BCS PRELIM REVIEWER Business process

1. Revenue processes (Chapter 8)

Preparing financial Administrative a. Sales processes
statements b. Sales return processes
Buying fixed assets Expenditure c. Cash collection processes
Receiving cash payments Revenue
from customers 2. Expenditure processes (Chapters 9 and 10)
a. Purchasing processes
Moving electronic Conversion
b. Purchase return processes
components from the c. Cash disbursement processes
stockroom to the d. Payroll processes
production floor to begin e. Fixed asset processes
making DVD players
Selling common stock to Revenue 3. Conversion processes (Chapter 11)
raise capital a. Planning processes
Purchasing electronic Expenditures b. Resource management processes
c. Logistics processes
components to
manufacture DVD players 4. Administrative processes (Chapter 12)
Paying employees at the Expenditures a. Capital processes
end of a payroll period b. Investment processes
Moving manufactured DVD Administrative c. General ledger processes
players from the
production floor to the Internal controls are the set of procedures and policies
warehouse adopted within an organization to safeguard its assets,
1. A well-known food chain company can influence check the accuracy and reliability of its data, promote
primary and secondary suppliers to maintain operational efficiency, and encourage adherence to
quality of supplies and efficiency of operations and prescribed managerial practices.
the business processes within the organization will
The accounting information system comprises the
operate more smoothly. TRUE
processes, procedures, and systems that capture
2. According to the data hierarchy in computer
accounting data from business processes; record the
systems, a set of employee records forming a
accounting data in the appropriate records; process the
payroll is an example of FILE
detailed accounting data by classifying, summarizing, and
3. This is the entities, processes, and information
consolidating; and report the summarized accounting data
flows that involve the movement of materials,
to internal and external users.
funds, and related information through the full
logistics process, from the acquisition of raw supply chain is the entities, processes, and information
materials to the delivery of finished products to flows that involve the movement of materials, funds, and
the end user. SUPPLY CHAIN related information through the full logistics process, from
4. Examples of this kind of data would be the free‐ the acquisition of raw materials to the delivery of finished
form text of a customer’s online review of a products to the end user. The supply chain includes all
product which might include Facebook posts, vendors, service providers, customers, and intermediaries.
tweets, or videos. UNSTRUCTURED DATA
5. It does not only align business processes in the IT Supply chain management is the organization and control
system used to record processes, it also improves of all materials, funds, and related information in the
efficiency and effectiveness of these processes. logistics process, from the acquisition of raw materials to
ACCOUNTING INFORMATION SYSTEM the delivery of finished products to the end user
6. The purposes of this network are to distribute data (customer).
or information to employees, to make shared data
In order to increase the efficiency and effectiveness of
or files available, and to manage projects within
these supply chain linkages, many organizations employ IT
the company. INTRANET
systems. Using IT systems to enhance efficiency and
7. These are sets of procedures and policies adopted
effectiveness of internal or supply chain processes is called
within an organization to safeguard its assets,
IT enablement.
check the accuracy and reliability of its data,
promote operational efficiency, and encourage information technology is defined as the computers,
adherence to prescribed managerial practices. ancillary equipment, software, services, and related
INTERNAL CONTROLS resources as applied to support business processes. IT
8. This type of processing mode requires that all usage to support business processes accomplishes one or
similar transactions be grouped together for a more of the following objectives:
specified time then this group of transactions is
processed as a set. BATCH PROCESSING 1. Increased efficiency of business processes
2. Reduced cost of business processes
3. Increased accuracy of the data related to business
processes
Business process reengineering (BPR) is the purposeful and
organized changing of business processes to make them
more efficient. BPR not only aligns business processes in
the IT system used to record processes. Data Warehouse and Data Mining
 data warehouse is an integrated collection of
Basic Computer Data Structures enterprise‐wide data that generally includes
1. A bit is a shortened reference to binary digit. The several years of non-volatile data, used to support
bit is the smallest unit of information in a management in decision making and planning.
computer system. A bit can have only one of two  operational database contains the data that is
values: zero or one. All data in a computer system continually updated as transactions are processed.
is reduced to a set of bits, or zeros and ones.  Data mining is the process of searching data
2. A byte is a unit of storage that represents one within the data warehouse for identifiable patterns
character. In most computer systems, a byte is that can be used to predict future behavior.
made up of eight bits. For example, the character
“A” would be represented in a computer system Structured, Unstructured, and Big Data
by a set of eight bits. Every character, including  Structured data easily fits into rows and columns.
letters, numbers, and symbols, are represented by These columns usually are fields of fixed length.
a byte.  Unstructured data does not easily fit into rows
3. field is one item within a record. and columns of fixed length.
4. A record is a set of related fields for the same  Big Data is known as high‐volume, high‐speed
entity. information that may be so large and diverse that
5. The entire set of related records forms a file. it demands innovative forms of IT processing. It is
6. database is a collection of data stored on the generally considered too large in size and scope to
computer in a form that allows the data to be be analysed with traditional database tools.
easily accessed, retrieved, manipulated, and
stored. Networks and the Internet
7. relational database stores data in several small  LAN is a computer network that spans a relatively
Internet is the global computer network, or small area.
“information super‐highway. “two-dimensional  Internet is the global computer network, or
tables that can be joined together in many varying “information super‐highway.”
ways to represent many different kinds of  An intranet is a company’s private network
relationships among the data. accessible only to the employees of that company.
8. Master files are the relatively permanent files that  extranet is like an intranet except that it offers
maintain the detailed data for each major process. access to selected outsiders, such as buyers,
9. transaction file is the set of relatively temporary suppliers, distributors, and wholesalers in the
records that will be processed to update the supply chain.
master file.
File Access and Processing Modes Examples of IT Enablement
 E‐business is the use of electronic means to
 Sequential access files store records in sequence, enhance business processes. E‐business
with one record stored immediately after another. encompasses all forms of online electronic trading
 Random access files (sometimes called direct —consumer‐based e‐commerce and business‐to‐
access files) are not written or read in sequential business transactions, as well as the use of IT for
order; rather, their records are stored in random process integration inside organizations.
order on a disk media.  Electronic data interchange (EDI) is the
 same files may sometimes be accessed either way, intercompany, computer‐to‐computer transfer of
sequentially or randomly. In cases where both business documents in a standard business format.
access methods are necessary, some systems use  point of sale system (POS) is a system of hardware
the indexed sequential access method (ISAM). and software that captures retail sales transactions
 Batch processing requires that all similar by standard bar coding. Nearly all large retail and
transactions be grouped together for a specified grocery stores use POS systems that are integrated
time; then this group of transactions is processed into the cash register.
as a batch. Batch processing is best suited to  Automated matching is a system in which the
applications having large volumes of similar software matches an invoice to its related
transactions that can be processed at regular purchase order and receiving report.
intervals.  Evaluated receipt settlement (ERS) is an invoice‐
 Online processing each transaction is entered and less system in which computer hardware and
processed one at a time. software complete an invoice‐less match
 Some online processing systems are also real‐time comparing the purchase order with the goods
processing systems, meaning that the transaction received.
is processed immediately, and in real time, so that
the output is available immediately.
 most of these resources are provided by the cloud
provider. This also means that the cloud provider
 E‐payables and electronic invoice presentment provides data security and backup of data.
and payment (EIPP) are both terms that refer to 4. Cost savings. Because of the detailed advantages,
Web‐enabled receipt and payment of vendor there are usually significant cost savings
invoices. recognized from cloud computing. Cloud
 Enterprise resource planning (ERP) is a multi‐ computing is usually a pay‐for‐service model. In
module software system designed to manage all other words, a company pays the cloud provider
aspects of an enterprise. only for the level of services it uses.

