CHAPTER 2
OVERVIEW OF TRANSACTION PROCESSING
AND ENTERPRISE RESOURCE PLANNING SYSTEMS
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
2.1 Table 2-1 lists some of the documents used in the revenue, expenditure, and human
resources cycle. What kinds of input or output documents or forms would you find in
the production (also referred to as the conversion cycle)?
Students will not know the names of the documents but they should be able to identify the
2.2 With respect to the data processing cycle, explain the phrase “garbage in, garbage
out.” How can you prevent this from happening?
When garbage, defined as errors, and allowed into a system that error is processed and the
resultant data stored. The stored data at some point will become output. Thus, the phrase
garbage in, garbage out. Data errors are even more problematic in ERP systems because
2.3 What kinds of documents are most likely to be turnaround documents? Do an
Internet search to find the answer and to find example turnaround documents.
Documents that are commonly used as turnaround documents include the following:
• Utility bills
• Meter cards for collecting readings from gas meters, photocopiers, water meters etc
2.4 The data processing cycle in Figure 2-1 is an example of a basic process found
throughout nature. Relate the basic input/process/store/output model to the functions
of the human body.
There are a number of ways to relate the input/process/store/output model to the human
2.5 Some individuals argue that accountants should focus on producing financial
statements and leave the design and production of managerial reports to information
systems specialists. What are the advantages and disadvantages of following this
advice? To what extent should accountants be involved in producing reports that
2.1 The chart of accounts must be tailored to an organization’s specific needs. Discuss
how the chart of accounts for the following organizations would differ from the one
presented for S&S in Table 2-4.
Some of the changes in the chart of accounts for each type of entity include the following:
a. University
students who pay tuition in installment payments.
• Tuition and fees would be one source of revenue. Others include gifts,
investment income, sales of services, and, for public universities, state
appropriations.
• Student loans are an asset; student deposits are a liability.
equity.
• Separate chart of accounts for each fund (general fund, special revenue fund,
capital projects fund, and debt service fund).
• Revenue and expenditure accounts would be grouped by purpose (e.g., police,
highways, sanitation, education, etc.).
• Encumbrance accounts
2.2 Design a chart of accounts for SDC. Explain how you structured the chart of
accounts to meet the company’s needs and operating characteristics. Keep total
account code length to a minimum, while still satisfying all of Mace’s desires.
(Adapted from the CMA Exam)
A six-digit code (represented by letters ABCDEF) is sufficient to meet SDC’s needs:
accounts.