Transaction Processing System

Transaction processing system (TPS) process transactions and produce reports. It represents the automation of the fundamental, routine processing used to support business operations. It processes pre defined transactions, one at a time, with direct, on-site entry of transaction into terminal and it produces predefined outputs and maintains the database.

It does not provide any information to the user for his/her decision-making. It uses the data and produces the data.

Transaction Processing System

Previously, data processing was performed on simple machine or manually. But now-a-days, it is done with the help of computers. Therefore TPS is also known as data processing system. Computer based data-processing has altered the speed and complexity of transaction processing but not the basic function. Its domain is obviously at the lowest level of management hierarchy of an organization. Transactions could be externally generated e.g. from customers, suppliers etc or internal to the organization such as make changes in addition, deletion or modification in existing data or records. The output of TPS may be in several forms.

Most business systems are transaction oriented and the goal of each business activity is to complete a transaction whether it is a sale of a product or talking an order from a customer. Because transactions are relatively easy to measure and documents are also easier to automate with computer applications.

A transaction processing cycle begins with a transaction which is recorded either by hand-written filled forms or directly to a computer. Initially when sales order form is prepared by the salesperson data is captured manually. Whereas order take at telephone enters orders at terminals. Railways reservation enters reservation information directly where as a purchase order is prepared manually and then typed for use. Transactions or data is recorded through keyboard and stored on hard disk, floppy disk or magnetic tape.

MICR input device are used to input magnetically encoded characters. Various data validation techniques such as parity bit checks are applied to remove the redundancy in data. Then valid records are processes. During transaction processing two major activities occur. First, updation of stored data related to that transaction and second, preparation of output such as transaction documents and reports.

The Main Characteristics of Transaction Processing System

  • Information can be processed on a regular basis.
  • Large amount of data can be processed.
  • Large database can be handled with high processing speed.
  • Entire data is maintained in the form of structured data.
  • Validation checks maintain the security and integrity of data.
  • User obtain accurate data.

Methods of Transaction Processing

There are two methods commonly used for processing used for processing transactions and updating master files.

  • Batch Processing
  • Online Processing

Batch Processing

When the processing of transactions is performed in form of batches. It involves collection of transactions into batches or groups which are subsequently processed at some specific time. The time of processing in predetermined and depends mainly on the operational role of the batch of transactions within the organization. The processing may be done hourly, daily, weekly, monthly etc.

Irrespective of the time intervals, the main objective is to collect transactions into a batch, input these information to the computer, process them one after other and produce results in the form of reports. One major disadvantage of batch processing is the delay in detecting and correcting errors. Remote batch processing enable the users to run their jobs from remote sites. The data is transmitted through communication links to the central computer. Transaction are processed centrally and results are transmitted back to the remote site when an output device is used to print the result.

Online Processing

Unlike batch processing, on-line processing does not require the transactions to be batched before they input to the computer. Instead, each transaction can be input to the system directly from a user terminal. Hence, online processing may be defined as a processing mode under which a user can interact with the computer at any time through I/O devices which are under the CPU’s direct control. In online environment, since the user has direct access to the computer, he/she can input the transaction, to the computer and receive back the results almost instantaneously.

For example, In a back inquiry system, clerk directly interacts with the computer and receive the answer immediately. Through online processing provide great flexibility and information efficiency, it can be quite complicated and hence require careful design procedures.

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