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Processing Transactions

The document discusses two methods of processing transactions in accounting systems: Batch Processing and Real-Time Processing. Batch Processing groups transactions for later processing, which can lead to outdated information and is less suitable for fast-paced industries, while Real-Time Processing updates records instantly, providing current data and better control but at a higher cost and increased vulnerability to cyber threats. The choice between these methods depends on business size, transaction volume, and available technology.

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4 views3 pages

Processing Transactions

The document discusses two methods of processing transactions in accounting systems: Batch Processing and Real-Time Processing. Batch Processing groups transactions for later processing, which can lead to outdated information and is less suitable for fast-paced industries, while Real-Time Processing updates records instantly, providing current data and better control but at a higher cost and increased vulnerability to cyber threats. The choice between these methods depends on business size, transaction volume, and available technology.

Uploaded by

ayanokoji70707
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Processing Transactions

4.1 Introduction
Transactions in an accounting system can be processed in two ways:

1.​ Batch Processing – Transactions are grouped and processed together at specific
times.​

2.​ Real-Time Processing – Transactions are processed instantly as they occur.

Choosing between these methods depends on factors like the size of the business, the
volume of transactions, and the technology available.

4.2 Batch Processing


What is Batch Processing?

Batch processing means transactions are collected and processed together in groups (batches)
at a later time. This can be:

●​ At fixed intervals (e.g., daily, weekly).


●​ After reaching a set number of transactions (e.g., 25 invoices before processing).

Examples of Batch Processing

●​ Payroll Processing – Employee salaries are calculated and processed together, usually
at the end of a pay period (e.g., monthly).
●​ Bank Transactions – Some banks process bulk transactions (e.g., check clearances) at
the end of the day.
●​ Supplier Invoices – A business may process all received invoices together at the end of
the week.

Limitations of Batch Processing

●​ Delayed Information – Since transactions are not processed immediately, reports and
financial records may be outdated.
●​ Errors Can Affect Multiple Transactions – If an error is found, it may be harder to
correct since multiple transactions were processed together.
●​ Less Useful for Fast-Moving Businesses – Industries that need real-time updates (like
retail and stock markets) may find batch processing too slow.

When is Batch Processing Used?

Batch processing is common in manual accounting systems, where transactions are


recorded and later entered into ledgers or computers in groups. It is also used in some
computerized systems when real-time processing is unnecessary or too costly.

4.3 Real-Time Processing


What is Real-Time Processing?

Real-time processing means transactions are processed instantly as they happen. This is only
possible in computerized accounting systems.

How Real-Time Processing Works

●​ As soon as a transaction occurs, all relevant records are updated automatically.


●​ Example: When a customer makes a purchase on credit, the system immediately
updates:
○​ The sales records
○​ The customer’s outstanding balance
○​ The inventory records (if goods were sold)

Advantages of Real-Time Processing

Up-to-Date Information – Financial data is always current, helping managers make


informed decisions.​
​
Better Control & Monitoring – Since transactions are processed instantly, errors can
be detected and corrected quickly.​
​
Efficient Business Operations – Businesses that rely on fast decision-making (e.g.,
e-commerce, stock trading) benefit from real-time updates.

Examples of Real-Time Processing

●​ Point-of-Sale (POS) Systems – When you buy something at a store, the sales system
instantly updates inventory and revenue records.
●​ Online Banking – When you transfer money, the bank updates your balance
immediately.
●​ E-commerce Websites – When a customer places an order, inventory and sales
records are updated instantly.

Limitations of Real-Time Processing

●​ More Expensive – Requires high-performance computers and internet connectivity.


●​ System Downtime Issues – If the system crashes, business operations may be
disrupted.
●​ Data Security Risks – Since real-time processing relies on networks and the internet, it
is more vulnerable to cyber threats.

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