BIS309

Lecture 3: Introduction to Transaction Processing Systems

 LECTURE OBJECTIVES
Understand the broad objectives of transaction cycles.
Recognize the types of transactions processed by each of the
three transaction cycles.
Know the basic accounting records used in TPS.
Understand the relationship between traditional accounting
records and their computer-based digital equivalents.

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 AN OVERVIEW OF TRANSACTION
PROCESSING
A financial transaction is an economic event that affects the
assets and equities of the firm, is reflected in its accounts, and
is measured in monetary terms.
Three transaction cycles: the expenditure cycle, the conversion
cycle and the revenue cycle. Every business:
Incurs expenditures in exchange for resources (expenditure cycle).
Provides value added through its products or services (conversion
cycle).
Receives revenue from outside sources (revenue cycle).

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AN OVERVIEW OF TRANSACTION
PROCESSING

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 AN OVERVIEW OF TRANSACTION PROCESSING
Expenditure Cycle: Time lag between components due to
credit relationship with suppliers.
physical component (acquisition of goods)
financial component (cash disbursements to the supplier)
Conversion Cycle:
the production system (planning, scheduling, and control of the
physical product through the manufacturing process)
the cost accounting system (monitors the flow of cost information
related to production)
Revenue Cycle: Time lag between components due to credit
relationship with customers.
 physical component (sales order processing)
 financial component (cash receipts)
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 ACCOUNTING RECORDS: MANUAL SYSTEMS
Source documents are used to capture and formalize
transaction data needed for transaction processing.
Product documents are the result of transaction
processing.
Turnaround documents - product documents of one
system that becomes source documents for another.
Journals are chronological records of transactions.
Special journals are used to record specific classes of
transactions that occur in high frequency.
Register denotes certain types of special journals.
General journal is used to record nonrecurring, infrequent, and
dissimilar transactions.
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ACCOUNTING RECORDS: MANUAL
SYSTEMS

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ACCOUNTING RECORDS: MANUAL
SYSTEMS

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ACCOUNTING RECORDS:
MANUAL SYSTEMS

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ACCOUNTING RECORDS: MANUAL SYSTEMS

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ACCOUNTING RECORDS: MANUAL SYSTEMS

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ACCOUNTING RECORDS: MANUAL
SYSTEMS

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 ACCOUNTING RECORDS: MANUAL SYSTEMS
Ledger is a book of accounts that reflects the financial
effects of a firm’s transactions as they are posted from the
various journals.
General ledgers contain account information in highly
summarized control accounts.
Subsidiary ledgers contain details for each 0f the individual
accounts that constitute a particular control account.
 Together the accounting records provide an audit trail for
tracing account balances contained in the financial
statements back to the source documents and events that
created them.
Important in the conduct of a financial audit.
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ACCOUNTING RECORDS: MANUAL SYSTEMS

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ACCOUNTING RECORDS:
MANUAL SYSTEMS

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ACCOUNTING RECORDS: MANUAL SYSTEMS

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ACCOUNTING RECORDS: MANUAL
SYSTEMS

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 DIGITAL ACCOUNTING RECORDS
Master file contains account data.
Transaction file is a temporary file of transaction records
used to update data in a master file.
Reference file stores data that are use as standards for
processing transactions.
Archive file contains records of past transactions retained
for future reference
Form an important part of the audit trail.
Digit record audit trails are less observable than those between
hard-copy documents, but they still exist.
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DIGITAL ACCOUNTING RECORDS

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