Page 223 - Accounting Information Systems

194 PART II Transaction Cycles and Business Processes

Sort Run

At this point, the sales order file is in no useful sequence. Remember from an earlier discussion that a
transaction file must be placed in the same sequence as the master file it is updating. The first sort run in
this system rearranges the sales order file by order of the secondary key—ACCOUNT NUMBER.

AR Update and Billing Run
The AR update program posts to AR by sequentially matching the ACCOUNT NUMBER key in each
sales order record with the corresponding record in the AR subsidiary master file. This procedure creates
a new AR subsidiary master file that incorporates all the changes to customer accounts that the transaction
records affect. The process leaves the original AR subsidiary master file complete and unchanged. This
automatic backup feature is an advantage of sequential file processing. Figure 4-23 illustrates this method
with some sample records.
Each sales transaction record processed is added to the sales journal file. At the end of the run, these
are summarized and an entry is made to the journal voucher file to reflect total sales and total increases
to AR.
To spread the billing task evenly over the month, some firms employ cycle billing to bill their custom-
ers. The update program searches the billing date field in the AR subsidiary master file for those custom-
ers to be billed on a certain day of the month and prepares statements for the selected accounts. The
statements are then mailed to the customer.

Sort and Inventory Update Runs

The procedures for the second sort and inventory update runs are similar to those previously described.
The sort program sorts the sales order file on the secondary key—INVENTORY NUMBER. The inven-
tory update program reduces the QUANTITY ON HAND field in the affected inventory records by the
QUANTITY SOLD field in each sales order record. A new inventory master file is created in the process.
Figure 4-24 illustrates the process.
In addition, the program compares values of the QUANTITY ON HAND and the REORDER POINT
fields to identify inventory items that need to be replenished. This information is sent to the purchasing
department. Finally, a journal voucher is prepared to reflect cost of goods sold and the reduction in inventory.

General Ledger Update Run

Under the sequential file approach, the general ledger master file is not updated after each batch of trans-
actions. To do so would result in the re-creation of the entire general ledger every time a batch of transac-
tions (such as sales orders, cash receipts, purchases, cash disbursements, and so on) is processed. Firms
using sequential files typically employ separate end-of-day procedures to update the general ledger
accounts. This technique is depicted in Figure 4-22.
At the end of the day, the general ledger system accesses the journal voucher file. This file contains
journal vouchers reflecting all of the day’s transactions that the organization processed. The journal
vouchers are sorted by general ledger account number and posted to general ledger in a single run, and a
new general ledger is created.
The end-of-day procedures will also generate a number of management reports. These may include
sales summaries, inventory status reports, transaction listings, journal voucher listings, and budget and
performance reports. Quality management reports play a key role in helping management monitor opera-
tions to ensure that controls are in place and functioning properly. In Chapter 8, we examine management
information needs and management reporting techniques.