CHAPTER 3

SYSTEMS DEVELOPMENT and DOCUMENTATION TECHNIQUES

Instructors Manual
Learning Objectives:
Prepare and use data flow diagrams to understand, evaluate and
design information systems.
Prepare and use flowcharts to understand, evaluate and design
information systems.
Questions to be addressed in this chapter include:
What is the purpose of documentation?
Why do accountants need to understand documentation?
What documentation techniques are used in accounting systems?
What are data flow diagrams and flowcharts?

How are they alike and different?

How are they prepared?

Introduction
Techniques used to document a system
Narratives, flowcharts, diagrams and other written materials that
explain how a system works.
Documentation tools are important on one or more of the following
levels:
1. At minimum, you must be able to read documentation to
determine how the system works
2. You may be required to evaluate internal control systems
documentation to identify control strengths and weaknesses
and recommend improvements. Alternatively, you may have to
evaluate the documentation for a proposed system to
determine if the system meets the companys needs
3. The greatest amount of skill is needed to prepare
documentation. If you are a member of a team that is
developing a new system, then you must prepare documentation
to show how both the existing and the proposed systems
operate.

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This chapter discusses the following documentation tools:

1. Data flow diagram, a graphical description of the source
and destination of data that shows data flow within an
organization, the processes performed on the data, and
how data are stored
2. Document flowchart, a graphical description of the flow
of documents and information between departments or areas
of responsibility within an organization
3. System flowchart, a graphical description of the
relationship among the input, processing and output in an
information system.
4. Program flowchart, a graphical description of the
sequence of logical operations that a computer performs
as it executes a program

Learning Objective One

Prepare and use data flow diagrams to understand,
evaluate and design information systems.

Data Flow Diagrams

A data flow diagram (DFD) graphically describes the flow of data
within an organization.
Elements in a Data Flow Diagram
Four Basic Elements:
(1)
(2)
(3)
(4)

Data sources and destinations

Data flows
Transformation processes
Data stores

Data flow diagram symbols shown in Figure 3-1 on Page 64:

Data sources and destinations

Data flows
Transformation processes
Data stores
Figure 3-2 on Page 64 shows the basic data flow diagram elements.

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Data Sources and Destinations

Data sources and data destinations are represented by squares, as
illustrated by items A (customer), J (bank) and K (credit manager)
in Figure 3-3 on Page 65.
A data flow represents the flow of data between processes, data
stores and data sources and destinations.
Processes represent the transformation of data. Figure 3-3 shows
that process payment (c) takes the customer payment and splits it
in to the remittance data and the deposit (which includes the
checks and deposit slip created within process payment).
A data store is a temporary or permanent repository of data.
[Power point slide #16 marks the data sources and destinations in
red. Power point slide #19 & #20 mark the data sources in red.
Power point slide #26 marks the transformation process in red.
Power point slide #28 marks the data store in red.]
Subdividing the Data Flow Diagram
The highest-level Data Flow Diagram is referred to as a context
diagram. A context diagram provides the reader with a summarylevel view of the system. A context diagram, about the payroll
process, is provided in Figure 3-5 on Page 66. [Refer to power
point slides #32 through #34]
Note in this payroll process that the timecard and proof of
hiring (new employee form) is provided to support the
payment to the employee.
Table 3-1 on Page 67 provides a narrative description of the same
payroll process in Figure 3-5.
After reading this narrative, you should be able to answer
the following two questions:
How many major data processing activities are
involved?
What are the data inputs and outputs of each activity
(ignoring all references to people, departments and
document destinations)?
List of the activities:
1. Updating the employee/payroll master file
This includes new employees and changes to current
employees status such as pay raises.

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2. Handling employee compensation

Paragraph 2 involves preparing a two-party check for
employees from information received from the timecard
and information from the employees data file.
Paragraph 5 involves preparing a two-party check for
the total amount of the employee payroll.
Paragraph 6 involves Susan sending the two-party check
to the total employee payroll to the bank and the
individual two-party checks to the employees.
3. Managing management reports
Payroll summary report
4. Paying taxes
5. Posting entries to the general ledger
All data inflows and outflows, and the five activities, form the
basis of the DFD as summarized in Table 3-2 on Page 68.
Using the narrative, the previous context diagram was extended
with more detail shown in Figure 3-6 on Page 68.
[Refer to power point slides #35 through #40 and #57]
Note that the five activities are now numbered in this
diagram (1.0, 2.0, 3.0, 4.0 & 5.0)
Figure 3-7 on Page 70 provides more detail about the data
processes involved in paying employees, and it includes the tax
rates table and the payroll register data flow omitted from Figure
3-6.
Note to the Instructor: The importance for students to know the
difference between a Level 0 DFD in Figure 3-6 and a Level 1 DFD
in Figure 3-7 should be stressed.

