Data Processing Cycle dpc
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CPAR-85-1ST-PREBOARDS-MAS
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- Source documents
- Turnaround documents
- Data Processing Cycle
- Data Storage
- Coding Techniques
- Audit trail
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Acc 214 Reviewer Week 1-3 1. Data Processing Cycle (DPC) - This refers to a set of operations that is responsible for the transformation of raw data into useful information. The goal of this process is to make use of the information to aid organizations (in accounting, i.e. businesses) in the decision-making process. 2. Source documents - Source documents are the original documents where details of a transaction can be found. A business transaction like purchase of goods entails several source documents such as purchase requisition form, purchase order, etc., which will all be discussed in the next part. Normally, source documents are numbered in a unique manner (e.g. sequential) so they can be easily traced when they enter the Accounting Information System (AIS). 3. Turnaround documents - A turnaround document is a form that is sent to a third-party who will fill out the document and return the same to the issuer. Since the form was returned, the information on the form operates as the source for the data entry back into the system. Data Processing Cycle Data Processing Cycle (DPC) plays a very significant role in developing an accounting information system. DPC involves operations used to transform data into useful information. 1. Collecting and preparation of data 2. Data input 3. Processing of the data with computer programs 4. Transmitting the resulting information to the user 5. Storing the input data and output information for future use As CPAs, the attest function is to 'audit'. Before starting the audit, one of tusepreliminary procedures is to understand the business. As we are in the modern era, most of the business transactions happen in a computing system/tool (i.e. computers). Upon understanding the business processes, you will encounter several flowcharts showing the business practices in transforming input to output in a nutshell. It is therefore important as accountants, to know this topic. 1. Data Input This part of the DPC has three steps. a. The first step is to capture the transaction data and enter them into the system. The data capture is usually triggered by a business activity. Data must be collected about three facets of each business activity: i. Each activity of interest ii. The resource (s) affected by each activity iii. The people who participate in each activity These data inputs are usually evidenced by paper source documents. Eventually, the data are transferred into the computer. The following are the common business activities and source documents b. The second step in processing input is ascertaining the accuracy and completeness of the data captured by the system. Ways to this is to utilize source document automation or well-designed turnaround documents and data entry screens. i. Source data automation- a device that capture transaction data in machine-readable form at the time and place of their origin. Examples include ATMs by banks, point-of-sale (POS) scanners used in retails stores, and barcode scanners n warehouses. ii. Turnaround documents- company output sent to an external party, who often adds data to the document, and then returned to the company as an input document. They are in machine-readable form to facilitate their subsequent processing as input records. An example is a utility bill that is sent to the customer, returned with the customer's payment, and read by a special scanning device when it is returned.In this part, try to get your utility bill (water or electricity) to perfectly visualize what turnaround document is. iii. To reduce risk of capturing incomplete data, users can also purchase prenumbered source documents or by having the system automatically assign a sequential number to each new transaction. Upon implementing this, any missing document may easily be traced by looking at the number series of the source documents and identifying those that cannot be found. c. Third Step in processing input is to make sure company policies are followed, such as approving or verifying a transaction. An example is programming the system to check customer's credit limit and payment history, as well as inventory status, before confirming customer sale. 2. Data Storage Company's data are one of its most important resources. Accountants need to understand how these data are stored and organized in the Accounting Information System (AIS) and how they can be accessed. Data storage is analogical to how books are organized into chapters, sections, paragraphs, and sentences. This part of DPC explains basic data storage concepts and definitions. b. Journals- contains journal entries that show the accounts and amounts to be debited and credited. i. General journal- used to record infrequent or nonroutine transactions ii. Specialized journal- records large number of repetitive transactions such as sales, cash receipts, and cash disbursements Periodically, the total of the journal entries of each account is posted to the ledger. c. Ledgers- where cumulative accounting information is stored i. General ledger- contains summary-level data for every asset, liability, equity revenue, and expense account ii. Subsidiary ledger- contains detailed data for any general ledger account with many individual subaccounts The general ledger account corresponding to a subsidiary ledger account is called a control account. The sum of all subsidiary ledger account should equal the amount in the corresponding general ledger control account. Any discrepancy between them indicates that a recording error has occurred. d. Coding Techniques- Data in ledgers is organized logically using coding techniques, the systematic assignment of numbers or letters to items to classify and organize them. i. Sequence Codes- items are numbered consecutively to account for all items ii. Block Codes- blocks of numbers are reserved for specific categories of data iii. Group Codes- two or more subgroups of digits are used to code items They are often used in conjunction with block codes iv. Mnemonic codes- letters and numbers are interspersed to identify an item, usually derived from the description of the item and is usually easy to memorize An example of coding is the chart of accounts, which is a list of the numbers assigned to each general ledger account. e. Audit trail- a traceable path of a transaction through a data processing system from point of origin to final output, or backwards. It is used to check the accuracy and validity of ledger postings. f. Computer-based storage concepts i. Entity - Person, place, or thing - Something an organization wishes to store data about ii. Attributes - Facts about the entity iii. Fields - Where attributes are stored iv. Records - Group of related attributes about an entity v. File - Group of related Records - File types: i. Transaction file- Contains records of a business from a specific period of time ii. Masterfile- Permanent records, updated by transaction with the transaction file iii. Database- Set of interrelated files 3. Data Processing- once data is entered into the system, they must be processed to keep the database current. The four different types of data processing activities are as follows: i. Creating new data records ii. Reading, retrieving, or viewing existing data iii. Updating previously stored data 2. Batch Processing- cheaper and more efficient, but data are current and accurate only after processing. Only used for payroll, that do not need frequent updating and that naturally occur or are processed at fixed time periods. 3. Online Real-time processing- ensures that stored information is always current, thereby increasing its decision-making usefulness Data input errors can be corrected in real time or refused. 4. Online batch processing- a combination of the two approaches, where transaction data are entered and edited as they occur and stored for later processing iv. Deleting data Download 21.94 Kb. Share with your friends:
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