CHAPTER THREE

THE SYSTEMS DEVELOPMENT PROCESS

Documentation includes the following types of tools:
 Narratives (written descriptions)
 Flowcharts
 Diagrams
 Other written material
How do accountants use documentation?
 At a minimum, they have to read documentation to understand how a system works.
 They may need to evaluate the strengths and weaknesses of an entity’s internal controls
 They may peruse documentation to determine if a proposed system meets the needs of its users.
 They may prepare documentation to:
 Demonstrate how a proposed system would work
 Demonstrate their understanding of a system of internal controls
Data flow diagrams: It is graphical descriptions of the sources and destinations of data. They
show: Where data comes from, how it flows, the processes performed on it and where it goes.

Flowcharts: Include three types: Document flowcharts describe the flow of documents and
information between departments or units. System flowcharts describe the relationship between
inputs, processing, and outputs for a system. Program flowcharts describe the sequence of
logical operations performed in a computer program.

DATA FLOW DIAGRAMS

Example of a data Accounts
flow diagram of1.0
the Receivable
2.0
customer
Customer payment Credit
Customer Process
Remittance UpdateReceivables
process fromPayment
payment Manager
Deposit
data A/R Information
Bank
Figure 3-3 in your
textbook.

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A data flow diagram consists of four basic elements:

Data sources and destinations

Data flows
Transformation processes
Data stores
I. Data sources and destinations: - Appear as squares and represent organizations or
individuals that send or receive data used or produced by the system. An item can be
both a source and a destination. Customer, bank and credit manager are data sources and
destination
II. Data flows: Appear as arrows and represent the flow of data between sources and
destinations, processes, and data stores. Data flows should always be labeled. The
exception is a data flow moving into or out of a data store. If a data flow is two-way, use
a bi-directional arrow. If two data elements flow together, then the use of one data flow
line is appropriate. If the data elements do not always flow together, then multiple lines
will be needed. Update
Gen Receiv-
eral ables
Ledg
er
Process
Customer
Cash Rec’d & Remittance Slip
Payment
Process
Customer Customer Inquiry
Customer Payment Payment
III. Transformation processes: Processes appear as circles and represent the
transformation of data. Every process must have at least one data inflow and at least
one data outflow. What do you notice about how the processes are labeled?

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 On the above diagram process payment and update Account receivable are a process.
VI. Data stores: Appear as two horizontal lines and represent a temporary or permanent
repository of data. Notice that the inflows and outflows to the data store are not
labeled. Account receivable on the above diagram is a data store.

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 SUBDIVIDING THE DFD

Few systems can be fully diagrammed on one sheet of paper, and users have needs for differing
levels of detail; again consequently, DFDs are subdivided into successively lower levels to
provide increasing amounts of detail. The highest level of DFD is called a context diagram. It
provides a summary-level view of the system. Again, it depicts a data processing system and the
external entities that are: Sources of its input and destinations of its output.

DATA FLOW DIAGRAMS

Depart- Govt.
ments Payroll Agencies
Processing Employee checks Employees
Human System Bank
Resources Manage-
This is the context ment
diagram for the S&S
We’re going to go through a partial example of how the first level of detail was created. But
payroll
before we do, let’s processing
step through some guidelines on how to create a DFD. Rule:
system (Figure 3-5 in
1. Understand the system. Observe the flow of information and interview people involved to
gain thatyour textbook).
understanding.
2. Ignore control processes and control actions (e.g., error corrections). Only very critical
error paths should be included.
3. Determine the system boundaries—where it starts and stops. If you’re not sure about a
process, include it for the time being.
4. Draw the context diagram first, and then draw successively greater levels of detail.
5. Identify and label all data flows. The only ones that do not have to be labeled are those
that go into or come out of data stores.
6. Data flows that always flow together should be grouped together. Those that do not flow
together should be shown on separate lines.
7. Show a process (circle) wherever a data flow is converted from one form to another.
Likewise, every process should have at least one incoming data flow and at least one
outgoing data flow.
8. Transformation processes that are logically related or occur simultaneously can be
grouped in one bubble.
9. Number each process sequentially. A process labeled 5.0 would be exploded at the next
level into processes numbered 5.1, 5.2, etc. A process labeled 5.2 would be exploded
into 5.2.1, 5.2.2, etc.

