UNIT – 4 Transaction Processing Systems.

1) Overview of Transaction Processing Systems :-

A Transaction Processing System or Transaction Processing Monitor is a set
of information which process the data transaction in database system that
monitors transaction programs (a special kind of program).
OR
“A transaction is any event that generates or modifies data that is eventually
stored in an information system. Transaction processing systems collect,
store, modify and retrieve the transactions”.
It consist of transection monitor, database, and transection.
Daily activities are recorded, keeping track of them requires a transaction
processing system. A transaction processing system, or TPS, is a system to
capture and process the detailed information necessary to update data on the
fundamental operations of an organization.

TPS:-
Transaction processing systems are used to record day to day business
transactions of the organization.
They are used by the users at the operational management level. The main
objective of a transaction processing system is to answer routine questions
such as:-
1) How printers were sold today?
2) How much inventory do we have at hand?
By recording the day to day business transactions, TPS system provides
answers to the above questions in timely manner.
TPS is backbone of an organization’s information systems.
The information produced from the transaction processing system is very
detailed.
An automated TPS consists of all the components of CBIS such as hardware,
software, database, telecommunication, people, and procedures.
A transaction processing system serves the foundation of other systems, such
as MIS, DSS and AI/ES.

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UNIT – 4 Transaction Processing Systems.

Types of transaction:-
1) Internal:

 Internal related to company and internal of organization.

 An internal transaction is a business transaction which does not
involve any outside organization or third party.
 These transactions are generally triggered by and are concerned with
internal functions of a business.
 Some internal transactions are also triggered by passage of time such
charge of depreciation in the books.

2) External:

 External organization, outside resources sales and purchase.

 An external transaction is a business transaction which takes place
between the business and an outside third party.
 An external transaction therefore involves two or more parties.
 It involves exchange of resources between the business and outside
third parties.

Internal VS External in tabular format: =

INTERNAL EXTERNAL
Business transactions which occurs Business transaction that occurs with the
without involving an external third involvement of one or more external third
party. parties.
Exchange of resources none or It exchanges the resources between
within the organization organization and external third parties.
Cash flow is generally no impact. In most of the cases there is the impact of
the cash flow.
Number of party – single Number of party – multiple

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UNIT – 4 Transaction Processing Systems.

It triggers internal functions It triggers external exchange of resources.

Ex :- Internal inventory transfer. Ex:- Purchasing and sales goods with
outside 3rd parties.

Acid Test of TPS.

A Atomicity
C consistency
I Isolation
D Duability => database permanent.

 Atomicity: Process should be successfully completed in group which process

transection process.
 Consistency: Process complete goes into one state to another in database and
system.
 Isolation: Transection should be completely processed.

 Components of TPS: - Input, Processing, Storage, Output

 Functions of TPS.

1) Input: Source department.

Data gathering, analyze the data all these things are perform over here.
2) Processing:-
It involves the processing journal (Financial) and register process. (Other
account data)
3) Storage: Computer store different records in the file.
Transection file, Master file.
4) Output: Generate in form of document.
.doc, trail balance, balance sheet etc.

Characteristic:-

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UNIT – 4 Transaction Processing Systems.

 Rapid Response: - Fast response with rapid response time is critical.

Business cannot afford to have customers waiting for a TPS to respond.
 Reliability: - Many organizations rely heavily on their TPS. A breakdown
will disrupt operations or even stop the business.
 Inflexibility: - A TPS wants every transaction to be processed in the same
way regardless of the user, the customer or the time of day. Accepting
different transaction data from different travel agents would be a problem.
 Controlled Processing: - The processing in TPS must support an
organization’s operations. A TPS minimizes the organization’s costs by
reducing the number of times that data must be handled and by providing the
timely updates to the databases.

1) Handles the data which will show the activities of the historical basis.
2) TPS is relevant to four major functions (Production, HR, Finance, marketing)
because these area has some transection.
3) TPS helps to access organization process.
4) TPS indicate large amount of data.
5) TPS the source is internal data output is useful to internal audience.
6) TPS process information on regular basis that is quickly, weekly, monthly,
yearly.
7) It provides high processing speed to handle large amount of data.

