution of Information system models
4.1 The manual model
4.2 The flat file mode
4.3 The database model
4.4 The resources, events and agents (REA) model
4.5 Enterprise Resources Planning (ERP) System
5. The role of the accountant
5.1 Accountants as users
5.2 Accountants as system designers
5.3 Accountants as auditors
B. Introduction to Transaction Processing
1. An overview of Transaction Processing systems (TPS)
1.1 The expenditure and revenue cycle
1.2 Documents under the manual system
1.3 Computer based systems
2. Documentation techniques
2.1 Data flow diagram (DFD)
2.2 Flow charts
3. Computer based accounting system
3.1 Differences between batch and real time systems
C. Transaction Cycles
1. The revenue cycle
1.1 Control issues surrounding revenue cycle
1.2 Computer based accounting systems
2. The expenditure cycle
2.1 Computer based purchasing and cash disbursement applications
2.2 Payroll processing and non-current asset procedures
3. The non-current asset system
D. Business communication in a computer environment
1. Traditional versus digital communication
1.1 The use of IT in business
1.2 Benefits and demerits of traditional and digital communication methods
1.3 How technology is changing the way businesses communicate (artificial
intelligence and drone technology)
1.4 Impact of the internet on business communication (the intranet, extranet and
internet)
1.5 Electronic emailing
1.6 Virtual teams and organisations implications to effective communication
E. The digital age and implications on accountants
1. Big Data and Data Analytics
1.1 Block chain technology
1.2 Cloud technology
1.3 Mobile phone technology and websites
1.4 Social media and how accountants use social media for business
1.5 Cyber security
F. Ethics Fraud and Internal Control
1. Understanding ethics and computer fraud
2. Common crimes in accounting information system technology
2.1 Data collection, data processing and database management
2.2 Information generation
3. Internal Control Environment and Procedures
3.1 The control environment
3.2 Types of controls (preventive, detective and corrective)
3.3 System vulnerability
3.4 Internet vulnerability
3.5 Malicious software, viruses, worms, trojan horses and spyware
4. Importance of system control
4.1 Control against malicious and destructive programmes
RECOMMENDED TEXTBOOKS
1. Hall James A Accounting Information Systems
2. Laudon K.C and Laudon J.P Management Information System
3. Bodnar and Hopwood, Accounting Information Systems
4. Holjander, Denna, Cherrington Accounting Information Technology and Business
Solutions
5. O’Brien J, Management Information Systems
6. Bovee and Thil, Excellence in business Communication
INTRODUCTION TO TRANSCTION PROCESSING SYSTEM
Learning objectives
By the end of the Chapter, candidates should have mastery of the following areas and must be
able to:
Provide an overview of Transaction Processing systems (TPS)
Explain documentation techniques
To explain computer-based accounting system
TRANSACTION PROCESSING
-This describes processing of specific accounting transactions for an organization
-A transaction processing systems collects processes and stores transactions to produce
financial reports for decision making
Financial transactions are measured in monetary terms, reflected in the accounts of an entity
and affect the accounting equation (where equity equals assets minus liabilities) e.g the
processing of a sales invoice.
-Non financial transactions form part of the monetary information system and are necessary to
process financial transaction. For example, adding a new debtor to the list of valid debtors
(non-financial) to be used in the later stages of processing financial transactions applicable to
the specific debtor.
COMPONENTS OF THE TPS
-There are:
o Input
o Processing
o Storage and output
INPUT PROCESSING STORING OUTPUT
Source JOURNALS LEDGE ONLINE
document & R& &
s FILES PRINTE
REGISTER
D
S
TRANSACTIONS PROCESSING SYSTEMS (TPS)
The collecting of data arises from source documents such as customers orders( and sales
invoices, created at the beginning of the transaction cycle to provide physical evidence of input
into the TPS.
In the processing phrase, journals and registers are used to provide a record of input. A journal
is chronological entry record that summarises financial transaction data. There are two primary
types of journals: specialized journals and general journals.
-Special journals are used to record transaction that occur in high volumes and that could be
grouped together as one entry.
e.g sales journal for summarizing sales
-purchase journals for summarizing purchases
-cash receipts journal for summarizing receipts of cash
-cash disbursement journal for summarizing receipts of cash
-General Journal are used to record non recurring and dissimilar transactions (such as the
provision for depreciation, closing entry journal for month or year end procedures)
Ledgers and files provide for the storage
-legers can be divided into general ledger and subsidiary ledger
-General ledgers are records of final accounts and, therefore reflect the summary of all
transactions
-Subsidiary ledgers support a general ledger. Such a general ledger will then be called a control
account
-A trial balance is made up of all the different general ledgers to test the accuracy of all the
debit and credit entries.
-Ledgers are usually in the form of files, which by definition is an organized collection of data.
