Systems Documentation

In part two of the Accounting Information System, we discussed the ways to document the AIS.
Accountants document business processes for two major reasons: (1) to understand a business process
more completely and/or (2) to understand the database that underlies the AIS. Although accountants may
use many different methods to document the AIS, we focused on just three: flowcharts, data flow
diagrams, and REA models. System documentation helps us understand the database that underlies the
AIS.

In this section, we’ll find a way to encapsulate the essential features of an accounting information
system: it’s documents, personnel involved, information flows, and related technologies. And we call that
process “systems documentation.” The following figures will help us develop and interpret process-
related systems documentation;

The first figure shows a partial systems

flowchart depicting some of the basic steps in the
Acquisition/Payment Process, remember that a
flowchart is a graphical representation of some part
of an information system. The acquisition/process
covers activities from recognizing the need for new
inventory through paying a vendor’s invoice. It
generally starts with a requisition that may or may not
become a purchase order and ends when cash is
disbursed to pay a vendor’s invoice. Remember that
the first step in developing flowcharts is establishing
the system boundary, in this example, the system boundary are the purchasing department, the receiving
department, and the vendor. The second step is determining column headings, our flowchart have three
columns: purchasing department, receiving department, and vendor. Third step is to list actions
performed within each column; fourth, to select appropriate symbols; and then to prepare a first draft.

To recap, in a DFD, data enters the system

and flows between processes within the system;
and as a result, data is produced as an output from
the system. For every process, there must be an
input and an output. The second figure is an
example of Partial Level Zero DFD of the
Acquisition/Payment Process, this DFD
encompasses the activities of the Purchasing
Department from that flowchart. The DFD has just
one process (prepare purchase order),
corresponding to the predefined process symbol in the flowchart. It comprises of three data flows, the
requisition data which is from the requesting department, the external p.o. data to be sent to our external
entity (vendor), and the internal p.o. data for keeping in the data store.
 The last figure is a Partial REA Model
of the Acquisition/Payment Process, the basic
principles for a REA model have the common
purpose of organizing a database and
providing instruction on how to properly read
it. The REA is organized by Resources, Events,
and Agents. The two strategically significant
operating events in this example is: requisition
goods and prepare purchase order. With respect to “requisition goods,” the resource would be inventory;
the agent would be employee and vendor. For “prepare purchase order,” the resource is inventory; the
agents are, once again, employee and vendor. Regarding the cardinalities, notice that the maximum
cardinalities call for a junction table because each “requisition goods” can be associated with many
“prepare purchase order,” and vice versa.

REA, flowcharts, and DFD’s all have a similar purpose. They are all models that represent an
accounting system. There is no “best” model when choosing which one to use. All three have their
advantages and disadvantages when selecting what is best. It depends on the user and the type of data
that is being organized. REA, flowcharts, and DFD’s are all different in terms of how they come to explain
the database. REA design has cardinalities to express their rules, while flowcharts and DFD’s use symbols
to differentiate all the different types of entities.

Critical Thinking

This chapter discussed several common documents associated with the acquisition/payment
process, providing examples of two (purchase requisition and purchase order). The relational database
form would be based on the receiving report/inventory table. In critical thinking, we will look at the work
of the receiving department in an acquisition/payment process. The Receiving Department is the central
receiving point for the delivery of items ordered and is responsible for verifying deliveries, inspecting for
damaged items, coordinating the delivery of items to ordering departments, and initiating necessary
paperwork for the proper receipting and eventual payment to the vendor for items received. Upon receipt
of a delivery, the receiving staff will match the received items to the description stated on the
accompanying bill of lading, and would query the database/ERP system to ensure that it is related to a
valid purchase order. Items likely requiring review are the quantity received, comparison to a quality
threshold, and the date and time of receipt. After inspecting the received items, the receiving staff would
access the receiving report form, count the items received and update the receiving log with the date and
time of receipt of each delivery, as well as the name of the shipper, supplier, purchase order number, and
description of goods received. And then send a copy of the signed bill of lading to the billing clerk in the
accounting department and file the master copy of the billing of lading by date in the warehouse filing
area. The accounting department would be able to match the purchase order with the receiving report
before issuing a check to pay the vendor’s invoice. Handling receiving transactions in that way promotes
strong internal control by:

 Matching the shipment with an existing purchase order.

 Requiring the receiving department to count the items received.
 Establising responsibility for the receiving transaction by including the Employee ID in the form.
 Having one centralized location for receiving all shipments.
Business Process Relationships

1. The operations department of a manufacturing company is in charge of making products that a

company sells. It has to produce detailed designs for the products and plan for the productions of the
required quantities. It must manufacture the products, test and ship them. It is also the one responsible
for requesting goods and services. When a department is in need of new or additional items, the
operations department will prepare a purchase requisition that would indicate the items needed and their
quantities. The purchase requisition serves as an important internal control by allowing the organization
to respond to legitimate needs, take advantage of quantity discounts, and establish relationships with
suppliers based on objective criteria. One copy would remain with the requisitioning department, while
another copy would go to purchasing.

2. One role of the purchasing department is to authorize all necessary materials needed for production or
daily operation of the entity. Having a central location that handles all purchasing for an organization helps
ensure that the organization is only buying things that are legitimately needed and it promotes operating
efficiency through coordination. A purchasing agent would complete a purchase order based on the
requisition forms which would be transmitted to the supplier. One copy would be sent to the receiving
department and a second copy would go to the accounting department.

3. Selling is one of the major forms of communication and customer acquisition in a company's marketing
promotion strategy. While the roles of a sales department vary somewhat by organization, its primary
duties include identifying and contacting prospects, delivering sales presentations, closing deals and
managing existing customer relationships. The sales department in the selling organization is responsible
for taking the customer’s order which could be by receiving a purchase order or receiving orders over the
phone, electronically, or via electronic data interchange. With the purchase order in hand, the sales staff
member would fill out an order form based on the data in the purchase order.

4. Credit departments work in conjunction with the sales department to make sure that the sales
extended on credit are going to credit worthy customers who will pay in a timely manner. Having a credit
department promotes good separation of duties, if the sales staff is allowed to grant credit; customers
might be allowed to purchase items on credit when they are not creditworthy.