TRANSACTION PROCESSING SYSTEMS

The transaction processing system (TPS) was the earliest form of computerized
management information system. Originally, business transactions were processed manually.
This was partly replaced by machine-assisted data processing systems. Gradually, electronic
data processing was introduced to record business transactions. TPS is today an integral part of
computer-based information systems. It is very difficult to imagine an organization without a
functional TPS. For example, if an airline reservation system breaks down for a day or two, it
will cripple the company and the flights will be in disarray causing untold miseries to customers.
In a business firm, there are two types of flows in and out of the firm. The first is a
physical flow. It is the flow of inputs through various processes within the firm and the output of
products and services out of the firm. The second is information flow. Information system
tracks the physical flow. The physical flow of input and output is measured and recorded. These
records are the sources of data for information corresponding to the physical flow.

The operations management takes care of the physical flow of resources and the
transaction processing system takes care of the information flow. The transaction processing
system processes all transactions and records them. This results in generation of transaction data
which are structured and stored in databases. Apart from recording routine transactions, TPS
also updates master files and databases.