Transaction Processing System

MIS Term Paper

Shaheed Sukhdev College of Business Studies

Submitted to: Ms. Neha
Submitted by:
Aaina Aggarwal (4939)
Pratiksha Sharma (4940)
BBS 3FB
2011
Acknowledgement
Firstly, my deepest gratitude to my project mentors; Ms. Neha, for her invaluable help, guidance and
support. Without her constant this project would never have come to fruition.

I would also thank my college “Shaheed Sukhdev College of Business Studies” for giving me an
opportunity to have an enriching experience in terms of this project.

Last but not the least, thank you Mummy and Papa and all my family members and friends for
always being there for me. It is because of each one of you that this project was made possible.

Thank you!!

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Table of Contents
ACKNOWLEDGEMENT 2

TABLE OF CONTENTS 3

INTRODUCTION 4

CHARACTERISTICS & ACID TEST 5

PROCESS OF TPS 6

TYPES OF PROCESSING 9

STORAGE & RETRIEVAL OF DATA 11

BACK UP & RECOVERY 12

TPS V/S DSS 14

REFERENCES 16

APPENDIX 17

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Introduction
Whenever two people make an exchange, it is called a transaction. Transactions are
important events for a company, and collecting data about them is called transaction processing.
Examples of transactions include making a purchase at a store, withdrawing money from a checking
account, making a payment to creditor, or paying an employee. Because transactions generally
involve an exchange of money, it is critical that the data be protected during transmission and stored
carefully so that it cannot be altered. It is also critical that the data be saved so that managers can
verify the data if any conflicts arise. Also, the sales and purchase data from the foundation of the
accounting and financial systems of every company, so the system must be able to produce the
standard reports. Company, is an advanced system that records and processes insurance-related
transactions. Filing and processing insurance claims is a highly information-intensive process in
which every step generates new data or modifies existing data. CareNet allows the company to
accurately capture this data and disseminate it at the right time to its 7 million clients. The
information generated by CareNet is useful both to employees of Travelers Insurance and to its
clients. A Travelers employee can access the system and look at the latest transaction; an authorized
client can also access CareNet to study the status of his or her insurance claim. This system,
therefore, spans organizational boundaries and provides information to both internal external
entities. So when we are talking about the transactions of an organization in computerized manner,
we talk about Transaction Processing System, popularly known as TPS.

A transaction processing system is a type of information system. TPSs collect, store, modify,
and retrieve the transactions of an organization. A transaction is an event that generates or modifies
data that is eventually stored in an information system. To be considered a transaction processing
system the computer must pass the ACID test. The essence of a transaction program is that it
manages data that must be left in a consistent state. E.g. if an electronic payment is made, the
amount must be both withdrawn from one account and added to the other; it cannot complete only
one of those steps. Either both must occur, or neither. In case of a failure preventing transaction
completion, the partially executed transaction must be 'rolled back' by the TPS. While this type of
integrity must be provided also for batch transaction processing, it is particularly important for
online processing: if e.g. an airline seat reservation system is accessed by multiple operators, after an
empty seat inquiry, the seat reservation data must be locked until the reservation is made,
otherwise another user may get the impression a seat is still free while it is actually being booked at
the time. Without proper transaction monitoring, double bookings may occur. Other transaction
monitor functions include deadlock detection and resolution (deadlocks may be inevitable in certain
cases of cross-dependence on data), and transaction logging (in 'journals') for 'forward recovery' in
case of massive failures. Transaction Processing is not limited to application programs. The
'journaled file system' provided with IBMs AIX Unix operating system employs similar techniques to
maintain file system integrity, including a journal.

