Tuesday, 6 December 2011

Transaction Processing System

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Transaction Processing System (TPS)

It is a system which performs collection, maintenance and updating of business data, the fundamentals business events that effects the organization.

for example selling an item, take an order, hiring an employee, keeping the books these are called transactions.

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Companies record these transactions mainly for four reasons

·  To provide information needed by employees to transact business and to perform their job function.

·  To collect information that managers need to make informed decisions.


To provide information for customers, suppliers, business partners and other who participate in the transactions.

To create records called audit trails that auditor use to verify corporate information reported by the company.

Examples of TPS


Order-Entry Systems

Distribution And Logistics System

Purchasing/Receiving Systems

Point-Of-Sale System

A point-of-sale transaction starts with the customer bringing items to a cash register and ends with the TPS updating the company’s inventory.

Distribution And Logistics Systems

This systems move, store and track inventory as well as ship finished goods

Reservation System

This system is a special type of order-entry system used by the airlines, hotels, car rentals agencies and other companies that sell , rent, or allocate space or services.

Transaction processing systems capture and transcribe data. They perform these functions using either batch or real-time processing.

Capturing And Transcribing Data

Companies can capture data in either paper or electronic form. Data captured on paper must be processed manually or converted into electronic form to be processed by computer.

Paper Data

Pre-designed forms, called source documents, capture transactions on paper and provide a secure, hard copy record of transactions. Examples of source documents include purchase orders, sales receipts, invoices and check registers.Even companies that have computer-based TPS use source documents to record transactions with information that cannot easily be keyed into system, such as a customer signature. Companies are eliminating paper source documents and using electronic versions instead.


It requires a computer or a computer terminal at each location that a transaction may occur. The number of terminals used and the computer hardware and software to support their use can be expensive.

At failure of the computer company can suffer significant problems to records its transactions regardless of having paper back, the whole business will slow down and would receive customer complaints.

Transcribing from Paper into Electronic Form

In this system data is converted from hard copy to the computers. Data entry clerk can either key or scan in data. Using source documents rather than entering transactions data directly in to the computer can saves money for installing computers and terminals to enter the data. The disadvantage of this system is this will generate human errors, duplicates works and increases the time.

But now a days companies are adopting more on direct entry of data by the employees who have entered the data for ex a customer entering the data by itself in the web-based ordering system.


Companies use two different methods to process transaction data

Batch processing it stores electronic records or transcribed paper records in a stand-alone computer file that other parts of the company’s information system cannot use or asses. At night , the computer processes the entire batch of records, thereby updating the company’s information system.

Real-time processing it handles data on entry , immediate updating the information system and making the data available to all uses.

Ensuring Effective Transaction Processing System

Developing And Updating Transaction Processing Systems

The reliability of the TPS’s is an important issue because a TPS contains hundreds lines of coding and even a small change in one line of a TPS program can produce errors and remain undetected for several weeks and when they occur they will cause savior damage. The TPS should be a system that would pass to generations for successive support staff, with a little possibility of change. To ensure this developers go through different environment.

Developing And Updating Transaction Processing Systems

Development Environment It contains in process copies of TPS software and data for software developers to use in checking and improving their new programs and then move to testing environment.

Developing And Updating Transaction Processing Systems

Testing Environment It contains a copy of all the transaction data that user test for performance, when the users believe they are satisfied with it then it passes to the production environment.

Judith R. Gordon, Steven R.Gordon (1)

Information Systems A Management Approach Second Edition.

Turban, E., McLean, E., Wetherbe, J., (00), Information Technology for Management rd, Wiley

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