2) Transaction Processing methods and objectives.

A transaction is an elementary activity conducted during business operations.
A TPS records a non-inquiry transaction itself, as well as all of its effects, in the
database and produces documents relating to the transaction.

Transaction processing may be accomplished in one of Three Methods: =

1) Batch Processing
2) On-line/Real-time processing.
3) On-line entry with delayed processing.

Batch Processing:

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UNIT – 4 Transaction Processing Systems.

This is also the computerized system. Here the data are collected and processed then
output is taken.

With batch processing business transactions are accumulated over a period of time
and prepared for processing as a single unit or batch.

There is some delay between the occurrence of an event and the processing event.

All transactions for a period of time would be collected in a group (Called batch),
input and processed as a “UNIT”.

The transactions are collected and stored offline on a magnetic tape or on paper.

This was normally done at regular intervals, such as every hour, day or week. The
biggest problem with batch processing is that the master file is never current.

Batch processing is fast and cost effective for many applications. A batch approach
is used for generating pay cheques and other forms of paper output.

Characteristics of batch transaction processing:

1. Relies on accumulating transaction data over a period of time and then processing
the entire batch at once.

2. Batch processing is usually cyclic: daily, weekly, or monthly run cycle is

established depending on the nature of the transactions

3. Cheaper than on-line processing

4. Easier to control than on-line processing

5. Database is constantly out of date

6. Batch processing is now being captured using disk files

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UNIT – 4 Transaction Processing Systems.

Disadvantages of Batch Processing:-

 All processing must wait until a set time. The processing schedule is
predetermined.
 Errors cannot be corrected during processing.
 Sorting the transaction data is expensive and time consuming.

Online/Real Time Processing (OLTP) :

With this form of data processing, each transaction is processed immediately,
without the delay of accumulating transactions into batch.
As soon as the input data is available, a program performs the necessary processing
and updates there cord affected by the transaction.
Data in an OLTP always reflect the current status. The drawback of OLTP is the
high costs associated with the necessary security and fault tolerance features.
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UNIT – 4 Transaction Processing Systems.

Online transaction processing is interactive and each transaction is processed as it

occurs.
Files are always current when online processing is used.
A person enters the data for a transaction into a system, where it is processed and
the output is received before the next input is entered.
Real time processing involves using a terminal or workstation to enter data and
display the result of the TPS.
It uses the network to link the terminals to the mainframe computer and to access
the online database.
Real time processing involves a large number of users who are simultaneously
performing transactions to change data.

2 main concerns with real time processing are:

 Concurrency: ensures that two users cannot change the same data at the same
time. One user cannot change a piece of data before another user has finished
with it.
 Atomicity: ensures that all of the steps involved in a transaction are completed
successfully as a group. If any steps fails, no other step should be completed.
Disadvantage:-
1) Tremendous expense.
2) Both software and hardware cost type of processing exceeds.

 What is TP Monitor?
Ans. A Transaction Processing Monitor (TP Monitor) is software that allows the
transaction processing application programs to run efficiently.
It manages the sequence of events that are part of a transaction.

3) ON- LINE Entry with Delayed Processing.

Online entry with delayed processing is a compromise between batch and online
processing.
With this type of system, orders or transactions are entered into the computer system
when they occur, but they are not processed immediately.
For example, when you call a toll-free number and order a product, your order is
typically entered into the computer when you make the call. However, the order may
not process until that even in after business hours.

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UNIT – 4 Transaction Processing Systems.