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Characteristics & Acid Test
Transaction processing systems offer enterprises the means to rapidly process transactions to ensure
the smooth flow of data and the progression of processes throughout the enterprise. Typically, a TPS
will exhibit the following characteristics:

 Rapid Processing- The rapid processing of transactions is vital to the success of any
enterprise – now more than ever, in the face of advancing technology and customer demand
for immediate action. TPS systems are designed to process transactions virtually instantly to
ensure that customer data is available to the processes that require it.
 Reliability- Similarly, customers will not tolerate mistakes. TPS systems must be designed to
ensure that not only do transactions never slip past the net, but that the systems themselves
remain operational permanently. TPS systems are therefore designed to incorporate
comprehensive safeguards and disaster recovery systems. These measures keep the failure
rate well within tolerance levels.
 Standardisation- Transactions must be processed in the same way each time to maximise
efficiency. To ensure this, TPS interfaces are designed to acquire identical data for each
transaction, regardless of the customer.
 Controlled Access- Since TPS systems can be such a powerful business tool, access must be
restricted to only those employees who require their use. Restricted access to the system
ensures that employees who lack the skills and ability to control it cannot influence the
transaction process.

Transactions Processing Qualifiers

In order to qualify as a TPS, transactions made by the system must pass the ACID test. The ACID tests
refers to the following four prerequisites:

 Atomicity
Atomicity means that a transaction is either completed in full or not at all. For example, if
funds are transferred from one account to another, this only counts as a bone fide
transaction if both the withdrawal and deposit take place. If one account is debited and the
other is not credited, it does not qualify as a transaction. TPS systems ensure that
transactions take place in their entirety.
 Consistency
TPS systems exist within a set of operating rules (or integrity constraints). If an integrity
constraint states that all transactions in a database must have a positive value, any
transaction with a negative value would be refused.
 Isolation
Transactions must appear to take place in isolation. For example, when a fund transfer is

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 made between two accounts the debiting of one and the crediting of another must appear
to take place simultaneously. The funds cannot be credited to an account before they are
debited from another.
 Durability
Once transactions are completed they cannot be undone. To ensure that this is the case
even if the TPS suffers failure, a log will be created to document all completed transactions.

These four conditions ensure that TPS systems carry out their transactions in a methodical,
standardised and reliable manner.

Process of TPS
The six steps in processing a transaction are:

 Data entry
 Data Capture
 Data validation
 Processing and revalidation
 Storage
 Output generation
 Query support

a. Data Entry

To be processed, transaction data must first be entered into the system. There a r e a n u m b e r o f
i n p u t d e v i c e s for e n t e r i n g d a t a , i n c l u d i n g t h e k e y b o a r d a n d t h e mouse.
Documents generated at the point where a transaction occurs are called source documents and
become input data for the system. For example, when a customer r e t u r n s a n i t e m a t
a s t o r e , t h e s a l e s r e c e i p t b e c o m e s t h e s o u r c e d o c u m e n t for the transaction
"return item for refund". T h e u s e o f a u t o m a t e d m e t h o d s o f d a t a e n t r y i s
k n o w n a s source data automation. 

Methods for Data Entry:

 Keyboard/video display terminals

 Opti cal character recogniti on (OCR) devices, such as opti cal scanning wands
and grocery check-out scanners.
 Magneti c ink character recogniti on (MICR) devices, such as MICR reader/sorters
used in banking for check
 Other technologies, including electronic mice, light pens, magneti c stripe cards,
v o i c e i n p u t , a n d t a c ti l e . I n p u t a l s o b e u s e d a s i n p u t d e v i c e d e p e n d i n g
u p o n t h e application requirement

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 b. Data Capture

W e c o u l d c a p t u r e t r a n s a c ti o n d a t a a s c l o s e a s p o s s i b l e t o t h e s o u r c e t h a t
generates the data. Salespersons capture data that rarely changes by prerecording it on machine-
readable media, or by storing it on the computer system.

