Page 108 - Accounting Information Systems

CHAPT E R 2 Introduction to Transaction Processing 79

DISADVANTAGES. The primary drawbacks with alphabetic coding are (1) as with numeric codes,
there is difficulty rationalizing the meaning of codes that have been sequentially assigned, and (2) users
tend to have difficulty sorting records that are coded alphabetically.

Mnemonic Codes
Mnemonic codes are alphabetic characters in the form of acronyms and other combinations that convey
meaning. For example, a student enrolling in college courses may enter the following course codes on the
registration form:

Course Type Course Number
Acctg 101
Psyc 110
Mgt 270
Mktg 300

This combination of mnemonic and numeric codes conveys a good deal of information about these
courses; with a little analysis, we can deduce that Acctg is accounting, Psyc is psychology, Mgt is
management, and Mktg is marketing. The sequential number portion of the code indicates the level of
each course. Another example of the use of mnemonic codes is assigning state codes in mailing
addresses:

Code Meaning
NY New York
CA California
OK Oklahoma

ADVANTAGES. The mnemonic coding scheme does not require the user to memorize meaning; the
code itself conveys a high degree of information about the item that is being represented.

DISADVANTAGES. Although mnemonic codes are useful for representing classes of items, they have
limited ability to represent items within a class. For example, the entire class of accounts receivable could
be represented by the mnemonic code AR, but we would quickly exhaust meaningful combinations of
alphabetic characters if we attempted to represent the individual accounts that make up this class. These
accounts would be represented better by sequential, block, or group coding techniques.

Summary

This chapter divided the treatment of transaction processing describe the key features of systems. Accountants must be
systems into five major sections. The first section provided proficient in using documentation tools to perform their
an overview of transaction processing, showing its vital role professional duties. Five types of documentation are com-
as an information provider for financial reporting, internal monly used for this purpose: data flow diagrams, entity rela-
management reporting, and the support of day-to-day opera- tionship diagrams, system flowcharts, program flowcharts,
tions. To deal efficiently with large volumes of financial trans- and record layout diagrams. The fourth section presented
actions, business organizations group together transactions two computer-based transaction processing systems: (1)
of similar types into transaction cycles. Three transaction batch processing using real-time data collection and (2) real-
cycles account for most of a firm’s economic activity: the time processing. The section also examined the operational
revenue cycle, the expenditure cycle, and the conversion efficiency issues associated with each configuration. Finally,
cycle. The second section described the relationship among we examined data coding schemes and their role in transac-
accounting records in both manual and computer-based sys- tion processing and AIS as a means of coordinating and man-
tems. We saw how both hard-copy and digital documents aging a firm’s transactions. In examining the major types of
form an audit trail. The third section of the chapter pre- numeric and alphabetic coding schemes, we saw how each
sented an overview of documentation techniques used to has certain advantages and disadvantages.