Real Time Batch Processing

With this form of data processing, each With batch processing, business
transaction is processed immediately, transactions are accumulated over a
without the delay of accumulating period of time and prepared for
transactions into a batch. processing as a single unit or batch.
Each transaction in real time processing All transactions for a period of time
is unique. It is not a part of a group of would be collected in a group (Called a
transactions. batch), input and processed as a unit.
Real- time processing requires the Batch processing requires the master
master file to be available more often for file to be available less often for
updating and reference. updating and references.
The database is accessible all of the time The database is not accessible all of the
for processing. time for batch processing.
Real time processing has fewer errors While batch processing, the data is
than batch processing as transaction organized and stored before the master
data is validated and entered file is updated. Errors can occur during
immediately. these steps.
More computer operators are required Comparatively less computer operators
in real time processing as the operations are required in batch processing.
are not centralized.
It is more difficult to maintain a real It is comparatively easy.
time processing system than a batch
processing system.
The main advantage associated with It is comparatively less expensive.
real time processing is the tremendous
expense, because of the hardware and
software costs.
Here is no delay between the occurrence Here is some delay between the
of an event and the processing of the occurrences of the processing of the
event. event.
Example : Example :
Airline reservation systems of an event Payroll processing, Billing, Accounts
and banking transaction system. payable, and accounts receivable.

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UNIT – 4 Transaction Processing Systems.

 Objective of the TPS

1) Process data are generated according to the transaction.

2) Data are maintained with high accuracy.
3) To ensure the data and information is regular and integrated.
4) Records and documents are produced in time which increases efficiency.
5) To provide the increase service and enhance the customer’s services maintain
TPS help with these features.

 Transaction Processing Cycle :-

The business data goes through a transaction processing cycle that includes :
a. Data Collection : capturing data necessary for the transaction.
b. Data Editing : check validity and completeness of data.
c. Data correction : corrects the wrong data.
d. Data Manipulation : Calculate, summarize, process data
e. Data Storage : Update Transaction(On databases)
f. Document Production and Reports : Create end result reports.

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UNIT – 4 Transaction Processing Systems.

3) Transaction Processing Activities

- Data collection
- Data editing
- Data Correction
- Data Manipulation
- Data storage

All transactions processing system performs a common set of basic data

processing activities.

TPS captures and process data that describe fundamental business

transactions. This data is used to update databases and to produce a variety
of reports.

Basically, TPS is an organized collection of people, procedures, databases, and

devices used to record completed business transaction and store data about these
transaction.

Transactions are the economic events or exchange between two or more business
entities.
1) Data collection: The process of capturing and gathering the needed data to
complete transactions.

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UNIT – 4 Transaction Processing Systems.

Data collection can be manual process or automated process.

The usage of automated data collection devices have made data collection
faster, more efficient and reliable and allow firms to use the collected data in
much more flexible ways.

For example, retail stores use scanners to read the bar code from product
packages and automatically enter the price item to TPS. Once the price data
is entered, the computer will determine customer’s bill.

2) Data Editing :
An important step in processing data is to check for validity and completeness
of data.

Control must be placed in the data entry form.

For example, quantity and cost must be numeric and names must be
alphabetic.

3) Data Correction :

A data that is not entered properly needs to be entered correctly.

Data correction involves re-entering incorrect data in the data entry point.

For example, a UPC code not found in the retail store checkout, is given a special
code to complete the transaction for an item.

4) Data manipulation: The process of performing calculation and other data

transformation related to business transactions and store data and information
in organization’s database for further processing.

For example, in a payroll TPS, managers multiply employee’s hours worked

times the hourly pay rate.

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UNIT – 4 Transaction Processing Systems.

5) Data storage: Data storage involves placing transaction data or information

in database. The stored data can be further processed and manipulated by other
information system.

In other words, the data appears to be the source of data for

Other information systems

6) Data production: The process of outputting records and reports.

The documents may be in the form of hard copy paper reports or soft copy
where documents are displayed on computer screens.

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UNIT – 4 Transaction Processing Systems.

 Document production and reports :=

TPS produce important business documents such as sales receipts, order entry list,
customer list, invoices, purchase orders, inventory on-hand report, paychecks and so
on.

Document can be hard copy report or displayed on the computer screen.

These transaction documents produced by TPS may be divided into 2 classes.

 Action documents
 Information documents.
1. Action Documents: = direct that an action takes place. Turnaround
documents initiate action and are returned after its completion to the
requesting agency. They therefore also serve as input documents for another
transaction.
2. Information Documents: = Confirms that a transaction has taken place or
inform about one or several transactions.

Transaction documents require manual handling and, in some cases,

distribution of multiple copies. The process is costly and may lead to
inconsistencies if one of the copies fails to reach its destination.

