 Transaction  It is a business event for example a sale of inventory “Hall 2009”

 Discuss any five elements that one would need in transaction processing [20marks]

 Transaction processing It is information processing that is divided into individual indivisible operations called transactions. In transaction processing, there is execution of business operations consisting of one or several requests or updates to a system as discrete units of work, each of them a transaction.

 Documents  Files  Journals  Ledgers  Registers

 1) Source Documents  These are used to capture and formalise transaction data needed for transaction processing.  E.gs receipts, invoices, purchase orders and even deposit slips

2) Product Documents  These are a result of transaction processing for example payroll checks to an employee is a product document of the payroll system.

 3)Turnaround Document Product document of one system that becomes a source document for another system, for example meter-reading card.

 1) Act as evidence that a transaction has been made.  2) Can be used as an audit trail because it backs up accounting journals and ledgers

 3) They contain information which often not divulged in any other form of literature for example basic facts of transaction such as amounts to which transactions was made, purpose and date

 1) Time consuming in gathering data  2) Risk of human error for example typing 578 instead of 587.

 Cash registers can also be called tills. It is a mechanical or electronic device used for the calculation and recording of sales transaction and to it a drawer is attached for storage of cash

 It makes the use of point of sale. This form of register is mainly used in banks and retail shops

 1) It saves time in terms of decision making  2) Eliminates distance because such systems can be accessed remotely  3) Reduces embezzlement because a customer should get a receipt and in case of change the drawer will only open when the transaction is entered in the system.

 1) Identity theft through the use of Trojan horse which obtain some information like passwords remotely.  2) Any technical errors will affect the whole system.

 Generally contains accounting data values which are updated from transactions for example general ledger

 1) The file is permanent  2) The file exist across fiscal periods.  3) Changes are made to the file to reflect the effects of new transaction. In short it updates periodically.

 1) If a system crashes some of information might be lost  2) The file is updated every time a transaction is made hence there will be poor audit trails i.e every transaction has to be checked individually  3) Time consuming since it gathers data from various sources.

 These are records in which the monetary transactions of the business are posted in the form of debits and credits.  These are books to which the records of accounts are transferred as final entry from original postings.

 1) Transactions relating to a particular person, item or heading of expenditure or income are grouped in the concerned accounts at one place. As a result complete and reliable information is available.

 2) The valuable information and statistics from the ledger may be used by management for decision making and running financial data efficiently

 3) A ledger can be used as an internal control measure for example sale and purchases control accounts entries are derived from the source documents to obtain the final purchases and sales figures which can be compared with the sales and purchases obtained from sales and purchases ledger.

 4) The updating of the general ledger lessens work at month ends.

 1) Time consuming  Accounting processes that uses paper journal and ledger or similar tools require copious time to complete tasks.

 2) Subject to errors Errors can be quite frequent in manual accounting processes.  3) Lake of security  Companies may be unable to prevent employees for reviewing sensitive data paper ledgers and journals.

 4) Few copies available  Larger organisations often find manual accounting difficult due to lake of multiple ledgers.

 DEFINATION  An accounting record where all business transactions are originally entered.  It details which transaction occurred and what accounts were affected

 1) Transaction is recorded as soon as it takes place so there is no possibility of any transaction being ommitted in the books of accounts.

 2) Since the transactions are kept in journal chronologically with narration, it can be easily ascertained when and why a transaction has taken place

for each and every transaction

 Time consuming-accountants will need to locate accounts and journals in the system prior to recording entries. Checking accounts balances and reviewing information is also difficult.

 Subject to errors-common errors are capturing information into incorrect accounts, transposing figures or recording information. While these errors are also in modern accounting system, manual systems have no internal checks and balances.

 Lack of security-companies may be unable to prevent employees from reviewing sensitive data in paper journals. files copied and stored on a computer may also be less secure. This may allow employees to abuse financial information through fraud and embezzlement.