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 10. Process names should include action verbs, such as update, prepare, etc.
11. Identify and label all data stores, whether temporary or permanent.
12. Identify and label all sources and destinations.
13. As much as possible, organize the flow from top to bottom and left to right.
14. You’re not likely to get it beautiful the first time.
15. On the final copy, lines should not cross. On each page, include: The name of the DFD,
The date prepared and the preparer’s name
Now that we’ve been through the guidelines for developing DFDs, let’s go back to the chapter
example and see if we can re-create a part of it. You may wish to create a table with the
following headings to organize your information: Data Inputs, Processes and Data Outputs

• The first paragraph of the narrative for the payroll process reads as follows:

When employees are hired, they complete a new employee form. When a change to an
employee’s payroll status occurs, such as a raise or a change in the number of exemptions,
human resources complete an employee change form. A copy of these forms is sent to payroll.
These forms are used to create or update the records in the employee/payroll file and are then
stored in the file. Employee records are stored alphabetically.

The first paragraph of the narrative for the payroll process reads as follows:
• The portion marked in bold relates to activities that go on outside the boundaries of the
payroll system. Consequently, these activities will not be included on the DFD.
• The portion marked in italic suggests two data flows coming into the payroll process
(new employee forms and employee change forms). The source of the inflows is the
human resources department. These forms are used to create or update the records in the
employee/payroll file and are then stored in the file.
• The sentence underlined suggests a process (update employee records) with the data
outflow going to a data store (the employee/payroll file).
• The final sentence in this paragraph (Employee records are stored alphabetically)
provides information about the physical storage of the data. Physical information is
utilized in flowcharts but not in data flow diagrams.

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 DATA FLOW DIAGRAMS Depart-
1.0 ments Employees
Human 2.0 Employee
New employeeUpdate Time
Resources Pay paychecks
form
Employee Empl. cards Payroll
Employ- Bank
change 3.0 Payroll 5.0
check
FileEmployee/ ees
Payroll
form Prepare Update
Payroll File disburse- Gen.
Reports
4.0 ment
Payroll data
tax Ledger
Payroll General
Manage- Pay disb. voucher Ledger
report Tax report Govt.
ment Taxes
& payment Agencies

Keep the following in mind as you develop your DFD: Remember to ignore control activities,
such as error correction processes and some data inputs and outputs will not appear on the first
level of the DFD but appear as the processes are exploded into greater levels of detail. The data
flow diagram focuses on the logical flow of data. Next, we will discuss flowcharts, which place
greater emphasis on physical details.
FLOWCHARTS
A flowchart is an analytical technique that describes some aspect of an information system in a
clear, concise, and logical manner. Flowcharts use a set of standard symbols to depict processing
procedures and the flow of data. Every shape on a flowchart depicts a unique operation, input,
processing activity, or storage medium. In the days of yore, flowcharts were manually created
using plastic templates. Most flowcharts are now drawn using a software program such as Visio.
Microsoft and Power Point are also used. The software uses pre-drawn shapes, and the developer
drags the shapes into the drawing. There are four types of flowcharting symbols: Input/output
symbols, Processing symbols, Storage symbols and Flow and miscellaneous symbols

Document Symbol: Represents a Display: Represents information

document or report that is prepared by hand or displayed by an online output device such
printed by a computer. as a terminal, monitor, or screen.

