LESSON 05

TRANSACTION
PROCESSING SYSTEMS
AND FUNCTIONAL AREA
INFORMATION
SYSTEMS
 A transaction is any business event that generates data
worthy of being captured and stored in a database. Examples of
transactions are a product manufactured, a service sold, a
person hired, and a payroll check generated. In another
example, when you are checking out of Walmart, each time the
cashier swipes an item across the bar code reader is one
transaction.
Lesson Objectives
At the end of this lesson, you will be able to:
● Describe Transaction Processing System (TPS)
● Describe Functional Area Information Systems
● Describe the advantages and disadvantages of
TPS
 In the modern business world, TPSs are inputs for the functional area information systems and
business intelligence systems, as well as business operations such as customer relationship
management, knowledge management, and e commerce. TPSs have to efficiently handle both
high volumes of data and large variations in those volumes (e.g., during periods of peak
processing). In addition, they must avoid errors and downtime, record results accurately and
securely, and maintain privacy and security.
1. When more than one person or
application program can access the
database at the same time, the database
has to be protected from errors resulting
from overlapping updates. The most
common error is losing the results of one
of the updates.
2. When processing a transaction involves more than one
computer, the database and all users must be
protected against inconsistencies arising from a failure
of any component at any time. For example, an error
that occurs at some point in an ATM withdrawal can
enable a customer to receive cash, although the
bank’s computer indicates that he or she did not.
(Conversely, a customer might not receive cash
although the bank’s computer indicates that he or she
did.)
3. It must be possible to reverse a transaction in its entirety if
it turns out to have been entered in error. It is also
necessary to reverse a transaction when a purchased item
is returned. For example, if you return a sweater that you
have purchased, the store must credit your credit card for
the amount of the purchase, refund your cash, or offer you
an in-store credit to purchase another item. In addition, the
store must update its inventory.
4. It is frequently important to preserve an audit
trail. In fact, for certain transactions an audit trail
may be legally required.
 These and similar issues explain why
organizations spend millions of dollars on
expensive mainframe computers. In today’s
business environment, firms must have the
dependability, reliability, and processing capacity
of these computers to handle their transaction
processing loads.
 Regardless of the specific data processed by a TPS, the
actual process tends to be standard, whether it occurs in a
manufacturing fi rm, a service fi rm, or a government
organization. As the first step in this procedure, people or
sensors collect data, which are entered into the computer
via any input device. Generally speaking, organizations try
to automate the TPS data entry as much as possible
because of the large volume involved, a process called
source data automation
 Next, the system processes data in one of two
basic ways: batch processing and online processing.
In batch processing, the firm collects data from
transactions as they occur, placing them in groups or
batches. The system then prepares and processes
the batches periodically (say, every night).
 In online transaction processing (OLTP), business
transactions are processed online as soon as they occur.
For example, when you pay for an item at a store, the
system records the sale by reducing the inventory on hand
by one unit, increasing sales figures for the item by one
unit, and increasing the store’s cash position by the
amount you paid. The system performs these tasks in real
time by means of online technologies.
 Functional Area Information System
Each department or functional area within an
organization has its own collection of application
programs, or information systems. Each of these
functional area information systems (FAISs) supports a
particular functional area in the organization by increasing
each area’s internal efficiency and effectiveness. FAISs
often convey information in a variety of reports. The figure
below shows information systems supporting functional
areas in an organization.