TRANSACTION PROCESSING

SYSTEMS
What is a Transaction Processing
System?
n Transaction Processing Systems are computerised systems
that perform and record the daily routine transactions
necessary to conduct the business.
n A Transaction Processing System consists of TP monitor,
databases, and transactions
n 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
n It’s an information system designed to process routine
business transactions.
n 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
•
Transaction Processing System

DBMS database
transactions

DBMS database

TP Monitor
TPS, MIS/DSS, and Special-Purpose
Information Systems
Transaction Processing Activities
l Data collection : Capturing data necessary for the
transaction
l Data editing : Check validity and completeness
l Ex: 400 hours/week instead of 40 hours/week
l Data correction : Correct the wrong data
l Data manipulation : Calculate, summarize
l Data storage : Update transactions
l Document production and reports : Create end results
(paychecks)
•
Transaction Processing Activities
Objectives of TPS
l 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

•
ACID test
l Atomicity : all steps involved in transaction completed
successfully as a group
l
l Consistency : transaction successfully transforms the
system and database from one valid state to another
l
l Isolation : transaction is processed concurrently with
other transactions. As if only transaction executing
the system
l
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
Custo Asset
mer management

Cost of assets
Payments

Accounts Accounts
receivable payable

Amounts owed by customers Amounts owed by company

Amounts paid by customers Amounts paid by company

Labour costs General

Payroll
ledger Asset depreciation

Paycheques Expense
transactions

Custo Budget
mer
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.
• 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
DataInput
Input Data
DataProcessing
Processing Output
OutputGeneration
Generation

Data
DataStorage
Storage
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
Terminal Terminal

Output

Terminal Immediate
processing
of each
transaction

Terminal
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
accumulate Input
Output
d (batched)
transaction
s
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 Order Processing
n Purchasing
n Accounts Receivables & Accounts Payables
n Receiving & Shipping
n Inventory on Hand
n Payroll
n 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
and 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 Process Update Master

Input Validation Transaction Master File File

Invalid Transaction
Correction Input and Control Control Log
Log