Page 91 - Accounting Information Systems

62 PART I Overview of Accounting Information Systems

Notice also that the physical products or goods mentioned in Facts 4 and 5 are not shown on the flow-
chart. The document (Copy 2) that accompanies and controls the goods, however, is shown. Typically, a
system flowchart shows only the flow of documents, not physical assets.
Finally, for visual clarity, system flowcharts show the processing of a single transaction only. You
should keep in mind, however, that transactions usually pass through manual procedures in batches
(groups). Before exploring documentation techniques further, we need to examine some important issues
related to batch processing.
Batch Processing
Batch processing permits the efficient management of a large volume of transactions. A batch is a group
of similar transactions (such as sales orders) that are accumulated over time and then processed together.
Batch processing offers two general advantages. First, organizations improve operational efficiency by
grouping together large numbers of transactions into batches and processing them as a unit of work rather
than processing each event separately.
Second, batch processing provides control over the transaction process. The accuracy of the process is
established by periodically reconciling the batch against the control figure. For example, assume that the
total value of a batch of sales orders is $100,000. This number is recorded when the batch is first
assembled and then recalculated at various points during its processing. If an error occurs during process-
ing (for example, a sales order is lost), then the recalculated batch total will not equal the original batch
total and the problem will be detected.
Both of these advantages have implications for designing batch systems. The first is that economies are
derived by making transaction batches large as possible. The average transaction cost is thus reduced when
the processing fixed cost associated with the batch is allocated across a large number of transactions.
The second implication is that finding an error in a very large batch may prove difficult. When a batch
is small, error identification is much easier. In designing a batch system, the accountant should seek a bal-
ance between the economic advantage of large batches and the troubleshooting advantage of small
batches. There is no magic number for the size of a batch. This decision is based on a number of opera-
tional, business, and economic factors. Among these are the volume of transactions, the competitiveness
of the industry, the normal frequency of errors, the financial implications of an undetected error, and the
costs of processing. Depending on these factors, a system might be designed to process many small
batches throughout the day or an entire day’s activity as a single batch.
Flowcharting Computer Processes
We now examine flowcharting techniques to represent a system that employs both manual and computer
processes. The symbol set used to construct this system flowchart will come from both Figure 2-17 and
Figure 2-21. Again, our example is based on a sales order system with the following facts:

1. A clerk in the sales department receives a customer order by mail and enters the information into a
computer terminal that is networked to a centralized computer program in the computer operations
department. The original customer order is filed in the sales department.
Facts 2, 3, and 4 relate to activities that occur in the computer operations department.
2. A computer program edits the transactions, checks the customers’ credit by referencing a credit his-
tory file, and produces a transaction file of sales orders.
3. The sales order transaction file is then processed by an update program that posts the transactions
to corresponding records in AR and inventory files.
4. Finally, the update program produces three hard copies of the sales order. Copy 1 is sent to the
warehouse, and Copies 2 and 3 are sent to the shipping department.
5. On receipt of Copy 1, the warehouse clerk picks the products from the shelves. Using Copy 1 and the ware-
house personal computer (PC), the clerk records the inventory transfer in the digital stock records that are
kept on the PC. Next, the clerk sends the physical inventory and Copy 1 to the shipping department.
6. The shipping department receives Copy 1 and the goods from the warehouse. The clerk reconciles
the goods with Copies 1, 2, and 3 and attaches Copy 1 as a packing slip. Next, the clerk ships the
goods (with Copy 1 attached) to the customer. Finally, the clerk records the shipment in the hard-
copy shipping log and files Copies 2 and 3 in the shipping department.