Chapter 2: Introduction to Transaction Processing

Summary Report

This chapter shows us an overview of transaction processing, like vital role of an

information provider for financial reporting, support of day-to-day operations, and
reporting of internal management. It also talks about the relationship among accounting
records in both manual and computer-based systems, and even presented a different
techniques of documentation that describes the key features of systems. Also it
presented us two computer-based transaction processing systems, and its operational
efficiency. Lastly, the data coding schemes and their role in transaction processing.
Ledger is a book of accounts that reflects the firm’s transactions for its
accounting period. It records financial information from Journals (The Book of First
Entry/Original Entry) as debits and credits and shows their current balances. It is also
referred to as the Book of Final Entry, because there are no more entries to be made
when closing the accounting books and is prepared from the Journal which is the book
of original entry.
A General Ledger is a book used to record, sort, and store balance sheet and
income statements transactions. Inside the general ledger, accounts are set up as
follows “Assets, Liabilities, Equity, Expenses, and Profit and Loss Summary”.
A Subsidiary Ledger is a ledger designed for storage of specific kinds of
accounting transactions. It can be set up for virtually any general ledger account.
However they are usually only created for accounts that gets high transaction volumes.
Once information has been recorded in the subsidiary ledger, it is periodically
summarized and posted to an account in the general ledger. Examples of Subsidiary
Ledgers are “Accounts Payable Ledger, Accounts Receivable Ledger, Inventory Ledger,
and Purchases Ledger”.

For Data Flow and Entity Relationship diagrams, these introduce the principal
features of these techniques, illustrate their use and shows how they are related. Data
flow diagram have symbols that show the procedures of every transaction and this
answering the question of what will be the next step of every external user. Entity
relationship diagram connecting the process of internal and external user of different
business to make their account system balance.
Flow charting manual activities is the process of showing the destination of every
transaction that fall into different departments. System flowchart describes the flows of
overall procedures of the company to easily detect the error by auditing department.
These are the old system procedures and it takes time to analyze every transactions of
the company. But now a days user are easily input the transaction in the new type of
system and system flow chart use only as guide of new entity.
We also learned about the Computer Based Accounting Systems. The batch
system processing and its opponent, the real time processing & we also have learned
two alternative data processing approach naming, the legacy and modern system. If we
are looking for an efficient way of processing high volume of data which assembles the
transactions into groups and has fewer resources required, Batch System Processing is
the answer. It has separate programs for input, process and output like the payroll
system in a company. But when we need an immediate process to get access to all the
records we need, even though it requires a lot of resources than the first one, Real Time
Processing is very timely and useful to us who uses customer service and ATMs.
Legacy systems are batch oriented, and use flat files for data storage. It is also
associated with processes that ae no longer applicable to current context so it somehow
creates confusion. While we’ve learned that a Modern system processes transaction in
real time. It is a client-server based & is widely used in the organization nowadays. It
store transactions and master files in relational database tables. A master file consists
of a Primary Key and a Secondary Key. A Primary Key is the unique set of data in a file
while a Secondary Key contains data that are similar from the other files. A destructive
update leaves no backup so backup procedures are necessary to be implement.
They had also discuss the different types of codes their importance and how they
are making this more easy and to maximize the working hours of an employee or
student. The Sequential, Block, Group, Alphabetic, Mnemonic are the codes that are
discussed.
System codes are used to represent an item in the inventory or supplier
accounts. It helps us to manage properly and identify easily the transactions from the
items that are already sold. There are different kinds of codes, first is the Sequential
Codes. Sequential Codes are pre-number source of documents. They’ve also discuss
the limitations of this code, like it doesn’t carry information, and it is hard to make some
changes, example is the sales invoice. Block Codes represents the whole classes of
items by restricting each class to a specific range. Their example is the chart of
accounts we can easily identify the accounts if they’re asset, liabilities and equity.
While the Group Codes are used to for complex items because it carries two or
more related data. An example is the sales order transaction. An advantage of this code
is that you can easily identify the store number, department number and item code. The
disadvantage is it can be overused. Alphabetic Codes may be assigned sequentially,
block and group coding techniques. Advantage is it can represent 26 variation per field.
And disadvantages are difficult to sort and rationalizing the meaning of codes. And the
last one is numeric code is an alphabetic characters in form of acronym and other
combinations. Advantage is codes doesn’t need to be memories, disadvantage is
limited liability to represent an item. Example, accounting can be acctng, engineering
can be engr.
Summary of discussion:
After the reporters had discuss their topic, reactors throw some questions at
them. First question was among the four (4) codes, what is the most helpful in terms of
business? They answered that it depends on the company & its situation, example
when a company has more sales, it will be more useful to use the alphanumeric, there’s
more combination than other codes. Second question what are the problems that may
occur in batch processing? They said that there may be a problem with regards to time
lapse. Third, what are the advantages of real data processing and they've answered
that its process is easier, due to the fact that you just do it all together, no need to sort it
or do it by batch. Fourth question, do we need to learn the transaction cycle if we’re
going to have a business? And they had answered yes, so you will know when to
spend, when to produce goods, and to know if you’re profiting. Lastly, what are the
disadvantages of computer based system and manual based system? Manual-based is
time consuming & needs more man-power, while in computer-based it costs millions,
and when you commit mistake, it will be costly.