Tips for Data Capturing:

Capture data directly without the use of data media by optical scanning of bar codes p r i n t e d o n
product packaging. It ensures the accuracy and reliability of data by
comparing

c. Data Validation

T h e r e a r e t w o s t e p s i n v a l i d a ti o n : error detecti on and error correcti on,

Error detection is performed by one set of control mechanism, and error correction is done by
another. Some commonly used error detecti on procedures are checking the data
for appropriate font (text, numbers, etc), checking for aberrations (abnormalities) (values t h a t
are too low or too high), and checking for missing data, invalid
d a t a , a n d inconsistent data. Missing data refers to fields that are missing a mandated data
value. F o r e x a m p l e , i f t h e n u m b e r o f h o u r s w o r k e d b y a p a r t - ti m e e m p l o y e e i s
missing on a payroll form; that is a missing-data error.

Invalid data is data that is outside the range. For example, if the number of hours worked by
a part-ti me employee is 72hours per week instead of the 1120 hours, then we have invalid data

Inconsistent data means that the same data item assumes diff erent values in different
places without a valid reason. For example, if payroll records show that an employee
worked 25 hours per day.

d. Processing and Revalidation

Once the accuracy and reliability of the data are validated, the data are ready for
processing. There are two ways to process the transactions: online and batch mode. Following
methods are available for Data Processing Online transaction processing (OLTP) is the almost
instantaneous processing of data. The term online means that the input device is directly
linked to the TPS and therefore the data are processed as soon as it is entered into the system. Input
device may be at a remote location and be linked to the system by networks or by
telecommunicati ons systems. Some examples of  online transacti on processing are ATM
transacti ons, student registrati on for  classes, flight reservations.

e. Data Storage

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Processed data must be carefully and properly stored for future use. Data
s t o r a g e i s a c r i ti c a l c o n s i d e r a ti o n - f o r m a n y o r g a n i z a ti o n s b e c a u s e t h e v a l u e
a n d usefulness of data diminish if data are not properly stored. The next step in the processing
of a transacti on is to output the results of the transaction to the decision maker.

f. Output Generation

Once data has been input, validated, processed, revalidated and stored, the output can
be communicated to decision makers in two ways:

 Documents and reports: Documents are a popular output method. They can be processed
further, either to generate additi onal informati on or to present the same
informati on in a diff erent format. Some examples of documents are invoices,
pay checks, purchase, invoice, sales receipts, and job orders. A d o c u m e n t i s
usually a record of one transacti on, whereas a report is a summary of two or
more transactions. For example, the manager of a retail store may receive an invoice (i.e., a
document) from a supplier indicating the quantity and type of each item ordered and the
total cost of the order. A report, on the other hand, may summarize all the invoices from a
given supplier.
 Forms, screens or panels: Computer output need not always be presented in hard-
copy form (such as r e p o r t s , d o c u m e n t s , a n d p r i n t o u t s ) , b u t c a n a l s o
a p p e a r o n c o m p u t e r s c r e e n s a n d panels. Such soft-copy presentations are known
as forms.
g. Query Support

T h e l a s t s t e p i n p r o c e s s i n g a t r a n s a c ti o n i s q u e r y i n g t h e s y s t e m .
Q u e r y f a c i l i ti e s a l l o w u s e r s t o p r o c e s s d a t a a n d i n f o r m a ti o n t h a t m a y
o t h e r w i s e n o t b e readily available. For example, a sales manager may query the system for the
number of damaged items in a given store. Many transaction-processing systems allow you to use
the Internet, intranets, e x t r a n e t s , a n d w e b b r o w s e r s o r d a t a b a s e m a n a g e m e n t
query languages to make inquiries and receive responses concerning the
r e s u l t s o f t r a n s a c ti o n p r o c e s s i n g acti vity. Typically, responses are displayed in a
variety of pre-specifi ed formats or screens. Examples of queries include:

 Checking on the status of a sales order 

 Checking on the balance in an account
 Checking on the amount of stock in inventory Transaction processing systems are
responsible for capturing, storing, and providing access to the basic data of the
organization. The goal is to capture the transaction data as soon as possible. Common
collection methods include:
o Point-of sale services
o Process control
o Electronic data interchange
o Electronic commerce websites.

