Discuss the characteristics and steps of transaction processing systems.
Answer: A transaction processing system is an information system that records company transactions (a transaction is defined as an exchange between two or more business entities). A transaction processing system meets the needs of operational managers; the output of the TPS becomes the input to an MIS.
Characteristics of Transactions Processing Systems
- A TPS records internal and external transactions for a company. It is repository of data that is frequently accessed by other systems.
- A TPS performs routine, repetitive tasks. It is mostly used by lower-level managers to make operational decisions.
- Transactions can be recorded in batch mode or online. In batch mode, the files are updated periodically; in online mode, each transaction is recorded as it occurs.
- There are six steps in processing a transaction. They are data entry, data validation, data processing, and revalidation, storage, output generation, and query support.
Steps in Processing a Transaction
There are six steps in processing a transaction are;
- Data entry: To be processed, transaction data must first be entered into the system. There are a number of input devices for entering data, including the keyboard and the mouse. For example, when a customer returns an item at a store, the sales receipt becomes the source document for the transaction “return item for refund”. An ATM receipt for a bank transaction becomes the source document for balancing a checkbook.
- Source document: The documents that is generated at the source where the transaction occurs. A sales receipt is an example of a source document.
- Data validation: Data validation is an essential step in transaction processing. It ensures the accuracy and reliability of data by comparing actual data with predetermined standards or known results. There are two steps in validation;
- Error detection: Error detection is performed by one set of control mechanisms.
- Error correction: Error correction is performed by another.
- 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 transactions;
- Online transaction processing (OLTP): Online transaction processing is the almost instantaneous processing of data. The term online means that the data input device is directly linked to the TPS and therefore the data are processed as soon as it is entered into the system. The input device may be at a remote location and be linked to the system by networks or by telecommunications systems. So data are processed as they are created; since there is no time lag between data creation and data processing, the information in an online system is always current.
- Batch processing: In batch processing, transactions are accumulated over time and processed periodically. Batch processing may be done on a daily, weekly, or monthly basis, or any other time period appropriate to the given application. For example, a company may process the travel expenses of its employees on a monthly basis, whereas sales may be processed at the end of each day.
Transaction file: Transaction file is a file that contains information about transactions that are processed as a batch and that occurred in a given period of time.
Master file: Master file is a permanent record of all transactions that have occurred in a company.
- Storage: Processed data must be carefully and properly stored for future use. Data storage is a critical consideration for many organizations because the value and usefulness of data diminish if data are not properly stored. The kind of processing and the type of storage medium are, to some extent, related issues. For example, magnetic tape is often used to store data that is batch-processed. However, online transaction processing cannot be done on magnetic tape; it relies on other types of storages media, such as magnetic disks.
- 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 additional information or to present the same information in a different format. Some examples of documents are invoices, paychecks, purchase invoices, sales receipts, and job orders. A report, on the other hand, may summarize all the invoices from a given supplier. (Nevertheless, these terms are often used interchangeably.)
- Forms; screens or panels: Computer output need not always be presented in hard-copy form (such as reports, documents, and printouts), but can also appear on computer screens and panels. Such soft-copy presentations are known as forms.
- Query support: The last step in processing a transaction is querying (asking question of) the system. Query facilities allow users to access data and information that may otherwise not be readily available. For example, a sales manager may query the system for the number of damaged items in a given store.