Interrelationships of Business Processes and the AIS Input Methods Used in Business Processes
 A business process is a prescribed sequence of
work steps completed in order to produce a  bar code is a printed code consisting of a
desired result for the organization. series of vertical, machine‐readable,
Types of Accounting Information Systems rectangular bar and spaces that vary in width
1. Manual systems and are arranged in a specific way to
- A source document is a record that captures represent letters, numbers, and other human‐
the key data of a transaction. readable symbols.
- A turnaround document is an output of the
accounting system that can be used as an A document flowchart shows the flow of documents and
input in a different part of the accounting information among departments or units within an
system. organization. Document flowcharts are usually divided into
- general ledger provides details for the entire columns, each representing a department or unit of the
set of accounts used in the organization’s organization.
accounting systems.
- Subsidiary ledgers maintain detailed data flow diagram, or DFD, is used by systems professionals
information regarding routine transactions, to show the logical design of a system. The advantage of
with an account established for each entity. DFDs is that they use only four symbols and are simple to
2. A legacy system is an existing system in operation read and understand.
within an organization. A legacy system uses older
technology in which the organization has a Entity relationship diagrams, or ER diagrams, are pictorial
considerable investment and that might be representations of the logical structure of databases.
entrenched in the organization.
3. Modern, Integrated Systems Cardinality refers to how many instances of an entity relate
to each instance of another entity.
Computing
 Client–server computing means that there are Summary of Study Objectives
two types of computers networked together The interrelationships of business processes and the AIS.
to accomplish application processing. As transactions occur, the systematic and defined steps that
 Cloud computing, a more centralized take place within the organization to complete the
approach to IT. Because of its many underlying tasks of the transaction are called business
applications, there may be no single, accepted processes. These business processes generate accounting
definition of cloud computing. information that must be captured, recorded, and
o Software that resides in the cloud is processed. The accounting information system comprises
called Software as a Service the processes, procedures, and systems that capture
o Databases that reside in the cloud are accounting data from business processes; records the
called Database as a Service accounting data in the appropriate records; processes the
o Sometimes the database is combined detailed accounting data by classifying, summarizing, and
with an operating system, and it is consolidating; and reports the summarized accounting data
referred to as Platform as a Service. to internal and external users. Business processes, IT
o Finally, the computer infrastructure systems, and the accounting information system are
in the cloud is called Infrastructure as inextricably linked.
a Service
The types of accounting information systems. Simply as a
advantages to cloud computing. way to organize the study of accounting information
1. Scalability. As a company grows, it can easily systems, we classify the systems in place into three
purchase new capacity from the cloud provider. categories: manual systems, legacy systems, and modern
2. Expanded access. Once the software and data are integrated systems. Manual systems use paper documents
stored in the cloud, it can be accessed by multiple and records, including journals and ledgers. Legacy systems
devices from many different locations. employ older technology in which the organization has a
3. Infrastructure is reduced. The company has a considerable investment and that might be entrenched in
reduced need for servers and data storage, since the organization. Modern, integrated accounting software
offers companies powerful, technologically advanced
systems to serve as accounting information systems that
integrate business processes across the organization.

