1. Electronic Data
Processing Systems
Chapter 6

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

3. Paper-Based Input System
In some computerized accounting systems,
inputs to the system are based on
handwritten or typed source documents.
These documents are then collected and
forwarded to computer operations for
error checking and processing.

4. Preparation and Completion of the Source Document
The source document, such as sales
orders, are prepared manually.
Errors can be minimized if the
source document is well designed
and easy to understand.

5. Transfer of Source Documents to Data Processing
Batch control totals and data transfer
registers controls data transfers.
User’s departments
Data processing

6. Transfer of Source Documents to Data Processing
Input document control form:
Document counts are a simple
form of batch control.
Batch totals may be taken for all or several
numeric fields in the original data file.
Data transfer log

7. Transfer of Source Documents to Data Processing
Data entry
Key verification
Visual verification
Program data editing

8. Program Data Editing Techniques
Data editing routines may be applied
to each of the basic data structures.
Character
Fields
Records
Files

9. Program Data Editing Techniques
What is a table lookup?
It is an editing program that compares
the value of a field to the acceptable
values contained in a table file.

10. Program Data Editing Techniques
Limit test
Continuous operations auditing
Check digit
Valid code check

11. Paperless Input Systems
In paperless input systems, sometimes called
online input systems, transactions are input
directly into the computer network.
Problem:
Possible loss of segregation
of duties and audit trail.

12. Paperless Input Systems
Source
document
Preparation
Data entry
Performed by the same person

13. 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.

14. Paperless Input Systems
What is tagging?
It means that additional, audit-oriented
information is included with
original transaction data.

15. Paperless Input Systems
Examples of paperless
input systems:
Online manual data entry systems
Automatic identification systems

16. Paperless Input Systems
Transactions in paperless input systems
involving human intervention typically
proceed through two phases.
1. Data entry and data editing
2. Transfer to the host application system

17. Paperless Input Systems
Completely Automated
Transaction Processing:
Networked vending machine (NVM)
Electronic data interchange (EDI)

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

19. Paper-Based Processing Systems
Examples of Batch Processing:
Weekly time reports to produce paychecks
Groups of checks to update
accounts payable master files
Processing invoices to update an
accounts receivable master file

20. Paper-Based Processing Systems
Performing Batch Processing:
Sequential file updating
Random-access file updating

21. Batch Processing with Sequential File Updating
Steps:
Preparing the transaction file
Updating the master file
Updating the general ledger
Preparing general ledger reports

22. Sequential File Processing
Invoices
Data
terminal
Process
input 1 2
Transaction
file
Batch
balance A 3

23. Sequential File Processing4 5 6 7
Transaction
file
Edit
program
Good data
file
Sort to
master file
sequence A
Rejected
data
Control
procedure
Control
report
Reconcile
Control
report 14 13

24. Sequential File Processing8
Control
data
Master file
update 10 9
Sorted
transaction
file
Old master
file
Old
master
New
master 11
Transaction
file
Retain for
backup 12 15

25. Son–Father–Grandfather Master Files
Old
master
file
Father
Next
file
update
File
update
New
master
file
Son
Backup
master
file
Grandfather

26. Updating the General Ledger
There are two major aspects to the operation
of a computerized general ledger system.
1. The direct processing of the general
ledger programs, most of which
takes place on a monthly basis
2. The processing in other computer
application systems to prepare the
inputs to the general ledger system

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

28. General Ledger File Update
As they are released by the general ledger, journal
vouchers are used to build a journal voucher file.
This file is program data edited to check for the
proper journal and account numbers and to
determine whether the accounts are correctly
associated with their related journals.

29. General Ledger File Update
Invalid data are reported as exceptions...
...and returned to their originating
sources for correction and reentry.

30. General Ledger File Update
The current journal voucher transactions
are processed against the previous
month’s general ledger master file.
The master file is updated and the current
period’s general ledger register is produced.

31. General Ledger File Update
Computer processing of accounting data
is typically a two-step procedure.
What are these steps?
Step 1
Preliminary reports are produced.
Step 2
It is a run that produces the final
listings and financial schedules.

32. General Ledger File Update
Preparing reports requires a link between
the general ledger accounts and the
report (s) in which they appear.
Line Coding

33. Example of a Line Code Account number (e.g., marketable securities)
Type of
report
(e.g., financial)
Report
(e.g., balance
sheet)
Line
location
on report
Column on
100601
100 03 2

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

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

36. Cash Receipts Application
New Invoice Application (Daily)
Open
item
accounts
receivable A
Control
file
Billing
data
File
update
File control
summary
Review and
approve

37. Cash Receipts Application
System Balancing (Daily)
Deposit
report C D
Reconcile
Control
file
Bank
summary
Activity
Bank
statement
(Monthly)
System
balancing B

38. Cash Receipts Application
Cash Remittance Processing (Daily)
Post office
Check
remittances
Cash receipts
total D
Check
endorsement
Deposit
slip A B
Open item
accounts
receivable
Data entry
Activity
file C

39. Cash Receipts Application
Cash Remittance Processing (Daily)
Deposit
register D
Bank
summary
file D
Data entry
Reconcile
Cash summary
report
Cash summary
report
Review
and
sign D

40. Paperless Processing Systems
Batch processing
Real-time or
online real-time processing

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

42. 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.

43. Paperless Processing Systems
Online, real-time systems (OLRS) process
transactions immediately after they are input.
These systems can provide
immediate output to users.
What are some types of real-time
processing in OLRS?

44. Paperless Processing Systems
Inquiry/response systems
Data entry systems
File processing systems
Full processing systems
(transaction processing systems)

45. Paperless Processing Systems
Relative disadvantages of OLRS are:
increased costs and complexity
of systems operations
sensitivity to hardware and software errors
they are more susceptible to processing errors
that arise from erroneous or fraudulent inputs.

46. Real-Time Sales System
These systems utilize contemporary information
technology to maximize system performance.
POS (Point-of-Sale) system
Bar coding for automatic identification
EDI (Electronic Data Interchange) ordering system

47. Real-Time Point-of-Sale System
Inventory
Accounts
receivable
General
ledger
Sales
slips
Reports
Customer
input via
Web
browser
Internet
Processor
POS
terminals
Other
terminals
Reports

48. Transaction Processing in Real-Time Sales Systems
send customer
electronic
catalog
Vendor
EDI
Retailer
>
forecast
customer’s
sales order
receive and
translate
incoming order
<

49. Transaction Processing in Real-Time Sales Systems
Vendor
EDI
Retailer
send
acknowledgement
>
send order to
inventory or
production
transmit advance
shipping notice
>
ship goods

50. 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.
Online, real-time paperless systems
tend to produce very little output.

51. 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.

52. End of Chapter 6