TRANSACTION PROCESSING SYSTEMS What is a Transaction Processing

TRANSACTION PROCESSING SYSTEMS

What is a Transaction Processing System? n n n Transaction Processing Systems are computerised systems that perform and record the daily routine transactions necessary to conduct the business. A Transaction Processing System consists of TP monitor, databases, and transactions Transaction execution is controlled by a TP monitor. It Creates the abstraction of a transaction, analogous to the way an operating system creates the abstraction of a process It’s an information system designed to process routine business transactions. Seeks time- and cost-efficiency by automating repetitive operations in large volumes.

What is a Transaction Processing System? • Interfaces with an organization’s other information systems, such as IRS, DSS, EIS. • Centers around accounting and finance transactions. • Example: Airline Reservation Systems, order entry/processing systems, bank’s account processing systems

transactions Transaction Processing System DBMS database TP Monitor

TPS, MIS/DSS, and Special-Purpose Information Systems

Transaction Processing Activities Data collection: Capturing data necessary for the transaction l Data editing: Check validity and completeness l l l Ex: 400 hours/week instead of 40 hours/week Data correction: Correct the wrong data Data manipulation: Calculate, summarize Data storage: Update transactions Document production and reports: Create end results (paychecks)

Transaction Processing Activities

Objectives of TPS Process data generated by and about transactions l Maintain a high degree of accuracy l Ensure data and information integrity and accuracy l Produce timely documents and reports l Increase labour efficiency l Help provide increased and enhanced service l Help build and maintain customer loyalty l Achieve competitive advantage l

ACID test l Atomicity: all steps involved in transaction completed successfully as a group l Consistency: transaction successfully transforms the system and database from one valid state to another l Isolation: transaction is processed concurrently with other transactions. As if only transaction executing the system l Durability: all changes transaction makes to database become permanent

The Major Characteristics of TPS n TPS handles data which shows the results of various activities on historical basis ie, activities which have already happened. n It is relevant to all the four functional areas ie, production, marketing, finance and human resources because each area has some kind of transaction. n TPS helps to assess the organizational performance. n Large amounts of data are processed. n The sources of data are mostly internal, and the output is intended mainly for an internal audience. n The TPS processes information on a regular basis: daily, weekly, monthly, etc.

The Major Characteristics of TPS • It provides high processing speed to handle the high volume of data. • Input and output data are structured (i. e. , standardized). • A high level of accuracy, data integrity, and security is needed which is provided by TPS.

Accounting TPS Asset management Customer Cost of assets Payments Accounts payable Accounts receivable Amounts owed by customers Amounts paid by customers Payroll Labour costs Paycheques Customer Amounts owed by company Amounts paid by company General ledger Expense transactions Budget Asset depreciation

Components Of TPS • There are four components of a Transaction Processing System • Input- These are source documents such as customer orders, purchase orders etc. They help in, 1. Capturing data. 2. Indicates what data is required for recording and what actions need to be taken. • Processing- It involves the use of journals and registers for chronological recording of data. Journals are used for financial accounting transactions and registers for other type of data.

Components Of TPS • Storage- The computer stores various records in files are of two types, transaction file and master file. • Output- The outputs generated are in the form of documents such as trial balance, profit and loss account, balance sheet etc.

Components Of TPS Data Input Data Processing Data Storage Output Generation

Transaction Processing Methods On-line transaction processing (OLTP) - method of computerized processing in which each transaction is processed immediately and the affected records are updated

On-line Schematic Terminal Output Immediate processing of each transaction Terminal

Transaction Processing Methods Batch processing – method of computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit.

Batch Schematic Data entry of accumulated transactions Input (batched) Output

Transaction Processing Methods On-line analytic processing (OLAP) – method of computerized processing in which data is entered on-line and validated but, their processing is done on periodic batch basis. It is basically used for making management decisions by analysis of the data.

Control for TPS • Control in the system is required to ensure that the system is achieving the objectives. • Audit Trails- It’s the chronology of activities that can be traced from beginning to the end or vice versa. This is important as it tells us what went wrong in the transaction. • Ensuring Processing of All Transactions- Control in TPS also ensures that all transactions have been processed. Problems such as interruptions in computer operation, carelessness of personnel etc results into non processing of some transactions.

TPS Applications n n n n Order Processing Purchasing Accounts Receivables & Accounts Payables Receiving & Shipping Inventory on Hand Payroll General Ledgers

Accounting Transaction Processing • The transactions can be internal or external. • When a department orders office supplies from the purchasing department, an internal transaction occurs, when a customer places an order for a product, an external transaction occurs. Internal Transactions: Those transactions, which are internal to the company and are related with the internal working of any organization. For example Recruitment Policy, Promotion Policy, Production policy etc External Transactions: Those transactions, which are external to the organization and are related with the external sources, are regarded as External Transaction. For example sales, purchase etc.

Accounting Transaction Processing • Every transaction involves two accounts, one is debited another is credited in the primary books. • From the book of primary accounts, a trial balance is prepared to show the balance of different account. • From the balance of different account, a trial balance is prepared to check the arithmetical accuracy of the records. • After preparing the trial balance, adjustment entries are passed to record the internal transactions, such as depriciation etc. • An adjusted trial balance is prepared incorporating the adjusting entries. • From the adjusted trial balance, profit and loss account and balance sheet are prepared to show the impact of all transactions

Transaction Processing Cycle Transaction Document Transaction Input Correction Input Validation Process Transaction Invalid Input Transaction and Control Log Update Master File Control Log Master File