Mention the various components of a transaction processing systems and discuss in detail one of its components ‗computer processing‘.

A Management Information System ICT Revision Questions and Answers

The principal components of a transaction processing system include inputs, processing, storage, and outputs. These components or elements are part of both manual and computerized systems.
Processing: Processing involves the use of journals and registers to provide a permanent and chronological record of inputs. The entries are done either by hand in simple manual systems (journalized) or by a data entry operator using a PC. Journals are used to record financial accounting transacts, and registers are used to record other types of data not directly related to accounting.

Journals are used to provide a chronological record of financial transactions. It is, theoretically possible, but not often practicable, to use the two column general ledger as the only book of original entry. However, to effect a division and saving of labour, special journals with special analysis columns are used to record similar and recurring transactions. Some of the more common special journals that may be kept are as follows:
 Sales Journal used to summarize sales made on account
 Purchase Journal used to summarize purchase made on account
 Cash Receipts Journal used to summarize receipt of cash
 Cash Disbursements Journal used to summarize disbursements of cash

These four journals are often used in conjunction with a separate general ledger to provide a complete bookkeeping system. Special columns can be used in these books of original entry to facilitate recording transactions or for classification of data.
The design of special-purposes journals is one of the most important steps in the design of an accounting system. Journals must be carefully designed if they are truly to economize clerical effort and at the same time function as true posting media in routing debits and credits to the ledger. Properly designed journals eliminate numerous postings and at the same time enable one to obtain quickly the total for all major transactions.
Computer Processing: When computers are used for processing, two different modes of processing accounting transactions are possible. These modes are batch processing and direct processing. Batch processing is conceptually very similar to a traditional manual accounting system. Batches of transactions are accumulated as transaction file. Transaction files are printed to provide documentation of inputs to the accounting system. Transaction files are subsequently posted to ledgers by computer programs. The ledgers are then periodically processed to generate financial statements. The flow of processing in a batch processing computer system is essentially same as in a traditional manual system – source documents to journals (transaction files), journal to ledgers, and ledgers to financial statements.
Processing converts data into information. Management is more interested in summary data such as total sales and total account balance than in the details of a particular sales transaction. Management thus has a permanent interest in the information that is contained in the accounts receivable master file. In contrast, management‘s interest in transaction files is temporary. Once the data have been processed to update master files, they are no longer of direct interest to management. Transaction files must be saved, of course, to maintain an audit trail.
A reference or table file contains data that are necessary to support data processing. Common examples of reference files used in data processing are payroll tax tables and master price lists.

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