Transaction Processing Systems

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1 Chapter 5: Computer-Based Transaction Processing Transaction Processing Systems A fundamental task in any AIS is to process transactions affecting the organization Transaction processing systems(ss) involve three stages: Data entry Data and file processing Output preparation Benefits of Understanding Transaction Processing Systems Recognize limitations in currently installed Transaction Processing Systems such as: inadequate data controls inefficient processing out-of-date files stored data that cannot be accessed quickly data that is poorly classified and coded Recommend new or improved processing approaches and storage methods 1

2 Layout of Input-Process- Output Discussion Data Processing Model Input Process Output Online Offline Periodic Realtime Always Batched (Batched) (Immediate) Processing May lead to May lead to Direct Sequential Realtime Processing Batched Processing Updating Updating Sequential Updating after Online Data Entry Sequential Updating from Batched (Offline) Inputs Data Entry Most transactions are initiated by business events triggered by various agents or by instructions within a computer program Other transactions are initiated by the passage of time, e.g., interest accruals Computer-based systems employ an off-line or on-line approach to data entry Off-line Data Entry Off-line refers to input devices not directly connected to the computer. Examples are key-to-tape, key-to-disk, and OCR readers Data must be first captured on source documents and similar transactions are batched together Batched transactions are transcribed into machine-readable form using an off-line device Turnaround documents may be used as direct input into a system 2

3 On-line Data Input On-line refers to devices that are directly and continuously connected to a computer system In on-line data entry, transaction data are entered into the computer directly as they occur Characteristics of on-line data entry may include: nonexistence of source documents (telephones, face-to-face conversations) input of data using source data automation (scanners at POS terminals) origination of data by parties external to the firm (ATM machines, telephone touch-tone based transactions) capture of data at remote sites (remote job entry or remote batch processing) Input Documents Input documents typically do the following: Authorize Subsequent Transactions Trigger Desired Actions Reflect Accountability Provide Data for Output and Reference On-line Data Entry design Four factors that can reduce the tendency for errors in on-line data entry are: Menus that clearly define alternative actions Dialogue prompts that display suggestions or questions to the user Graphical user interfaces that allow a user to make selections Preformatted screens that display formats for transaction documents. These can be associated with menu options 3

4 Advantages of On-line versus Off-line Data Entry Off-line data entry offers the advantages of economy and productivity On-line data entry offers the advantages of timeliness, flexibility, and simplicity Options in Computer-Based Transaction Processing Source of Differentiation Source(s) of T ransactions Focus of T ransaction Data Input Approach Timing of Processing Mode of Processing Timing of Outputs U sers of Inform ation Main Computer Site Batches of Events O ff-line Periodic (delayed) Sequential Spooled Currency not critical Options Remote Individual Events On-line Im m ediate (real- tim e) Direct Im m ediate C urrency critical Figure 5-7 Data Processing Methods Batch data processing involves the processing of data in groups (or batches) of like transactions at periodic intervals. Used when transaction activity is low or periodic Real-time processing consists of processing each transaction as it arises and is captured 4

5 Batch Processing Method In batch processing, transaction data are stored in a transaction file until a master-file update is performed. The storing of transaction data in a transaction file may occur either through off-line or on-line entry of data Advantages of batch processing include: processing can be done in background mode processing is only performed when needed batch processing leaves a good audit trail Disadvantages: the master-file is only as current as last processing run. If transactions are batched before entry, any errors in transaction data cannot be corrected at the time of entry. They must be corrected and reentered either through a separate run or during the next processing cycle Real-time Processing Method Real-time processing involves the processing of each transaction as it arises and is captured Data from each transaction are entered via an online device and posted directly and immediately to the affected record(s) in one or more master files Real-time processing may be interactive in that it may involve direct interactions between humans and computerized systems Real-time Processing Method Advantages of real-time processing include: This method keeps the master file more current than the batch runs Errors are caught at the time of data entry Drawbacks of real-time processing include: More complex and expensive than batch systems Harder to audit Controls and backup procedures are more elaborate in order to guard against unwarranted access and human error 5

6 Document Flowcharts Flowcharts are pictorial representations of transaction processing systems that portray flows of some type A Document Flowchart emphasizes the hardcopy inputs and outputs and their flows through organizational units Auditors and accountants may use document flowcharts when analyzing a current system for weaknesses in controls and reports Common Document Flowcharting Symbols - I Punched Card Floppy Disk Keying operation Document Multiple copies of a specific document Manual Operation Connector between two points on a flowchart Journal or ledger Common Document Flowcharting Symbols - II Permanent file of documents Information flow Document flow Annotation for additional explanation Envelope Adding machine tape used for batch control 6

