Accounting Information Systems - Lesson 1.4 - Business Process Transaction Cycle

Summary

Patrick introduces business processes, also called transaction cycles, as a way to organize and discuss activities within an accounting information system (AIS). In this lesson, the terms are used interchangeably.

What Is a Business Process?

A business process is a related, coordinated, and structured group of activities or tasks performed by people, computers, or machines to achieve a specific organizational goal. The tasks are connected: together, they accomplish something that individual tasks cannot do on their own.

Organizations have many business processes. These processes work together to support broader organizational goals; no single process typically achieves those goals by itself.

Example: Paying an Employee

The payroll process involves more than recording hours and issuing a paycheck. It may include these steps:

1. Record working hours in a timekeeping system.
2. Calculate the hours worked and send the information for review.
3. Obtain supervisor approval of the employee’s time.
4. Review and approve payroll within the payroll department. The department checks calculations and investigates unusual amounts.
5. Process payroll, often through a third-party provider, which calculates deductions and net pay and prepares payment details.
6. Approve the payroll results and issue payments by check or direct deposit. Depending on the arrangement, the company or the provider may handle payment.
7. Reconcile the payments by comparing withdrawals and payment records with reports, including identifying checks that have not yet been cashed.

These steps are related because they all contribute to the goal of paying employees accurately.

Transactions and Transaction Processing

• A transaction is an agreement between two entities to exchange goods or services. Transactions can also occur between departments within the same organization.
• Transaction processing is the process of handling and recording a transaction. It can include collecting data, entering it into an accounting system, and providing the resulting information to users.

Main Takeaway

A business process is a coordinated set of interrelated tasks aimed at a specific goal. Those tasks often involve transactions, and an AIS supports the collection, processing, recording, and reporting of transaction information.

Speaker

• Patrick — the instructor and sole speaker featured in the subtitles.