Chapter 2: Introduction to Transaction Processing Systems (TPS)

1. Transaction Cycles

Business transactions are grouped into three main cycles:

• Expenditure Cycle:

• Physical Component: Acquisition of goods or services.

• Financial Component: Payments made to suppliers (cash disbursements).

• Conversion Cycle:

• Production System: Planning, scheduling, and managing the production process.

• Cost Accounting System: Tracks production costs and monitors inventory.

• Revenue Cycle:

• Physical Component: Sales order processing and delivery of goods/services to customers.

• Financial Component: Collection of cash or receivables from customers.

2. Types of Accounting Records

• Manual Systems:

• Source Documents: Initial records of transactions (e.g., purchase orders).

• Product Documents: Results of transaction processing (e.g., invoices).

• Turnaround Documents: Product documents reused as source documents in subsequent processes.

• Computer-Based Systems:

• Master Files: Permanent records like account data (e.g., general ledger).

• Transaction Files: Temporary records of transactions awaiting processing.

• Reference Files: Constant data used in operations (e.g., tax rates).

• Archive Files: Historical records for reference (e.g., past transactions).

3. Processing Methods

• Batch Processing:

• Groups similar transactions for processing at a later time.

• Suitable for high-volume, independent transactions.

• Example: Payroll processing.

• Real-Time Processing:

• Processes each transaction as it occurs without delay.

• More resource-intensive but offers immediate updates.

• Example: Online booking systems.

4. Documentation Techniques

• Entity-Relationship Diagrams (ERD):

• Visual representation of relationships between resources, events, and agents.

• Data Flow Diagrams (DFD):

• Illustrates how data flows between processes, data stores, and entities.

• System Flowcharts:

• Depicts relationships among processes, documents, and the type of media used.

5. Coding Schemes in AIS

• Types of Codes:

• Sequential Codes: Numbers assigned in a specific order (e.g., invoice numbers).

• Block Codes: Groups transactions or accounts into blocks (e.g., chart of accounts).

• Group Codes: Combines fields to represent complex data (e.g., store-department-item).

• Alphabetic Codes: Letters used to classify data (e.g., product categories).

• Mnemonic Codes: Informative abbreviations (e.g., “NY” for New York).

• Purpose of Codes:

• Simplify data management.

• Ensure accountability.

• Facilitate auditing and tracking.

6. Batch vs. Real-Time Systems

• Batch Systems:

• Efficient for high-volume tasks.

• Processes data during non-peak hours.

• Example: Consolidating daily sales at the end of the day.

• Real-Time Systems:

• Immediate processing of data.

• Better suited for time-sensitive operations.

• Example: Processing credit card payments instantly.