databases and accounting systems
TRANSCRIPT
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DATABASES ANDACCOUNTING SYSTEMS
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Database Accounting Systems
Most accounting students learn the mechanics of
accounting using the tools of manual double entry
bookkeeping such as journals and ledgers
Businesses saw the advantages of relational
databases for all their information processing
needs.
Consolidate data and data-handling operations
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Events-based Theories of Accounting
Over the past thirty years, researchers such as
William McCarthy and George Sorter have
developed and refined various events-based
approaches to accounting theory. Provides a solid theoretical underpinning for
accountants increasing use of relational databases
to perform accounting tasks
Objectives: Accountants should strive to store allrelevant attributes of economic events in a readily
accessible form
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Double Entry Bookkeeping vs.
Database Accounting
Double-entry bookkeeping provided an excellent
method for recording transactions
Developed 500 years ago
High cost of gathering information
Recording transactions was a time-consuming task
Quickly identify essential elements of transactions
Capture and store key attributes of transactions in a highly
aggregated form
Cost of information gathering a affordable levels
Debit-credit balancing check provided an important internal
control feature
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Double Entry Bookkeeping vs.
Database Accounting
Computerized transaction processing
Easily captures a wide variety of information
Bar code readers
Reduces cost of acquiring and storing multiple attributesof each economic event
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Case study
Most sales transactions begin when customer sends
a purchase order. If the firm receiving the purchase
order has the goods in stock and finds the
customers credit to be acceptable, the firm ships theordered goods and invoices the customer.
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Double-entry bookkeeping system
General Journal Entry
Date Account Debit Credit
Date Accounts Receivable Amount
Sales AmountExplanation
Transaction due
Names of the accounts debited
Names of the accounts credited
Transaction amount
Explanation of the transaction
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Double-entry bookkeeping system
Specialized journals and subsidiary ledgers
Sales journal
Subsidiary ledger
Account code
Customers name
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Database accounting system
Store many more attributes of the sales transaction
than a journal entry can store.
Data is stored in an atomic form
Store multiple attributes in multiple tables
Establish a primary key
One or more fields in a table that provides a unique identifier
for each row in the table
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Advantages of database accounting
systems
Reduce data storage costs
Stores data only once
Eliminate data redundancy
Eliminate data inconsistencies Avoid duplicate processing
Ease add, delete update data maintenance tasks
Make data independent of applications Centralize data management
Centralize data security
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Advantages of database accounting
systems
Ease report modifications and updates
Provided ad hoc query capabilities
Facilitate cross-functional data analysis
Permit multiple users simultaneous data access
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Disadvantages of Database
Accounting Systems
Greater hardware requirements
The database software itself
Employing a database administrator
System operation becomes critical
Incorrect data entry corrupts many users work
Territorial disputes over data ownership may arise
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Centralization of data and security
control
Increases risk
Contingency plans
Back-up
Recovery
Security
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Business Activity Classifications
Service Firms
Simplest form of business activity
No need to track inventory
Merchandising Firms
Buy and sell Track revenues , inventory, sales and expenses
Cost of goods
Manufacturing Firms
Production of goods
Purchase of raw materials and labor
Incurring other manufacturing costs
Processing raw materials, labor and other cost into goods
Selling the finished goods
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Transaction cycles
Revenue cycle
Purchase cycle
Payroll cycle
Production cycle
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Accounting Information Systems and
Database Systems
Events accounting
Storing data about an economic event
REA Accounting Model
Aggregations of data
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Database Management systems
Provide software to:
Store
Retrieve
Modify
Pre-DBMS Data Acquisition and Reporting
Flat Files (1960s)
Programs were written in Common Business OrientedLanguage (COBOL)
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Functions of Database Management
System
Efficient data maintenance
User-accessible catalog
Concurrency control
Transaction support
Recovery services
Security and authorization services
Integrity facilities
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Advantages of DBMS
Subschema
A pseudo table that appears to the user to be the real
table
Data independence Hide the details of physical storage
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Relational DBMS
Late 1960s and early 1970s
Dr. E.F. Codd
Data model
Abstract representation of database system
Description of data
Methods of accessing the data
Hierarchical model
Network model
Relational model - Logical and physical characteristics of the
database are distinct
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Database objects
Formal term Less formal term Data processing term
Relation Table File
Tuple Row Record
Attribute Column field
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Database objects
Entries must be single valued
Each attribute has a distinct name
Every entry in a column contains a value for that
column only and values are of the same data type
Order of the rows are unimportant
Order of columns are unimportant
Each row is unique