Focus 3-1 on Page 69 Guidelines for Drawing a Data Flow Diagram

1. Understand the system
2. Ignore certain aspects of the system
Ignore all control processes & control actions
3. Determine system boundaries
4. Develop a context diagram
5. Identify data flows
6. Group data flows

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7. Identify transformation processes

8. Group transformation processes
9. Identify all files or data stores
10.

Identify all data sources and destinations

11.

Name all Data Flow Diagram elements

12.

Subdivide the Data Flow diagram

13.

Give each process a sequential number

14.

Repeat the process

15.

Prepare a final copy

[Refer to power point slides #42 through #46]

Multiple Choice #1
The DFD symbol used for the processing of a customer payment would
be

a.
b.
c.
d.
Multiple Choice #2
Which of the following statements is false?
a. An entity can be either a source or a destination.
b. DGDs do not show the physical storage medium (such as disks
and paper) used to store the data.
c. A context diagram depicts a data processing system and the
external entities that are the sources and destinations of
the systems inputs and outputs.
d. The S&S Update employee and payroll files includes the
employee/payroll file input.

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Multiple Choice #3
There were five data processing activities in Ashtons description
of S&Ss payroll processing activities. The second activity is
a.
b.
c.
d.

Posting entries to the general ledger

Updating the employee/payroll master file
Generating management reports
Handling employee compensation

Multiple Choice #4
There are fifteen guidelines for drawing a DFD. Never combine
unrelated items into a single transformation process are included
in which of the 15 guidelines?
a.
b.
c.
d.

Group data flows

Group transformation processes
Name all DFD elements
Determine system boundaries

Multiple Choice #5
Which of the following would be considered to be a data source?
a.
b.
c.
d.
e.

Human resources
Employees
Government agencies
All of the above
None of the above

Learning Objective Two

Prepare and use flowcharts to understand,
evaluate and design information systems.

Flowcharts
A flowchart is an analytical technique used to describe some
aspect of an information system in a clear, concise and logical
manner. Flowcharts use a standard set of symbols to describe
pictorially the transaction processing procedures a company uses
and the flow of data through a system.
The Sarbanes-Oxley Act requires companies to document their
business processes and internal controls.
Flowchart Symbols in Figure 3-8 on Pages 71 and 72
1. Input/output symbols. Input/output symbols represent
devices or media that provide input to or record output
from processing operations.

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2. Processing symbols. Processing symbols either show what

type of device is used to process data or indicate when
processing is performed manually.
3. Storage symbols. Storage symbols represent the device
used to store data that the system is not currently
using.
4. Flow and miscellaneous symbols. Flow and miscellaneous
symbols indicate the flow of data and goods. They also
represent such operations as where flowcharts begin or
end, where decisions are made and when to add explanatory
notes to flowcharts.
Focus 3-2 on Page 73 provides the following guidelines for
preparing flowcharts:
1
2
3

5
6
7
8

9
10

Understand a system before

flowcharting it
Identify the entities to be
flowcharted
When several entities such as
departments or functions are
involved, divide the flowchart
into columns
Flowchart only the normal flow
of operations

11

Design the flowchart so that

flow proceeds from top to
bottom and from left to right
Give the flowchart a clear
beginning and ending
Use the standard flowcharting
symbols
Clearly label all symbols.
Write a description of the
input, process or output
inside the symbol
When using multiple documents,
place document numbers in the
top right-hand corner
Each manual processing symbol
should have an input and an
output

15

12

Use on-page connectors to avoid excess

flow lines
Use arrowhead on all flow lines

13

If a flowchart cannot fit on a single

page, clearly label the pages

14

Show documents or reports first in the

column in which they are created then
show them again in another column in
which the documents are being processed
Show all data entered into or retrieved
from a computer file

16

18

Draw a line from a document to a file

to indicate that it is being filed
Draw a rough sketch of the flowchart as
a first effort
Redesign the flowchart to avoid clutter

19

Verify the flowcharts accuracy

20

Draw a final copy of the flowchart

17

[The following power point slides provide the same guidelines with
additional detailed information: #92-#94, #96, #97, #105, #108, #110,
#112, #114 and #116.]
Common flowcharting symbols are provided in Figure 3-8 on Pages 72
and 73.