123 Multiple Copies of One Document: Online Keying: Represents data entry by
Indicates multiple copies of a paper an online device such as a terminal or
document or report. The document copies personal computer.
should be numbered in the upper, right-
hand corner. Terminal or Personal Computer:
Combines the display and online keying
Input/output; Journal/Ledger: symbols to represent terminals and
Can represent any input or output on a personal computers.
program flowchart. Also represents
accounting journals or ledgers in a
document flowchart.

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 used to show data being copied from one
Computer Processing: Represents a process document to another.
performed by a computer, which usually
results in a change in data or information. Communication Link: Represents the
transmission of data from one location to
another via communication lines.
Manual Operation: Represents a
processing operation that is performed manually.
On-page connector: Connects processing
Auxiliary Operation: Represents a from one location to another on the same
processing operation carried out by a page. It is used to avoid crisscrossing lines.
device other than a computer, e.g., an
optical character scanner. Off-page Connector: Connects the
processing flow between two different
pages. It signals the exit from one page and
Magnetic Disk/Drive: Represents data stored the corresponding entrance on another page.
on a magnetic disk or drive.

Magnetic Tape: Represents data stored on a Terminal: Represents the beginning, end, or
magnetic tape. Sometimes represents a point of interruption in a process or
transaction files. program. It is also used to indicate an
Document or Processing Flow: Represents external party.
the direction of processing or document
flow. Normal flow is top to bottom and left
Decision: Represents a decision-making
to right.
step. It is used in a program flowchart to
Data/Information Flow: Represents the show branching to alternate paths.
direction of data/information flow. It is often

DOCUMENT FLOWCHARTS

A document flowchart shows the flow of documents and information among areas of
responsibility in an organization. These flowcharts trace a document from cradle to grave and
show: Where a document comes from, where it’s distributed, how it’s used, its ultimate
disposition and everything that happens as it flows through the system. Internal control
flowcharts are document flowcharts used to evaluate the adequacy of internal controls, such as
segregation of duties or internal checks. They can reveal weaknesses or inefficiencies such as:
Inadequate communication flows, unnecessarily complex document flows and Procedures that
cause wasteful delays. Document flowcharts are also prepared in the system design process.

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 This is part
of the
document
flowchart
from Figure
3-9 in your
textbook.
GUIDELINES FOR PREPARING FLOWCHARTS
Let’s step through some guidelines for preparing flowcharts:
 Identify: Entities to be flowcharted, e.g., departments, functions, external parties (the parties who
“do” things in the story), Documents or information flows and Processes. As you read through a
narrative, you may want to mark the preceding items with different shapes (e.g., drawing a
rectangle around entities, circling documents, etc.).
 Use separate columns for the activity of each entity. Example: If there are three different
departments or functions that “do” things in the narrative, there would be three columns on the
flowchart.
 Flowchart the normal course of operations, and identify exceptions with annotations.

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 As much as possible, the flow should go from top to bottom and left to right.
 Use standard flowcharting symbols, and draw with a template or computer.
 Clearly label all symbols. Use annotations, if necessary, to provide adequate explanation.
 Give the flowchart a clear beginning and ending: Show where each document originated and its
final disposition. One approach you can use is to read through the narrative and for each step
define: What was (were) the input(s), what process was carried out and what was (were) the
output(s). Every manual process should have at least one input and at least one output.
 Show all data entered into or retrieved from a computer file as passing through a process first. Do
not show process symbols for: Forwarding a document to another entity and filing a document.
 Do not connect two documents except when forwarding to another column.
 When a document is forwarded, show it in both locations.
 When using multiple copies of a document, place document numbers in the upper, right-hand
corner.
 Show on-page connectors and label them clearly to avoid excess flow lines.
 If a flowchart takes more than one page, label the pages as 1 of 5, 2 of 5, 3 of 5, etc.
 Show documents or reports first in the column where they are created.
 Start with a rough draft; then redesign to avoid clutter and crossed lines.
 Verify the accuracy of your flowchart by reviewing it with users, etc. Place the flowchart name,
the date, and the preparer’s name on each page of the final copy.

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