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Transaction Processing System in AIS

The document discusses transaction processing systems (TPS) in accounting information systems. It defines TPS as the subsystem responsible for recording transactions in journals/vouchers and distributing operational information. There are three main TPS cycles: the expenditure cycle handles purchasing/payables; the conversion cycle includes production/cost accounting; and the revenue cycle processes sales/receivables. Each cycle captures transactions, records their effects, and produces operational information across subsystems like purchases, cash disbursements, payroll, sales order processing and cash receipts.

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JerianCeledonioMacatuggal
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470 views

Transaction Processing System in AIS

The document discusses transaction processing systems (TPS) in accounting information systems. It defines TPS as the subsystem responsible for recording transactions in journals/vouchers and distributing operational information. There are three main TPS cycles: the expenditure cycle handles purchasing/payables; the conversion cycle includes production/cost accounting; and the revenue cycle processes sales/receivables. Each cycle captures transactions, records their effects, and produces operational information across subsystems like purchases, cash disbursements, payroll, sales order processing and cash receipts.

Uploaded by

JerianCeledonioMacatuggal
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Transaction Processing System in AIS – Chapter 2

 HABIBULLAH QAMAR  MAY 7, 2020

Today we will start accounting information systems chapter. AIS Chapter 2 is about
Transaction processing systems and its cycles. In the first chapter of the Accounting
information system, we started with a basic definition of the accounting information
system and elaborated the concepts of what is a system , what is an information
system and then what are particularly accounting information systems. We discuss the
sub system of accounting information systems and general framework of accounting
information systems with the ending discussion evolution of accounting information
systems. 

What is transaction processing system (TPS) 


One of the most fundamental and important subsystems of AIS. As we define it in our
previous lecture, when we discussed the framework of AIS. This system(TPS) is
responsible for converting financial events into . transactions. Recording of
Transaction in Journals and vouchers and distributing necessary information for daily
operations. examples of transaction processing systems in AIS are sales order entry,
payroll, employee records, manufacturing, and shipping management systems. 
Transaction processing system definition
In an Accounting information systems, TPS is the most fundamental system that
is responsible for recording of Transaction in Journals and vouchers and distributing
necessary information for daily operations.
Types of transaction processing system in AIS

There are three main Subsystems of TPS including the revenue cycle, the
expenditure Cycle and the conversion cycle. all of these cycles support different
objectives. All of these have similar characteristics. For example, all three capture
financial transactions, record the effects of transactions, and produce information
about transactions to support day-to-day activities.
What is Transaction in TPS?

Let’s start with the definition of Transaction “ An economic event that affects the
assets and equities of the firm, is reflected in its accounts, and is measured in
monetary terms.” e.g. Sale of goods or services, the purchase of inventory, the
discharge of financial obligations and the receipt of cash on account from customers.
Financial transaction can initialized by internal events like the depreciation of fixed
assets, the application of labor raw materials overhead to the production process,
transfer of inventory from one department to another, There may thousands of
transactions for a business in a day. The only way to  handle these efficiently is to
group them. Figure shows the relationship of these cycles and examples of all
transactions processing systems in an AIS. 
Expenditure Cycles

Every business starts with the purchase of materials, property, and labor in exchange
for cash. Most expenditure transactions are based on a credit relationship between the
trading parties. The actual disbursement of cash takes place at some point after the
receipt of the goods or services.Thus, from a systems perspective, this transaction has
two parts: a physical component (the acquisition of the goods) and a financial
component (the cash disbursement to the supplier). 

Subsystems of Expenditure Cycles


Purchases/accounts payable system. This system identifies the need to acquire
physical inventory (such as raw materials) for example Places an order with the
vendor. After receiving goods the purchases system records the event by increasing
inventory and establishing an account payable to be paid at a later date.

Cash disbursements system is responsible for authorizing the payment, disburses the
funds to the vendor and records the transaction by reducing the cash and accounts
payable accounts. 

Payroll system is another example of TPS that collects labor usage data for each
employee, computes the payroll, and disburses paychecks to the employees. 

Fixed asset system works with transactions involving the acquisition, maintenance,


and disposal of its fixed assets. These are relatively permanent items that collectively
often represent the organization’s largest financial investment. Examples of fixed
assets include land, buildings, furniture, machinery, and motor vehicles. 

The Conversion Cycle

The Conversion Cycle is composed of two major subsystems: the production system :
activities?The production system involves the planning, scheduling, and control of the
physical product through the manufacturing process, determining raw material
requirements, authorizing the work to be performed and the release of raw materials
into production.
The cost accounting system is major in this cycle and it monitors the flow of cost
information related to production. It generated cost Information which is useful for
inventory valuation, budgeting, cost control, performance reporting and management
decisions.
The Revenue Cycle
Firms sell their finished goods to customers through the revenue cycle. All
transactions that include cash sales and credit sales are recorded and processed by this
cycle of TPS. Revenue cycle transactions also have a physical and a financial
component, which are processed separately.
Sales order processing subsystem is responsible for preparing sales orders, granting
credit, shipping products (or rendering of a ser-vice) to the customer and  billing
customers. Cash receipts. For credit sales, some period of time (days or weeks) passes
between the point of sale and the receipt of cash.

Let’s Recap what we learned today in this lecture!


 Transactions
 Transaction Cycles
 Cash flow of TPS
 Subsystems of Cycles
 The Expenditure cycle
 Conversion cycle
 Revenue cycle

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