Client–server computing. Client–server computing means

that there are two types of computers networked together Documenting processes and systems. A useful way to
to accomplish application processing. The important document processes and systems is to prepare a pictorial
characteristics of client–server computing are as follows: representation. There are many methods of documenting
Both client and server computers are networked together; processes and systems, including process maps, data flow
the system appears to users to be one integrated whole; diagrams, system flowcharts, document flowcharts, and
individual parts of processing are shared between the entity relationship diagrams. Process maps, data flow
server and client; and the client computer participates in diagrams, and document flowcharts appear in selected
the data processing or data manipulation in some chapters of this book to illustrate business processes.
meaningful way. Ethical considerations at the foundation of accounting
information systems. Detecting fraud may be difficult in a
Cloud computing. Cloud computing offers a centralized computerized environment, especially when there are a
approach to IT through virtual servers provided by a third limited number of people responsible for maintaining the
party. The important characteristics of cloud computing are computer systems. Accountants must recognize the
its scalability, reduced computer infrastructure, and ability opportunities for unethical behavior within computerized
to be accessed from many different locations. These processes, and must carefully monitor those systems.
characteristics enable a company to be more efficient and
to avoid excessive costs associated with maintaining its own
IT infrastructure and resources.

Accounting software market segments. The market for

accounting software can be categorized into four market
segments: small companies, midmarket, beginning ERP, and
tier 1. There is much movement within these market
segments as software development companies attempt to
appeal to other segments of the accounting software
market. Input methods used in business processes. In
manual systems, input is initially captured on source
documents. In IT systems, many different methods are
available for inputting data. Some of these methods include
manual keying of source documents, bar code scanners,
point of sale systems, EDI, and e‐business. These input
methods for IT systems reduce cost, time, and errors in
data input.

The processing of accounting data. Data can be processed

by batch processing or online and real‐time processing.
Batch processing is less complex, but due to its time lag, the
accounting data is not always current. Online and real‐time
systems process data individually as business transactions
occur, making outputs available immediately. Outputs from
the AIS related to business processes. The outputs of an
accounting information system include trading partner
documents, internal documents, internal reports, and
external reports. These outputs may be in electronic or
paper form.