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Types of Processing
While the transaction process must be standardised to maximise efficiency, every enterprise
requires a tailored transaction process that aligns with its business strategies and processes. For this
reason, there are two broad types of transaction:

Batch Processing

Batch processing is a resource-saving transaction type that stores data for processing at pre-defined
times. Batch processing is useful for enterprises that need to process large amounts of data using
limited resources.

Examples of batch processing include credit card transactions, for which the transactions are
processed monthly rather than in real time. Credit card transactions need only be processed once a
month in order to produce a statement for the customer, so batch processing saves IT resources
from having to process each transaction individually.

Updating in a batch

This is used when transactions are recorded on paper (such as bills and invoices) or when it's being
stored on a magnetic tape. Transactions will be collected and updated as a batch at when it's
convenient or economical to process them. Historically, this was the most common method as the
information technology did not exist to allow real-time processing.

The two stages in batch processing are:

 Collecting and storage of the transaction data into a transaction file - this involves sorting
the data into sequential order.

 Processing the data by updating the master file - which can be difficult, this may involve data
additions, updates and deletions that may require to happen in a certain order. If an error
occurs, then the entire batch fails.

Updating in batch requires sequential access - since it uses a magnetic tape this is the only way to
access data. A batch will start at the beginning of the tape, then reading it from the order it was
stored; it's very time-consuming to locate specific transactions.

The information technology used includes a secondary storage medium which can store large
quantities of data inexpensively (thus the common choice of a magnetic tape). The software used to
collect data does not have to be online - it doesn't even need a user interface.

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Real Time Processing

In many circumstances the primary factor is speed. For example, when a bank customer withdraws a
sum of money from his or her account it is vital that the transaction be processed and the account
balance updated as soon as possible, allowing both the bank and customer to keep track of funds.

The following features are included in real time transaction processing systems:

 Good data placement: The database should be designed to access patterns of data from
many simultaneous users.

 Short transactions: Short transactions enables quick processing. This avoids concurrency and
paces the systems.

 Real-time backup: Backup should be scheduled between low times of activity to prevent lag
of the server.

 High normalization: This lowers redundant information to increase the speed and improve
concurrency, this also improves backups.

 Archiving of historical data: Uncommonly used data are moved into other databases or
backed up tables. This keeps tables small and also improves backup times.

 Good hardware configuration: Hardware must be able to handle many users and provide
quick response times.

Updating in real-time

This is the immediate processing of data. It provides instant confirmation of a transaction. This
involves a large amount of users who are simultaneously performing transactions to change data.
Because of advances in technology (such as the increase in the speed of data transmission and larger
bandwidth), real-time updating is now possible.

Steps in a real-time update involve the sending of a transaction data to an online database in a
master file. The person providing information is usually able to help with error correction and
receives confirmation of the transaction completion.

Updating in real-time uses direct access of data. This occurs when data are accessed without
accessing previous data items. The storage device stores data in a particular location based on a
mathematical procedure. This will then be calculated to find an approximate location of the data. If
data are not found at this location, it will search through successive locations until it's found.

The information technology used could be a secondary storage medium that can store large
amounts of data and provide quick access (thus the common choice of a magnetic disk). It requires a
user-friendly interface as it's important for rapid response time.

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Reservation Systems Reservation systems are used for any type of business where a service or a
product is set aside for a customer to use for a future time.

Storage & Retrieval of Data

The storage and retrieval of data must be accurate as it is used many times throughout the day. A
database is a collection of data neatly organized, which stores the accounting and operational
records in the database. Databases are always protective of their delicate data, so they usually have
a restricted view of certain data. Databases are designed using hierarchical, network or relational
structures; each structure is effective in its own sense.

 Hierarchical structure: organizes data in a series of levels, hence why it is called hierarchal.
Its top to bottom like structure consists of nodes and branches; each child node has
branches and is only linked to one higher level parent node.