The process of producing documents is an iterative process involving drafting,

checking, and revising the document. It should continue until a document of
acceptable quality is produced. The acceptable quality level depends on the
document type and the potential readers of the document.

Production reporting in Business Central allows production and business

professionals to get insights and statistics about current and past production
activities.

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UNIT – 4 Transaction Processing Systems.

 Output of the most management information system are collection of reports.

Reports are distributed to the manager.

There are basically five types of Reports.

1) Schedule Report: - It produces the report on daily, monthly and weekly.

You can schedule reports to run on a regular basis, and have the results emailed to
the user in PDF format.

These reports include summary values at the top (for example, the number of
requests, SLA breaches, alerts triggered, and unique clients in a specified week)

2) Key Indicator Report: It basically summarize the previous day activities

which were crucial and that problems’ solution is given first by the manager
and executives.

When you submit the Key Indicators Report, Payables prints two reports that allow
you to review Payables transaction activity, and review the current number of
suppliers, invoices, payments and matching holds in your Payables system:

3) Demand Report :-

To give this kind of certain report/information in manger’s request.

In other words we can say that this report in generated on “Demand”.

A non-scheduled report needed at the moment by management. A report

produced on demand.

4) Exception Report :-

This type of the report is produced when the unusual situation occurs in which
management action is required.

5) Drill Down Report :-

This type of report is generated to provide the increasingly detail report. Data about
situation.

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UNIT – 4 Transaction Processing Systems.

By the use of this report we can get the exact scenario and analyst can see data high
level, detail and very detail analyses.

 Write a Short note on Traditional TPS

 Transaction Processing Applications

- Order Processing system
- Purchasing Systems
- Accounting Systems
There are mainly three traditional transaction processing system.

1) Order processing system

 Order Entry :-
To capture the basic data needed to process on the customer’s order.
Orders may come through the mail or telephone, it can be gathered by a staff of sales
representatives or by EDI or directly by the customer using data entry from on the
firm’s website through Internet.
The Inventory status of each inventory item or the order is checked to determine
whether sufficient finished product is available.
Once the order is entered and accepted, it becomes an open daily sales journal (which
includes customer information, products ordered, quantity, discount and price) is
generated.
With Electronic data interchange(EDI), a customer can place order directly from its
purchasing TPS into order the order processing TPS of another organization, or both
the TPS of customer and supplier can be linked in directly through 3rd party.

 Sales configuration system

To ensure that the product, services, orders are sufficient to the customer objective
or not.
Another important aspect of order processing is sales configuration.
It ensures that the product and services ordered are sufficient to accomplish the
customer’s objective and work well together.

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UNIT – 4 Transaction Processing Systems.

For example, using a sale configuration program, a sales representative knows that
a computer printer needs a certain cable and a LAN card so that it can be connected
to the LAN.
Without sales configuration program, a sales representative might sell a customer
the wrong item.
Sales configuration program also suggest optional equipment. For example, if a
customer orders a palmtop computer, the sales configuration program will suggest
an AC adapter, backup software and cables and a modem to allow the palmtop
computer the ability to connect to the internet.
Sales configuration software can also solve customer problems and answer customer
questions.
 Shipment planning system
To identify customers order and send it to particular location.
A system that determines which open orders will be filled and from which location
they will be shipped.
The output of this system is a plan that shows where each order is to be filled and a
precise schedule for shipping with a specific carrier on specific date and time.
The system also prepare a pick list that is used by warehouse personnel to select the
ordered goods from the warehouse. (Containing item and quantity)
Picking list instruct the warehouse workers where to locate the items.
Packing slip and shipping notice are generated.
These outputs may be in paper form or they may be computer records that are
transmitted electronically.

 Shipment execution system

To coordinate the outflow of all the products from the organization, with
objective of delivery quality product on the time to customer.
This system coordinates the outflow of all products and goods from the
organization.
Warehouse operators pack items in the box and item number and quantity for
each item is entered in the system.
It also creates a packing document for each order, which is enclosed with the
shipping materials.
The system passes shipped information (Item number and quantity) to the
inventory control system to update the inventory.