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Document Flowcharts
A document flowchart illustrates the flow of documents and
information among areas of responsibility within an
organization.
Document flowcharts that describe and evaluate
internal controls are often referred to as internal
control flowcharts.
The document flowchart for the S&S payroll process, as
described in Table 3-2 on Page 68, is now shown in
Figure 3-9 on Pages 74 and 75.
Note that there are four areas of
responsibility; payroll, accounts payable,
management and general ledger.
Note that the solid lines represent the document
or processing flow while the dashed lines
represent the data/information flow.
[The following power point slides provide the inputs,
processes, outputs, forwarding documents to the next
department, on-page and off-page connectors marked in red:
power point slide #91, #95, #98-#104, #106-#107, #109, #111,
#113 and #115.]
System Flowcharts
System flowcharts depict the relationship among the input,
processing and output of an Accounting Information System.
A systems flowchart for the sales processing at S&S is provided in
Figure 3-10 on Page 76. [Refer to power point slide #122]
Note that there are two types of data storage used, magnetic
disk and on-line storage.
Note the display output; customer account status, inventory
status and sales analysis. Customer account status would
advice the sales clerk on whether to approve credit for the
customers purchase of merchandise. Also, inventory status
would tell the sales clerk whether there the item that the
customer wants to purchase is currently being stored in the
warehouse.
Program Flowcharts
A program flowchart illustrates the sequence of logical operations
performed by a computer in executing a program.
Some of the computer programs are COBOL (Common Business
Language), FORTRAN, RPG from the old days. COBOL is still being
used. Now, there is C Plus Plus and Java.

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Figure 3-11 on Page 77 shows the relationship between system and

program flowcharts. [Refer to power point slides #124 through
#126]
[Power point slides #128 through #134 show a comparison between
DFDs and program flowcharts using an interesting illustration of a
registrars office in a small college.]
Note to the Instructor: An example of using a program flowchart
for COBOL programming for a payroll process is provided on the
next page 9. This is provided solely for the students information
and to familiarize the student with the basic program flowchart.
It also provides another method, pseudocode, which is used instead
of flowcharting for COBOL programming.

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Page 10 of 13

However, the use of flowcharting for computer program was reduced

with the introduction of pseudocode. Pseudocode uses an outline
type format of If, Then, Else and ENDIF statements. The following
is the pseudocode for the payroll program flowchart on page 7.
Read a payroll record; at end move Y to flag
PERFORM . . . UNTIL flog = Y
Move spaces to line
Compute gross pay
IF hours-worked is greater than 40
THEN
Compute overtime pay, add to gross
ENDIF
Compute total exemption
IF gross pay is greater than total exemption
THEN
Compute tax
ELSE
Tax = 0.00
ENDIF
Compute net pay
Set up and write line
Read a payroll record; at end move Y to flag
ENDPERFORM
Wrap up operations
Stop

Multiple Choice #6
The Sarbanes-Oxley Act requires companies to
a.
b.
c.
d.
e.

use flowcharting to document business processes

group data flows
identify the entities to be flowcharted
document their business processes and internal controls.
None of the above

Multiple Choice #7
Which flowchart symbol is used to represent a processing operation
performed manually?
a.
b.
c.
d.

Auxiliary operation
document or processing flow
manual operation
computer processing

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Multiple Choice #8
The flowchart that begins by identifying the inputs that enter the
system and their origins is
a.
b.
c.
d.
e.

system flowchart
internal control flowchart
document flowchart
A and C
none of the above

Multiple Choice #9
In a document flowchart, a dotted line was be used for which of
the following?
a. Using tax tables to prepare the payroll register
b. Filing the payroll register
c. Using new employee data to update employee/payroll
register
d. Using the payroll register to prepare payroll checks
Multiple Choice #10
Which of the following statement or statements is/are false?
a. System flowcharts depict the relationships among the
input, processing, and output of an AIS.
b. A document flowchart illustrates the flow of data and
information among areas of responsibility within an
organization.
c. Internal control flowcharts describe and evaluate
internal controls.
d. Program flowchart illustrates the sequence of logical
operations performed by a computer in executing a
program.
Multiple Choice Question Answers
Number Answer Number
Answer
1
B
6
D
2
B
7
C
3
A
8
A
4
D
9
A
5
B
10
B
Reference Used:
1 Parts of this discussion are based on Tom DeMarco, Structured Analysis and
System Specification (Upper Saddle
River, NJ: Prentice Hall, 1979). DeMarco has been at the forefront of structural
analysis and design techniques
and is a well-respected authority on the subject.

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Note to Instructor: A number of students will most likely not have very
much experience in completing flowcharts that are described in chapter
three. Below are instructions for completing flowcharts using MS XL:
Flowcharting Using MX XL. Chapter three will require the use of
flowcharts. The toolbar option for using MS XL flowcharts is
provided in the XL software. To insert shapes go to the menu at
the top of your XL computer screen; first left click on View, then
left click on Toolbar and then left click on Drawing. Now you need
to go to the menu at the bottom of your screen. Left click on
AutoShapes and then left click on Flowchart. Click on the shape of
your choice. Then go to the location on your XL spreadsheet where
you want to put the shape, place your cursor there and left click
at that position. To insert connectors between shapes you follow
the same procedures, except instead of left clicking on Flowchart,
you left click on Connectors. To add Text to a Shape, you right
click inside the shape and start typing.

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