The output could be an online or a printed report generated from the TPS
-Financial reports such as the balance sheet or income statement
-transaction reports such as the sales invoices and goods receipt notes
-Enquiry report such as the sales invoices and goods receipt notes
-Existing reports such as debtor’s monthly statements and bank reconciliation statements
TP ENVIRONMENT
1. Paper based environment
-By use of hand written source documents
2. Paperless processing environment
-Transactions are initiated, recorded, approved and executed electronically
TP METHODS
1. Batch processing
–is the posting of one or a group of similar transaction (such as sales, invoices) all at
one time
-very similar to a manual accounting system
-batches of transactions are accumulated as a transaction file
-Method is still found in some accounting packages such as pastel
2. Real-time processing
-transactions are posted one by one as they are captures and are used to locate the
master file immediately
-This method allows only one transaction at a time to be processed
Advantages of this type of processing are:
• Master files updates occur as soon as the processing is done
• Digital documentation replaces the hard copy documents which always have a
financial and operational burden when it comes to storage space.
• Real time processing help to shorten the cash cycle of companies.
Objectives of TPS
· To produce timely documents and reports
· Increases labour efficiency
· Helps provide increased and enhanced services
· Help to build and to maintain customer loyalty
· Ensure data and information integration
· Maintain a degree of accuracy to ensure error free input and processing so as to give a true
reflection of the organizations transactions.
· To capture, process, store transactions and to produce a variety of documents related to routine
business activities.
Online and Real Time Processing
This is the input of transactions while the input device is connected directly to the main CPU
of the system. The difference is that online processing updates masterfiles whenever transaction
data is entered which may not be when the activities occur, whilst real time processing update
master file as when the activity occurs.
APPLICATION OF AN ACCOUNTING TRANSACTION PROCESSING SYSTEM IN
BUSINESS OPERATIONS
Transaction Cycles
i) Operational cycle
ii) Financial management cycle
1) Operational Cycle
a) Subsidiary Accounts
i) Inventory
ii) Suppliers
iii) Customers
2) Expenditure Cycle
i) Inventory management system
ii) Ordering system
iii) Receiving system
iv) Billing system
v) Goods returned system
vi)Cash disbursement system
3) Revenue Cycle
i) Quotation system
ii) Ordering system
iii) Shipment system
iv) Billing system
v) Goods returned system
vi) Cash receipt system
vii) Bad debts written off
4) Production Cycle
i) Production planning
ii) Production order
iii) Cost accounting
b) Financial Management Cycle
Also known as the administrative cycle, it involves activities which are in the transaction cycle
of the business e.g general cycle which involves the set-up & maintenance of the financial
system, the GL to be specific, journal entry, finance, payroll, assets and financial reporting
cycles. Basically the financial management cycle comprises of system maintenance, journal
entries and financial reporting.
Financial management function is responsible for:
o Managing accounting systems
o Budgeting process
o Managing customer credit
o Monitoring and analyzing the financial condition of an organization
o Auditing process
o Insurance coverage for personnel and property
o Calculating and paying income, payroll, duty and other taxes
The financial management function is supported by financial information systems, which are
categorized into operational, tactical and strategic.
a. Operational financial information systems which is mainly made up of the accounting
systems. These produce repetitive, routine information outputs.
They are task oriented and focus on processing financial transactions. They are:
i) General ledger system
ii) Fixed asset system
iii) Sales order processing
iv) Accounts receivable system
v) Accounts payable system
vi) Stock control system
vii) Purchase order processing system
viii) Payroll system
b. Tactical financial information system- these support decision making by
providing managers regular summary reports, exception reports, ad hoc reports
and other information and resource allocation. They are
i) Budgeting systems
ii) Cash management systems
iii) Capital budget systems
iv) Investment management systems
c. Strategic financial information systems- they are concerned with goal and
direction setting for organizations e.g
i) Trend analysis
ii) Financial condition analysis
FURTHER READING ON PRACTICAL PACKAGES
www.pastel.co.za
www.sap.co.za
www.quickbooks.co.za
www.turbocash.net
Research more on your own decision support systems (DSS), management information systems
(MIS), group decision support system (GDSS), and executive information systems (EIS)
DSS:
– DSS generally provide support for unstructured or semi-structured decisions (decisions that
cannot be described in detail). DSS problems are often characterized by incomplete or
uncertain knowledge, or the use of qualitative data. DSS will often include modelling tools in
them, where various alternative scenarios can be modeled and compared. Investment decisions
are examples of those that might be supported by DSS.
MIS:
-MIS is generally more sophisticated reporting systems built on existing transaction processing
systems. There are often used to support structured decision making decisions that can be
described in detail before the decision is made). Typically will also support tactical level
management, but sometimes are used at other levels. Examples of structured decisions
supported by MIS might include deciding on stock levels or the pricing of products.
EIS:
-EIS support a range of decision making, but more often than not, this tends to be unstructured.
EIS support the executive level of management, often used to formulate high level strategic
decisions impacting on the direction of the organization. These systems will usually have the
ability to extract summary data from internal systems, along with external data that provides
intelligence on the environment of the organization. Generally these systems work by providing
a user friendly interface into other systems, both internal and external to the organization.
GDSS:
-Group Decision Support System (GDSS) is an interactive, computer-based system that helps
a team of decision-makers solve problems and make choices. GDSS are targeted to supporting
groups in analyzing problem situations and in performing group decision-making tasks.