7 A Sample Document Flowchart Requesting Department Central Supplies Department Goods Requisition Form 12 A 1 Goods Requisition Form A File System Flowcharting Symbols Processing Manual Operation Processing Collate Auxiliary Operation Sorting Also known as off-line process System Flowcharting Symbols Storage Punched Card Punched Paper Tape Magnetic Tape Online Storage Input/Output Document Magnetic Disk Off-line Storage 7

8 Systems Flowcharting Symbols Connectors Start/Stop A Terminal Can also be an external entity On-page connector Off-page Connector Logic Flow Telecommunication Link System Flowcharting Symbols Miscellaneous - I Data Preparation Communication Link Termination Can also be an external entity System Flowcharting Symbols Miscellaneous - II Bridge for crossing flows Annotation for additional explanation Batch total - any total Goods; e.g., inventory shipment 8

9 Sequential vs. Direct Updating Sequential Updating from Batched/Online Inputs: To update a master file sequentially within a computer-based application, the processing program starts at the beginning master file record. It then reads every record in the file, changing data in each record affected by a transaction (see Figs. 5-6 and 5-7 & 5-8). Sequential Updating requires sorting of the transaction file by the master file sorting key (e.g., transactions originally sorted on transaction_no. must now be resorted by master-file customer_no.). Since all the records in a master file are read during the update, sequential updating increases the processing time significantly if only a few records are to be updated. Direct Updating: Instead of processing a batch of transactions sequentially against an entire master file, each transaction in the batch can be posted directly to the affected records. Direct Updating with batched transactions eliminates the sorting step. Direct Updating is only feasible if the master files are stored on directaccess storage. DFD Showing Batched Sequential Processing of Transactions Origination of Transactions Prepare Financial Outputs Financial Statement & other Outputs Recipients of Outputs Source Documents Batch Totals Subsidiary and General ledgers Updated Records Transaction Data (Journals) Batch Documents & Compute Totals Post Data to Accounting Records & Verify Batch Totals Batch of Documents Prepare Batch Documents for Sequential Processing Sorted Batch of Documents Figure 5-12 Enterprise Resource Planning ERP is a software with an integrated set of applications for enterprise-wide use in functional areas such as finance, accounting, human resource management, manufacturing, logistics, etc. ERP systems permit an integration of data and applications. Both financial and non-financial data can be integrated ERP systems also facilitate access to data that are within the firm but outside the ERP system Standardization of worldwide systems, consistent and accessible data, and on-line processing of data result in firm-wide data availability 9

10 File Management Issues A File is a collection of related data stored together for future use All computerized applications involving transaction processing typically employ one or more files Because of their involvement with transaction processing, and auditing of such processing, accountants need to be aware of file management issues File Access - I Sequential Access: This requires each record in a file to be scanned, beginning with the first record in the file The sequential access method is inefficient for finding individual records. However, it is very effective if a large number of records in a file need to be accessed File Access - II Direct Access: This denotes any method that involves the accessing of desired records in some way other than by an exhaustive search through all the records in a file Significant methods of Direct Access include: Indexed sequential file Randomization Binary searches Linked lists Inverted lists All Direct Access methods require direct-access storage media such as magnetic disks and the use of Pointers Pointers are data elements whose values specify or point to the physical storage addresses where associated data are stored. In contrast to the other data elements of a record, a pointer provides direction rather than content 10

11 Coding AISs depend on coding to record, store, classify and retrieve financial data. Computer systems most often use numeric codes or alphanumeric codes for processing accounting transactions. Purposes of coding: uniquely identifies transactions and accounts compresses data aids in classification process conveys special meanings Coding Systems Mnemonic Codes give visible clues concerning the objects they represent Sequence Codes are the simplest type of coding scheme that assign numbers or letters in consecutive order Block Codes assign a series of numbers within a sequence to entities or events having common features Group Codes reveal two or more dimensions or facets pertaining to an object Design Considerations in Coding Codes should serve some useful purpose Codes should be consistent Codes should be standardized throughout the organization Codes should plan for future expansion 11

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Chapter 2 Introduction to Transaction Processing

Chapter 2 Introduction to Transaction Processing TRUE/FALSE 1. Processing more transactions at a lower unit cost makes batch processing more efficient than real-time systems. T 2. The process of acquiring