 Network structure: Similar to hierarchical, network structures also organizes data using
nodes and branches. But, unlike hierarchical, each child node can be linked to multiple,
higher parent nodes.

 Relational structure: Unlike network and hierarchical, a relational database organizes its
data in a series of related tables. This gives flexibility as relationships between the tables are
built.

A relational structure.

A hierarchical structure.
A network structure.

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In a TPS, there are 5 different types of files. The TPS uses the files to store and organize its
transaction data:

 Master file: Contains information about an organization’s business situation. Most

transactions and databases are stored in the master file.

 Transaction file: It is the collection of transaction records. It helps to update the master file
and also serves as audit trails and transaction history.

 Report file: Contains data that has been formatted for presentation to a user.

 Work file: Temporary files in the system used during the processing.

 Program file: Contains the instructions for the processing of data.

Back up & Recovery

Back up process

Since business organizations have become very dependent on TPSs, a breakdown in their TPS may
stop the business' regular routines and thus stopping its operation for a certain amount of time. In
order to prevent data loss and minimize disruptions when a TPS breaks down a well-designed
backup and recovery procedure is put into use. The recovery process can rebuild the system when it
goes down.

Recovery process

A TPS may fail for many reasons. These reasons could include a system failure, human errors,
hardware failure, incorrect or invalid data, computer viruses, software application errors or natural
or man-made disasters. As it's not possible to prevent all TPS failures, a TPS must be able to cope
with failures. The TPS must be able to detect and correct errors when they occur. A TPS will go
through a recovery of the database to cope when the system fails, it involves the backup, journal,
checkpoint, and recovery manager:

 Journal: A journal maintains an audit trail of transactions and database changes. Transaction
logs and Database change logs are used, a transaction log records all the essential data for
each transactions, including data values, time of transaction and terminal number. A
database change log contains before and after copies of records that have been modified by
transactions.

 Checkpoint:
The  purpose  of  checkpointing is to provide a snapshot of the data within the database. A
checkpoint, in general, is any identifier or other reference that identifies at a point in time

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 the state of the database. Modifications to database pages are performed in memory and
are not necessarily written to disk after every update.
Therefore, periodically, the database systemmust perform a checkpoint to write these updat
es which are held in-memory to the storage disk. Writing these updates to storage disk
creates a point in time in which the databasesystem can apply changes contained in a transa
ction log during recovery after an unexpected shut down or crash of the database system.
 Recovery Manager: A recovery manager is a program which restores the database to a
correct condition which can restart the transaction processing.

Depending on how the system failed, there can be two different recovery procedures used.
Generally, the procedures involve restoring data that has been collected from a backup device and
then running the transaction processing again. Two types of recovery are backward recovery and
forward recovery:

 Backward recovery: used to undo unwanted changes to the database. It reverses the
changes made by transactions which have been aborted. It involves the logic of reprocessing
each transaction, which is very time-consuming.

 Forward recovery: it starts with a backup copy of the database. The transaction will then
reprocess according to the transaction journal that occurred between the time the backup
was made and the present time. It's much faster and more accurate.

Types of back-up procedures

There are two main types of Back-up Procedures: Grandfather-father-son and Partial backups:

Grandfather-father-son

This procedure refers to at least three generations of backup master files. thus, the most recent
backup is the son, the oldest backup is the grandfather. It's commonly used for a batch transaction
processing system with a magnetic tape. If the system fails during a batch run, the master file is
recreated by using the son backup and then restarting the batch. However if the son backup fails, is
corrupted or destroyed, then the next generation up backup (father) is required. Likewise, if that
fails, then the next generation up backup (grandfather) is required. Of course the older the
generation, the more the data may be out of date. Organizations can have up to twenty generations
of backup.