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UNIT – 4 Transaction Processing Systems.

The shipped information is also passed on to the invoicing system to create an

invoice.

 Inventory Control system

Here, all the customer records are computerized and manually updated.
Keeping track of each unit.

For each item picked during the shipment execution process, a transaction
providing the stock number and quantity picked is passed to the inventory
control system.

In this way inventory records are updates the inventory records to reflect the
exact quantity on hand of each stock keeping unit.

Once products have been picked out of the inventory, other documents and
reports are initiated by the inventory control application.

When a shipment is made the quantity of the item is deducted from the current
stock.

It creates inventory status report to reflect current stock and the need for
ordering.

 Invoicing

Generates customer invoices based on records received from the shipment

execution system.

The knowledge of order number, which contains customer and item

information, helps creating the invoice.

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UNIT – 4 Transaction Processing Systems.

 Customer relationship management

To maintain relation between the organization it may be marketing, HR,
programming, Finance, advertising to retain loyal customers.

 Routine System
Best way to transfer product from one location to another location.

 Scheduling System
Best time to pick up product and send it to the destination.

 Purchasing System

1) Inventory Control: This includes raw materials, packing materials, spare parts
and supply etc.
2) Purchase Order Processing System: To help purchasing department to
compute their transaction quickly, fastly and efficiently.
3) Receiving System: To create records receipt.
4) Account Payable System : To increase profit, to improve cash flow and
provide more effective management of current system.

 Purchasing System
The purchasing transaction processing system is used when an item (such as a chair
or software) is ordered to a supplier from a company.
The activities for purchasing systems are :
1) Inventory Control
2) Purchase order processing
3) Receiving
4) Accounts Payable

 Inventory Control :
It helps inventory to maintain and keep track of raw materials, packing materials,
spare parts, supplies etc.

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UNIT – 4 Transaction Processing Systems.

Through this inventory ensures that sufficient raw material, packaging material,
maintenance part are available or not. As the items are used, the system updates the
item quantity and procedure reports.

 Purchase Order Processing Systems :

This system helps purchasing departments in completing their transactions quickly
and efficiently.
The purchasing department can facilitates the buying process by keeping data of
supplier’s good and services.
Telecommunication, internet, public networks allows purchasing manager to
compare price, products and do this purchase order processing efficiently.
Once supplier is selected, the supplier’s computer gets directly connected to buyer’s
system, orders can be sent by an EDI which reduces purchasing cost, time, and
efforts.
Before issuing a purchase order, company policies such as charged account number,
required signatures, order limit etc are checked.
Purchase order can be delivered electronically to the supplier.
A copy of the purchase order is forwarded to the receiving system to compare with
the invoice when items will be received.

2) Receiving System :-
Receiving department is responsible for taking control of all incoming items,
inspecting them, also routing them to the people or department that ordered them.
This department is responsible to notify the purchasing department when items have
been received.
Notification can be done by receiving report or electronically by business transaction
created by entering data in to the receiving TPS.
Receiving departments do quality control by inspection, whose procedure and
practices are set.
Suppliers sent customers advance shipment notice. In addition items have bar codes
for item checking and reading, to improve accuracy and fewer efforts.
This system creates records of expected and actual received items.
A receiving system typically updates the inventory to keep the inventory status
current.

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UNIT – 4 Transaction Processing Systems.

Received items are checked and a receiving transaction is forwarded to the accounts
payable system.

 Accounts Payable System :

This system that increases an organization’s control over purchasing, improves cash
flow, increases profitability, and provides more effective management of current
liabilities.
Once the accounts payable department receives a bill from supplier, the bill is
verified and checked for accuracy.
After satisfaction data is entered into the accounts payable application.
In addition to check, payments can be made also with EDI, internet or other
electronic payment system.
A bill from a supplier initiates the verification of received items and in turn the
system creates a check for the supplier.
The system also prints purchase journal which itemizes all purchases for a period.
This journal is generated by accounts payable application, this report summarizes
and organization’s bill paying activities for a particular period.

 Accounting System.

The accounting systems must track the flow of data related to all the cash
flows that affect the organization.

