B107 Principles of Information Systems
TOPIC 7
ORGANISATIONAL INFORMATION SYSTEMS AND TRANSACTION
PROCESSING SYSTEMS
Objectives:
 To describe what is meant by a business transaction and by transaction
processing.
 To understand the 3 roles of computerised TPSs:
 They handle recording, calculation and reporting tasks that are part of the
transaction.
 They record data and produce information needed from the TPS for
operations-level decision making.
 The data and information produced from the TPS can provide the data
required for higher-level ISs.
 To look at why TPSs are very suitable for computerisation and the value that
computerisation provides.
 To outline the transaction processing cycle.
Readings:
 Stair & Reynolds (1999) Principles of Information Systems, Chpt 8
 Beekman et al. (1999) Chpt 12 (not in unit reader)
 Ahituv Chpt 5 (from previous topic) p134-138,
Introduction
Ahituv (Chpt 5 pp134-135) identifies 3 categories of IS:
 TPS - supports the activities of the operations level
 SDS - supports decisions of the operational and management control levels
(often referred to as MIS)
 DSS - supports decisions of the management control and strategic planning
level
But acknowledges that the distinctions between them aren't always clear.
This topic mainly examines TPSs.
The TPS is at the base of the three categories because it provides the data for the
other three.
B107 Principles of Information Systems
1
What is Transaction Processing?
Business transactions are events that occur as part of doing business, for example,
sales, purchases, deposits/withdrawals, refunds, payments.
A transaction involves a series of tasks that need to be done to carry out the
transaction.
These may involve physical processes.
Transactions also often include recording and calculation processes (e.g. payroll
system).
One system may include a number of transactions. In the payroll system, in
addition to calculating the pay, it is necessary to report pay amounts to the Tax
Department and print group certificates. All these use the records of the pays.
Records needed for one transaction may also be needed for another.
Includes transactions on WWW.
Example
Identify 4 business transactions that YOU have made this year.
Example
Write down the sequence of steps that form the transaction that occurs when a
shop assistant using an old fashioned cash register collects money from a
customer
B107 Principles of Information Systems
2
Information from transactions
Businesses also need information about their transactions for decision making.
This provides:
 A record of the transaction for auditing.
 A record of each transaction in case somebody questions them.
 Data for higher level ISs
Data from the TPS is very useful:
 It is the basis of the business's predictions for the future.
 It allows the business to set a budget.
 It allows the business to work out what resources it will need to continue doing
business.
 It provides a comparison between now and the past in order to see whether the
business is doing better or worse than previously.
=> A TPS does two tasks
 The processing to carry out the transaction.
 Keeping a record of the transaction for information purposes.
Manual and computerised TPSs
Transaction processing can be done manually or supported by computer.
Transaction processing predates computerised TPSs. It is part of doing business.
In either implementation, the same basic processes are carried out.
Computerisation is made easier because the processes don’t tend to change
much.
TPSs usually operate within a single functional area of a business - e.g. the Payroll
Department.
TPS cover a broad range of business functions. But there is a preponderance of
accounting type systems, since handling money is the most basic transaction and
the one that must be most carefully recorded.
Many of these TPS(s) are interconnected (eg see Stair & Reynolds p 340)
B107 Principles of Information Systems
3
Example
Write down the sequence of steps that form the transaction that occurs when a
shop assistant using a computerised POS TPS collects money from a customer.
Computerised TPSs
TPSs were the earliest business systems to be computerised (as early as the
1950s). Early TPSs ran on large mainframe computers and are today’s ‘legacy
systems’.
Originally data were stored in flat files and processed with COBOL programs. With
the advent of DBMSs in the 1960s, these became popular for TPSs.
Basically TPSs are very suitable for computerisation. This is because a transaction
is very precise, regular, repetitive, unchanging, well understood.
There is nothing unpredictable and few decisions to be made. These decisions
can be built into the code (computer program).
TPSs involve simple, well understood, calculations. Frequently the same data must
be repeatedly entered and calculated (e.g. payroll system).
B107 Principles of Information Systems
4
The advantages of computerisation
Transaction processing is fairly boring and repetitive work when it is done
manually.
Computerising TPSs speeds up both the task of carrying out the transaction and
the task of recording the data and processing it into information. It therefore,
increases productivity and lowers business costs.
Information on the transactions is extracted faster, which results in better service to
customers and more timely information for decision making.
Automation removes duplication of effort. Data is only entered once and used in
different ways. And is also available for information processing.
A good computerised TPS can give a company an edge over its competitors by
reducing its costs, improving its service to customers and providing reliable timely
information on which to make decisions.
The characteristics of a computerised TPS
In order to be useful, a good TPS must conform to certain characteristics:
 A good TPS is fast

The data have been extensively checked within the system and are accurate.

The system is reliable - includes:
 well maintained hardware
 well designed and well tested software

The system is fail safe, with well planned and tested Disaster Recovery plans.
In the event of failure, the operation can be quickly resumed.

Backups are made.

The system outputs the right information to:
 Process the transaction.
 Provide information for audit purposes and operational level decision
making.
 Make data and information available to other organisational ISs.
The transaction processing cycle
The basic processes of an IS covered in Topic 5 all occur in the transaction
processing cycle - i.e.:
1. Data capture and transcription
2. Data vetting
3. Storage and Retrieval
4. Data transformation
5. Information output
B107 Principles of Information Systems
5
1. Data capture and transcription

Capture the data – directly eg POS or from a document

Transcribe data into a computer readable format.
2. Data vetting

Verify the data ie ensure accuracy, completeness, authenticity of documents/on
line transactions
 Checks and controls need to be built into the system. Where possible these
should be automated.
 Manual checks will also be done and staff should be trained to automatically
check the data and information for anomalies.
3. Storage and Retrieval

The format in which the data are stored must be addressed, since this can
influence whether data integration is possible within the organisation. This is
particularly important where a TPS is to provide data for higher level systems.

Update data to ensure that it is always current.
4. Data transformation

The data must be processed into information. Often this involves updating
master files.
5. Information output

Output the information. This may be reports, responses to inquiries or action
documents - eg:
 Detail reports of batches of transactions, used to check for accuracy and for
audit.
 Display individual records on screen.
 Simple summary data for operational level management decision making.
 Documents needed by the transaction (eg payslip)
 A query facility may be included.
B107 Principles of Information Systems
6
Example
Describe the major elements of a TPS that could be used to book PCs in the
Murdoch University computer labs
Batch or on-line processing
In the past data was often processed by using batch processing. Today most
systems are on-line though some eg bank cheque processing, payroll are mainly
still run in batch mode.
On-line processing has the advantage that the data are always up to date and
immediately available.
Computers today have the power for on-line processing and network lines allow
more ‘traffic’.
However, there are cost advantages to batch processing because the processing
can be occur when there are slack resources on the computer and network lines.
Processing batches of records at one time also means that extra accuracy checks
can be made that are not possible when records are being processed one at a
time.
B107 Principles of Information Systems
7