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Chapter 2 Business Processes

This chapter provides an overview of essential business processes, including acquiring capital, hiring employees, and managing transactions. It discusses the information needs for decision-making and the role of the data processing cycle in organizing these processes. Additionally, it highlights the importance of Accounting Information Systems (AIS) and Enterprise Resource Planning (ERP) systems in supporting business operations and decision-making.

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5 views

Chapter 2 Business Processes

This chapter provides an overview of essential business processes, including acquiring capital, hiring employees, and managing transactions. It discusses the information needs for decision-making and the role of the data processing cycle in organizing these processes. Additionally, it highlights the importance of Accounting Information Systems (AIS) and Enterprise Resource Planning (ERP) systems in supporting business operations and decision-making.

Uploaded by

nahatdogan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER 2: OVERVIEW OF BUSINESS PROCESSES

INTRODUCTION
- Questions to be addressed in this chapter:
- What are the basic business processes in which an organization
engages?
- What decisions must be made to undertake these processes?
- What information is required to make those decisions?
- What role does the data processing cycle play in organizing business
processes and providing information to users?
- What is the role of the information system and enterprise resource
planning in modern organizations?

INFORMATION NEEDS AND BUSINESS PROCESSES


- Businesses engage in various processes:
- Acquiring capital
- Buying buildings and equipment
- Hiring and training employees
- Purchasing inventory
- Doing advertising and marketing
- Selling goods or services
- Collecting payment from customers
- Paying employees
- Paying taxes
- Paying vendors

- Types of information needed for decisions:


- Financial and non-financial
- Internal and external sources
- An effective AIS integrates information of different types and from
different sources.

INTERACTION WITH EXTERNAL AND INTERNAL PARTIES


- AIS interacts with:
- External parties: customers, vendors, creditors, government agencies.
- Internal parties: employees, management.
- The interaction is typically two-way.

BUSINESS CYCLES
- A transaction is:
- An agreement between two entities to exchange goods or services.
- An event measurable in economic terms.
- Business transaction cycle:
- Begins with capturing transaction data.
- Ends with information output (e.g., financial statements).

FIVE MAJOR TRANSACTION CYCLES


1. Revenue cycle (interactions with customers: selling goods, receiving
cash).
2. Expenditure cycle (interactions with suppliers: purchasing goods,
paying cash).
3. Production cycle (transforming raw materials and labor into finished
goods).
4. Human resources/payroll cycle (hiring, training, paying, and managing
employees).
5. Financing cycle (raising capital, repaying capital, distributing
returns).

TRANSACTION PROCESSING: DATA PROCESSING CYCLE


- Consists of four steps:
1. Data input
2. Data storage
3. Data processing
4. Information output

DATA INPUT
- Capturing data related to:
- Event occurrence
- Resources affected
- Agents involved

DATA STORAGE
- Components:
- Ledger: Stores cumulative information about resources and agents.
- General ledger: Summary-level information.
- Subsidiary ledger: Detailed information for specific accounts.
- Coding techniques (sequence codes, block codes, group codes).
- Chart of accounts.
- Journals (general and special journals).
- Audit trail (tracing transactions).

DATA PROCESSING
- Four types of file processing:
1. Updating data (e.g., recording a sale).
2. Changing data (e.g., updating customer address).
3. Adding data (e.g., new customer entry).
4. Deleting data (e.g., removing old customer records).
- Approaches:
- Batch processing (data processed in groups).
- Online batch processing (data stored temporarily before batch
processing).
- Online real-time processing (immediate updates to master files).

INFORMATION OUTPUT
- Forms:
- Documents (e.g., invoices, paychecks).
- Reports (regular, on-demand, exception-based).
- Queries (user-specific data requests).
- Purposes:
- Financial reporting
- Operational control
- Performance measurement
- Decision-making

ROLE OF AIS
- Traditionally focused on financial data.
- ERP systems integrate financial and non-financial data.
- Provides comprehensive business information.

SUMMARY
- Business processes involve multiple cycles and interactions.
- Data processing plays a crucial role in organizing and using business
information.
- AIS and ERP systems support business operations and decision-making.

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