1) Budget
2) Accounts Receivable
3) Payroll
4) Asset Management
5) Account Payable
6) General Ledger

 Budget Transaction Processing System.

A budget is a financial plan that identifies items amount that the organization
estimates it will spend.

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UNIT – 4 Transaction Processing Systems.

Budgeting can be an expensive and time consuming process.

Automating the budget saves time, ensures consistent budget and monitors
well.
Here, data are distributed to user or candidate to prepare the budget.
A budget is a financial plan that identifies items amount that the organization
estimates it will spend.
Budgeting can be expensive and time consuming process.
Automating the budget saves time, ensures consistent budget and monitors well.

 Account Receivable System.

To manage cash flow of the company this is done on basis of two ways
- Goods sold
- Services perform
A system that manages the cash flow of the company by keeping track of
the money paid by the customers and other companies for goods and
services sold to them.

The major output of the accounts receivable system is monthly bills or

statement sent to the customers.

Transaction created by accounts receivable system updates general ledger

accounts.

Also, maintains amount received in form of loan from bank, and financial
institute.

Interest earned by the company from various asset is also maintain in

account receivable.

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UNIT – 4 Transaction Processing Systems.

 Payroll System prepare :

- Payroll check and stamp.
- Payroll register
- W- to - Statement.(world trade organization)

Generates payroll checks and payroll register, as well as TDS and from 16 statements
at the end of the year for tax purposes as output.
In addition, payroll processing produces employee journal containing various
earning factors such as leaves taken, all deductions, increments, credits, gross pay
etc.

A typical pay check register details the employee’s hours worked for the period,
salary, vacation pay, federal and state taxes with held, and other deductions.
Payroll journal is a report that contains employee’s names, the record where
employee worked during a week, hours worked, the pay rate, a premium factor for
overtime pay, earnings, earning type, various deductions and pay calculations done.

 Asset Management transaction processing system.

To control investment into capital equipment.

The asset management transaction processing system controls investments in

capital equipment and manages depreciation for maximum tax benefits

This include efficient handling of wide range of depreciation methods,

country specific tax reporting and depreciation structures for various countries
where firm does business, and work flow managed processes to easily add,
transfer and retire assets.

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UNIT – 4 Transaction Processing Systems.

 Accounts Payable System :

In this subsystem payment to be made by the organization in various capacity such
purchase payment, payment to be made to employee, contactor, bank, government,
financial institute.
Let us discuss about the sub system of purchase payment that increases an
organization’s control over purchasing, improves cash flow, increases profitability
and provides more effective management of current liabilities.

Once the accounts payable department receives a bill from supplier, the bill is
verified and checked for accuracy.

After satisfaction data is entered into the accounts payable application.

In addition to check, payments can be made also with EDI, internet or other
electronic payment system.

A bill from a supplier initiates the verification of received items and in turn the
system creates check for the supplier.

 General ledger System.

Designing is done in form of Ledger.

EX:- Balance sheet of account.

Every monetary transaction that occurs within firm must be properly

recorded.

Payment of supplier’s invoice, receipt of payment from customer and

payment to an employee are example of financial transaction.

It is a system that produces a detailed list of all business transactions and

activities.

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UNIT – 4 Transaction Processing Systems.

General Ledger system designed to automate financial reporting and data

entry.

Reports include profit and loss statements, balance sheets, general ledger
statements etc. Various income and expense accounts can be generated for
the current period, year to date and month to date as required.

The reports generated by the general ledger application are used by

accounting and financial manages to monitor the profitability of the
organization and to control cash flow.

The order processing system generates as invoice for customer order to

include with the shipment.

This information is also sent to the accounts receivable system to update the
customer’s account.

When the customer pays the invoice, the payment information is also used to
update the customer’s account.

The necessary accounting transactions are sent to the general ledger system
to keep track of amounts owed and amounts paid.

Similarly, as the purchasing systems generates purchase order and those

items are received, information is sent to the accounts payable system to
manage the amounts owed by the company.

Data about amounts owed and paid by customers to the company and form
the company to vendors and others are sent to the general ledger system that
records and reports all financial transactions for the company.

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