Chapter 3 – Electronic Business (E-Business) Systems

Accounting Information Systems 8eUlric J. Gelinas and Richard Dull

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Learning Objectives• Appreciate the possible changes to organizational processes

that occur when e-business is introduced.

• Understand major approaches to transfer electronic data during business events processing.

• Understand the complexities that are introduced as electronic document management moves us steadily toward the paperless office.

• Understand the complexities surrounding EDI that are introduced when linking two different organizations’ computer systems for joint business event data processing.

• Appreciate the challenges faced by organizations when they pursue direct business links with customers via the Internet or other networks.

• Appreciate the business advantages gained through effective use of e-business. 2

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Electronic Business

• Electronically linking business processes among individuals and organizations.

• Byproduct: elimination of sales staff, normally intermediary between two parties to transactions.

• Transactions completed quicker, more efficiently and more effectively.

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Comparison of Manual and Automated Systems

Journalizing, Posting, and

Summarizing in a Manual

Accounting System

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Automated Accounting System

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Batch Processing• Known as periodic mode because master data is updated

periodically (e.g., nightly).

• Delay occurs between business event and updating master data

– Business event occurs– Record business event data– Update master data– Generate outputs

• The disadvantage of periodic mode systems is that the only time the master data are up to date is right after the processing has been completed.

• As soon as the next business event occurs, the master data are no longer up to date.

Batch Processing of Accounting Data

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Online Transaction Entry• Enter business events at the time and place

the event occurs.

• Computer input device used to enter data at source.

• Input document is eliminated.

• Price data is retrieved from the system.

• Source documents are printed by the system.

• Event information in accumulated on tape or disk.

Online Transaction Entry (Batch)

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Online Real-Time Processing

• Transaction occurrence/recording in transaction files.

• Update master files instantaneously.

• Also known as “immediate mode”.

• Generate reports periodically or on an as needed basis.

• Supports queries to generate unique reports for key decisions.

Online Real-Time Processing

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Communication Networks

• Client server technology

• Local area networks (LAN’s)

• Wide area networks (WAN’s)

• Internet

• Web browsers• Intranet

• Extranet

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Methods of Conducting E-business• E-mail - generally requires human translation and data

entry.

• Electronic Document Management - capture and storage of document images instead of paper.

• Electronic Data Interchange - computer-to-computer exchange of business data in structured formats that allow direct processing of those electronic documents by the receiving computer system.

• Internet Commerce - computer-to-computer exchange of business event data in structured or semi-structured formats via Internet communication that allows the initiation and consummation of business events.

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EDI Components

1. An originating application prepares an electronic business document, such as a purchase order (PO).

7. At the destination organization, an application processes the business data.

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EDI Components

2 and 6. An application’s electronic business document must be translated from standard message format to the structured EDIformat that will be recognized by the receiving computer.

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Electronic Data Interchange Set

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EDI Components

3 and 5. Establish a method to communicate electronic message. EDI service bureaus or the Internet may be used for cost effectiveness.

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EDI Components

4. Instead of connecting to each trading partner, an organization can use a VAN. The organization can connect to the VAN, leave outgoing messages and pick up incoming messages from its “mailbox.”

Web Services Implementation of an SOA Architecture

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Typical Connection for Internet Commerce

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Internet Commerce• Circles 1 and 7

– Customer connects to vendor in client-server configuration

• Circles 2 and 5– Connection to Internet through direct connection

or service provider

• Circles 4 and 6– Assurance services provide limited assurance that

web site is reliable and secure

• Circle 3– The Internet