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Data Processing Cycle


Before we discuss the database, it shall be better if we discuss the data processing cycle in the context of accounting. Data processing involves collection, sorting, relating, interpreting and processing in such a manner that raw data provides meaningful information. The quality of information is directly related to the data used. Therefore, it is important that quality, with respect to the steps involved in data processing cycle, which are data capturing, data input, processing and generating information available to the user, is ensured. It requires a series of steps that are discussed below:
  1. Source Documents: As a first step, accounting data is captured from the evidence of transactions to prepare a voucher. The voucher has the relevant details of the transaction and expresses, and also documents, the transaction. Sample vouchers have been given in the exhibit. For example, exhibit 1.1 expresses and also documents that the proprietor has contributed Rs. 1,00,000 on October 10, 2006 towards capital of the business. The vouchers are designed in a manner that accounting data is recorded in a systematic manner.
  2. Data input: The accounting data in the vouchers is entered in the storage device of the computer through a pre - designed Data Entry Form in the accounting software. The form is very similar to the physical form of the voucher. The form appears on the monitor screen and data is entered in the designated cells.
Data is stored in a data storage structure provided for the purpose in the software. A blank data record will appear as follows:

 

Code

Name of the Account

Type

     

 

The data which is fed into the computer and stored in the designated storage structure will appear as follows:

 

Code

Name of the Account

Type

2200016

Axis Bank Ltd., Lajput Nagar, New Delhi

2

1100001

Capital Account

1

1100005

Loan Account

1

3300001

Purchases Account

3

2200015

Cash Account

2

3300015

Printing and Stationery Account

3

4100001

Sales

4


In the given table, 'Type' indicates the category to which the head of account belongs. Type indicates liabilities, Type 2 indicates assets, Type 3 indicates expenses and Type 4 indicates incomes. It is indicated by the first numeric code of the code of the account.
  1. Manipulation of Data: Manipulation of data means analyzing the data for the purposes of generating reports. For a particular report, only a part of the total data may be required, which is retrieved from the database and presented. The stored data is manipulated for transformation into final reports. The accounting data is stored in the designated tables and manipulated. The reports, in the context of accounting, could be trial balance, ledgers or financial statements, in pre - designed formats.
  2. Output of Data: Output of data refers to report generation. In the context of accounting, such reports are trial balance, ledger, financial statements, age of the debtors, purchases made by each of the debtor during a particular period, etc. These reports are generated in the pre - designed format through data manipulation.

Model of Database for Accounting


An organization is established to undertake one or several operations or projects. Typically, it is an environment with a single administrative control. Examples of organizations are banks, hospitals, manufacturers, etc. All these organizations have different functions, but still there are some basic or common functions performed by all the organizations. One common function for all the organizations is accounting.

In accounting, typically, an organization collects processes and stores the financial and material resources or data. The data of a particular object is collected and stored at one place in a systematic manner. The data thus collected is processed to eliminate duplicate records. The data collected and stored will have entire data of the object, but only a part of the whole data is relevant to a particular user department. The collected and stored data is the database out of which a relevant part of the data can be retrieved by the user department to the extent it is permitted by the data administrator. It is the function of the administrator to disseminate information to the user as permitted. The accounting functions performed by an organization depend on its nature and purpose and may include payroll, accounts receivable and payable, sales reports and forecasts, design and manufacturing. An organization can perform the above functions efficiently if it has built adequate database of relevant information. We may say that, without the proper and relevant database, an organization may not perform efficiently.

The database is used for storing information that is useful to an organization. To represent this information, some means of modeling is used. The components used in modeling are limited to the objects of interest to the organization and the relationships among these objects. For example, one category of objects of concern to any organization is its personnel and employees.

The process of designing database for accounting is described through a flow chart. Each category of objects has certain characteristics or properties, called attributes. Relationships have certain properties as well, which are represented as the attributes of the relationship.
 
Let us discuss each attribute of the flow chart:
  1. Reality: Reality refers to some aspect of the real world situation, for which database is to be designed. For example, in the case of a doctor, database is created of the patients with respect to their ailments, treatment given and so on. Reality is a real world situation. In the context of accounting, accounting itself is a reality that is to be expressed. For example, a transaction is documented using a voucher a voucher that is serially numbered and dated, and bears account name along with its code for the debit and credit entry. Account codes are given to each account head according to the grouping of the account head, ie., asset, liability, expense and income. Evidences of transactions, ie., bills receipts, contracts, etc., form the basis of entry. Now this is an accounting reality.
  2. ER Design: ER Design refers to the formal blueprint showing use of Entity Relationship (ER) concepts to represent the description of reality.
  3. Relational Data Model: Relational Data Model refers to data model through which ER design is transformed into inter - related data tables along with the restrictions in the form of rules that are specified to ensure the consistency and integrity of the stored data.
  4. Normalisation: Normalisation refers to the process through which database design is refined so that the duplicate or redundant data is eliminated or reduced.
  5. Refinement: As an outcome of the completion of normalization process discussed above, the database design is arrived at. The database design thus reached is the final database design as it does not require any further refinement.




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