Chapter 2 Introduction to Transaction Processing

Learning Objectives

After studying this chapter, you should:

■ Understand the broad objectives of transaction cycles.

■ Recognize the types of transactions processed by each of the three transaction cycles.

■ Know the basic accounting records used in transaction processing systems.

■ Understand the relationship between traditional accounting records and their magnetic equivalents in
computer-based systems.

■ Be familiar with the documentation techniques used for representing manual and computer-based
systems.

■ Understand the differences between batch and real-time processing and the impact of these
technologies on transaction processing.

■ Be familiar with data coding schemes used in accounting information systems.

TRANSACTION CYCLES

- Three transaction cycles process most of the firm’s economic activity: the expenditure cycle, the
conversion cycle, and the revenue cycle. These cycles exist in all types of businesses—both
profit-seeking and not-for-profit types. For instance, every business (1) incurs expenditures in
exchange for resources (expenditure cycle), (2) provides value added through its products or
services (conversion cycle), and (3) receives revenue from outside sources (revenue cycle).
Figure 2-1 shows the relationship of these cycles and the resource flows between them.