Data Processing Cycle and Ledgers

Data Processing Cycle

• Consists of four operations: data input, data storage, data processing, and information output.
• These operations are performed on data to generate meaningful and relevant information.

Data Input

• The initial step involves capturing transaction data and entering it into the system.
• Data collected encompasses the activity of interest, the resources affected, and the people involved.
• Source documents are used, such as sales orders, purchase orders, and employee time cards.
• Turnaround documents are company outputs sent to external parties, then returned with added data.
• Source data automation collects transaction data in machine-readable form at the point of origin.

Data Processing

• The second step ensures captured data is accurate and complete.

Information Output

• The third step ensures compliance with company policies, such as transaction approval and verification.

Ledgers

• Cumulative accounting information is stored in general and subsidiary ledgers.
• General ledgers contain summary-level data for every asset, liability, equity, revenue, and expense account.
• Subsidiary ledgers record detailed data for general ledger accounts with individual subaccounts like accounts receivable, inventory, and accounts payable.
• A general ledger account that summarizes total recorded amounts in a subsidiary ledger is a control account.

Coding

• Coding Systematically assigns numbers or letters to classify and organize items.
• Sequence codes number items consecutively, where gaps indicate missing items needing investigation. Using prenumbered checks, invoices, and purchase orders are examples.
• Block codes reserve number blocks for specific data categories, aiding organization; an example is a chart of accounts.
• Group codes use subgroups of digits to code an item, often alongside block codes.
• Mnemonic codes use letters and numbers to identify items. For instance, Dry300W05 represents a low-end, white dryer made by Sears.
• For a better Coding system; ensure consistency with intended use and allow for growth.

Journals

• Specialized Journals record repetitive transactions such as credit sales, cash receipts, purchases, and cash disbursements.
• Credit sales are recorded and then posted.
• An audit trail allows a transaction to be traced through the data processing system.

Computer-Based Storage Concepts

• An entity is something about which information is stored.
• Attributes are the characteristics of interest that are stored for each entity.
• A field is where the data value for a specific attribute is stored
• A record is the fields containing data that constitutes an entities attributes.
• A data value is content in the field within a record.
• A file is a set of logically related records.
• A master file is a permanent file storing cumulative data, updated as transactions occur.
• A transaction file contains individual business transactions within a specific fiscal period.
• A database consolidates records from separate files with minimal data redundancy.

Data Processing (CRUD)

• Creating involves adding new data records.
• Reading involves retrieving or viewing existing data.
• Updating involves modifying previously stored data.
• Deleting involves removing data.
• Batch processing updates data at a set period.

Output

• Documents record transactions or other company data.
• Reports help employees control operations and help managers make decisions and formulate strategy.
• A query requests data to address a problem or question; the information is then retrieved, displayed, or printed.

Enterprise Resource Planning (ERP) System

• It integrates all aspects of an organization's activities into one system.
• Typical ERP modules include: financials; human resources and payroll; order to cash; purchase to pay; manufacturing; project management; customer relationship management; and system tools.
• ERP systems offer benefits such as integrated data, single data entry, enhanced visibility, better access control, standardized procedures, improved customer service, and real-time manufacturing updates.
• ERP systems also have disadvantages like cost, time requirements, process changes, complexity, and resistance.