Partial backups

This only occurs when parts of the master file are backed up. The master file is usually backed up to
magnetic tape at regular times, this could be daily, weekly or monthly. Completed transactions since
the last backup are stored separately and are called journals, or journal files. The master file can be
recreated from the journal files on the backup tape if the system is to fail.

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TPS V/s DSS
In theory, the relational model supports databases for both transaction processing and decision
support. In reality, compromises must be made in the design of database management software to
optimize often- conflicting design objectives. Transaction-processing databases are optimized for the
insert, update, and delete operations used to capture data, whereas decision-support databases are
optimized for query operations used to analyze the data. Data for decision-support systems is often
captured by online transaction-processing systems and then loaded into a decision-support system.

Transaction-processing databases

Transaction-processing systems are designed to capture information and to be updated quickly.

They are constantly changing and are often online 24 hours a day. Examples of transaction-
processing systems include order entry systems, scanner-based point-of-sale registers, automatic
teller machines, and airline reservation applications. These systems provide operational support to a
business and are used to run a business.

Transaction-processing systems have the following characteristics:

 High transaction rate -To ensure high throughput, transactions are simple and touch as few
tables as possible.

 Constant change -Transactions occur in large numbers, and their changes are largely
uncontrolled and unpredictable, within the limits of the system.

 Join paths -Join paths can be random and cyclic, and they are interpreted at the time of the
query.

 No redundancy -Redundant and aggregate data is avoided in order to ensure data integrity
and reduce lockout contention.

 Relational integrity -The reliability of the data depends on transaction integrity. Relational
integrity checks are too slow and require much structural complexity.

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  Predictable SQL queries -To ensure consistent response time, SQL statements are simple,
predefined, and carefully tested. Indexes are optimized for these statements but are
otherwise avoided because they adversely affect update and insert performance.

 Recoverability -To ensure against data loss, two-phase commit and rollback mechanisms,
continuous transaction logs, and mirrored disk technology are employed.

These goals are achieved by database schemas with a high degree of normalization--schemas that
contain large numbers of tables connected by complex join paths. Normalization provides fast
transaction response time and a complex schema that is easily manipulated by the applications that
use it, but difficult to understand by the people who need the data.

Decision-support databases: Decision-support systems are designed to allow analysts to extract

information quickly and easily. The data being analyzed is often historical: daily, weekly, and yearly
results. Examples of decision-support systems include applications for analysis of sales revenue,
marketing information, insurance claims, and catalog sales.

A decision-support database within a single business can include data from beginning to end: from
receipt of raw material at the manufacturing site, entering orders, tracking invoices, and monitoring
database inventory to final consumer purchase. These systems are used to manage a business. They
provide the information needed for business analysis and planning.

Decision-support systems have the following characteristics:

 Understandability- Data structures must be readily understood by users, often requiring

denormalization and precomputed aggregations (summary data).

 Relatively infrequent changes-Most changes to the database occur in a controlled manner

when data is loaded at regular intervals.

 Join paths -Join paths are simple, noncyclic, and based on business relations. They are
defined when the database is built.

 Relational integrity-Relational integrity, necessary to ensure correct results, is built into the
database when the data is loaded or deleted.

 Unpredictable and complex SQL queries-SQL query statements submitted against the
database vary considerably and unpredictably from query to query. They can contain long,
complex SELECT statements that make comparisons or require sequential processing. These
queries might reference many thousands, millions, or even billions of records in a database.

 Large result sets-Extensive and frequent browsing must be supported.

 Recoverability Regular backups, or snapshots, of the static database ensure against data loss.

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References
 www.wikipedia.org/wiki/Transaction_processing_system
 www.transactionprocessingsystem.net
 www.egtoget.com/notes/mis/tps.pdf
 www.bestpricecomputers.co.uk/.../transaction-processing-systems.htm
 web.cs.wpi.edu/~gpollice/cs562-s05/TPS-1_990913.pd
 www.cs.sunysb.edu/~cse515/Fall07/slides/ch26.pptf
 Class notes

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APPENDIX
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