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Overview of Transaction Processing and Enterprise Resource Planning Systems

This document provides an overview of transaction processing systems (TPS) and enterprise resource planning (ERP) systems. It defines a TPS as a system that processes routine business transactions like orders and payments. Key aspects of TPS covered include the transaction processing cycle, types of transactions, and methods of processing like batch and real-time. The document also discusses the components of manual accounting systems and computerized files. It concludes with a description of ERP systems and their advantages and disadvantages compared to traditional TPS.

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Hibaaq Axmed
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87 views21 pages

Overview of Transaction Processing and Enterprise Resource Planning Systems

This document provides an overview of transaction processing systems (TPS) and enterprise resource planning (ERP) systems. It defines a TPS as a system that processes routine business transactions like orders and payments. Key aspects of TPS covered include the transaction processing cycle, types of transactions, and methods of processing like batch and real-time. The document also discusses the components of manual accounting systems and computerized files. It concludes with a description of ERP systems and their advantages and disadvantages compared to traditional TPS.

Uploaded by

Hibaaq Axmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Chapter 2

Overview of Transaction
Processing and Enterprise
Resource Planning Systems
What is TPS?
Definition:
• A Transaction Processing System (TPS) is a type of information
system that collects, stores, modifies and retrieves the data
transactions of an enterprise. e.g.; airline reservation systems,
electronic transfer of funds, payroll employee records, sales order
entry, manufacture and shipping.
• Designed to process routine business transactions
• Seeks time and cost efficiency by automating repetitive operations
in large volumes
What is a Transaction?
Transaction:
• A business activity between seller and buy to exchange an asset for
payment.
• Basic business operations such as customer orders, purchase orders,
receipts, time cards, invoices, and payroll checks in an organization.
Types of Transactions:
• Internal Transactions: Those transactions, which are internal to the
company and are related with the internal working of any organization. For
example, Recruitment Policy, Promotion Policy, Production policy etc.
• External Transactions: Those transactions, which are external to the
organization and are related with the external sources, for example, sales,
purchase etc.
Manual System Accounting Records
 Journals Transaction data are often recorded in a journal before
they are entered into a ledger.
 Special journals- records large numbers of repetitive
transactions such as sales, cash receipts, and cash
disbursements.
 General journal- nonrecurring, infrequent, and dissimilar
transaction
 Ledger a book of financial accounts
 General ledger- shows activity for each account listed on the
chart of accounts
 Subsidiary ledger- shows activity by detail for each account
type.
Types of TPS
1.Batch processing:
• is where the information is collected as a batch and then processed
later on. An example of batch processing is paying by cheque.
• Batch processing is useful for enterprises that need to process large
amounts of data using limited resources.
Advantages of Batch Processing
 Organizations can increase efficiency by grouping large numbers of
transactions in to batches rather than processing each event separately.
 Batch processing provides control over the transaction process via
control figures.
2. Real Time Processing:
• Real time processing is where all details of the transaction are
recorded and changed at the time as it occurs. Examples of
real time processing are ATM’s.
Why Do So Many AIS Use Batch Processing?
 AIS processing is characterized by high-volume, independent
transactions, such are recording cash, receipts checks and
received in the mail.
 The processing of such high-volume checks can be done
during an off-peak computer time.
 This is one reason why batch processing maybe done using
real time data collection.
3. Storing and Retrieving-Database:
• 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.
• Databases are always protective of their delicate data, so they
usually have a restricted view of certain data
Computer files
 Master File- generally contains account data (e.g., general ledger
and subsidiary file)
 Transaction File- a temporary file containing transaction since
last update
 Reference File- contains relatively constant information used in
processing (e.g., tax tables, customer addresses)
 Archive File- contains past transaction for reference purposes.
Data Processing Cycle
Data Input

Steps in Processing Input are:


• Capture transaction data triggered by a business activity
(event).
• Make sure captured data are accurate and complete.
• Ensure company policies are followed (e.g., approval of
transaction).
Data Capture
• Information collected for an activity includes:
• Activity of interest (e.g., sale)
• Resources affected (e.g., inventory and cash)
• People who participated (e.g., customer and employee)
• Information comes from source documents.

2-11
Source Documents
• Captures data at the source when the transaction takes
place
• Source documents
• Turnaround documents
• Source data automation (captured data from machines,
e.g., Point of Sale scanners at grocery store)
Data Storage
 Important to understand how data is organized
▫ Chart of accounts
 Coding schemas that are well thought out to anticipate
management needs are most efficient and effective.
▫ Transaction journals (e.g., Sales)
▫ Subsidiary ledgers (e.g., Accounts receivable)
▫ General ledger
Note: With the above, one can trace the path of the transaction
(audit trail).
• Audit trail for
Invoice #156 for
$1,876.50 sold to
KDR Builders
Data Processing
Once business activity data have been entered into the system,
they must be processed to keep the databases current. The four
different types of data processing activities, referred to as CRUD,
are as follows:
Four types of processing (CRUD):
• Creating: new records (e.g., adding a customer)
• Reading: existing data
• Updating: previous record or data
• Deleting data
 Data processing can be batch processed (e.g., post records at the
end of the business day) or in real-time (process as it occurs).
2-15
Information Output
The data stored in the database files can be viewed
 Online (soft copy)
 Printed out (hard copy)
▫ Document (e.g., sales invoice)
▫ Report (e.g., monthly sales report)
▫ Query (question for specific information in a database, e.g.,
What division had the most sales for the month?)
Enterprise Resource Planning (ERP) Systems
• Integrates activities from the entire organization
▫ Production
▫ Payroll
▫ Sales
▫ Purchasing
▫ Financial Reporting

2-17
Advantages of ERP System
• Integrated enterprise-wide allowing for better flow of the
information as it’s stored in a centralized database and can be
accessed by various departments which also improves customer
service.
• Data captured once (i.e., no longer need sales to enter data about a
customer and then accounting to enter same customer data for
invoicing)
• Improve access of control of the data through security settings
• Standardization of procedures and reports
Disadvantages of ERP System
• Costly
• Significant amount of time to implement
• Complex
• User resistance (learning new things is sometimes hard for
employees)
The necessity for controls
A company’s management has a number of obligations:
• To manage the business effectively.
• To produce timely, and accurate financial statements and
management information
• To safeguard the business’ assets
• To prevent and detect fraud.
• These things do not happen at random-the company needs
systems that;
• will be less prone to error
• may play a part in fraud prevention and detection
• will help with safeguarding the assets

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