Chapter 3 – Electronic Business

(E-Business) Systems

Accounting Information Systems: Foundations in

Enterprise Risk Management 9e
Richard Dull, Ulric J. Gelinas, and Patrick Wheeler

© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S.
only, with content that may be different from the U.S. Edition. May not be scanned, copied,
duplicated, or posted to a publicly accessible website, in whole or in part.
 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
 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

4
 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.
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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.
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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.
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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
EDI
format 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.”

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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

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What do you perceive to be the
advantages and disadvantages of
conducting business on the Internet?
Explain your answer.

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