Chapter 2: Introduction to Transaction Processing Discussion Notes

●​ Overview of Transaction Processing​

○​ The Transaction Processing System (TPS) processes financial transactions

and serves as a vital information provider for financial reporting, internal
management reporting, and supporting day-to-day operations.
○​ Financial Transaction (Technical Term Definition): An economic event that
changes a company's assets (what it owns) and ownership stakes (equity), is
recorded in its accounts, and can be measured in money. Examples include
selling goods, buying inventory, paying bills, or receiving cash from
customers.
○​ To efficiently handle the large volume of similar financial transactions,
businesses group them into transaction cycles.
○​ Figure 2-1: Relationship Between Transaction Cycles
■​ Explanation: This diagram illustrates how the three main transaction
cycles – Expenditure Cycle, Conversion Cycle, and Revenue
Cycle – interact within a business and how resources flow between
them. It shows how cash, materials, labor, and finished goods move
within the company and to/from customers.
○​ The Expenditure Cycle:
■​ Begins with acquiring materials, property, and labor in exchange for
cash.
■​ It has two main components: a physical component (acquiring
goods/services) and a financial component (cash disbursement).
■​ Major Subsystems:
■​ Purchases/Accounts Payable (AP) System: Recognises the
need for inventory, places an order with a vendor, records the
receipt of goods by increasing inventory, and creates a
payable.
■​ Cash Disbursements System: Authorises and disburses
payments to vendors, recording a reduction in cash and
accounts payable.
■​ Payroll System: Collects labor usage data, computes payroll,
and disburses paychecks.
■​ Fixed Asset System: Processes transactions for acquiring,
maintaining, and disposing of long-term assets like land,
buildings, and machinery.
○​ The Conversion Cycle:
■​ Composed of two major subsystems: the production system and the
cost accounting system.
■​ Production System: Involves planning, scheduling, and controlling
the physical product through manufacturing, including raw material
requirements and directing work-in-process.
 ■​ Cost Accounting System: Monitors the flow of cost information
related to production, used for inventory valuation, budgeting, cost
control, and management decisions (e.g., make-or-buy).
■​ While formal in manufacturing, service and retailing firms also engage
in conversion activities to ready products/services for market, but often
without formal subsystems.
○​ The Revenue Cycle:
■​ Firms sell finished goods to customers, involving cash sales, credit
sales, and receiving cash from credit sales.
■​ Like the expenditure cycle, it has physical and financial
components processed separately.
■​ Primary Subsystems:
■​ Sales Order Processing: Handles tasks like preparing sales
orders, granting credit, shipping products, billing customers,
and recording the transaction.
■​ Cash Receipts: Collects cash, deposits it in the bank, and
records these events.
●​ Accounting Records (Manual Systems)​

○​ Documents: Provide evidence of economic events and can initiate or result

from transaction processing.
■​ Source Documents: Documents created at the beginning of a
transaction, used to capture and formalise data (e.g., a sales order
formalising a customer order).
■​ Figure 2-2: Creation of a Source Document
■​ Explanation: This flowchart shows how a Customer's
Order (an economic event) triggers a clerk in the Sales
System to prepare a multi-part Sales Order, which
then becomes the Source Document for further
processing.
■​ Product Documents: Documents that are the result of transaction
processing (e.g., a payroll check, a customer bill).
■​ Figure 2-3: A Product Document
■​ Explanation: Extending the previous example, this
diagram shows how the initial Customer's Order and
the generated Sales Order (source document)
eventually lead to the creation of a Bill (product
document) for the customer after processing.
■​ Turnaround Documents (Technical Term Definition): Documents
that start as product documents from one system but then become
source documents for another system. They contain important
information to facilitate processing (e.g., a remittance advice portion of
a bill returned with payment).
■​ Figure 2-4: A Turnaround Document
■​ Explanation: This visual shows a Bill (product
document from the Sales System) being sent to a
customer. The customer then tears off the Remittance
Advice (a part of the bill) and returns it with a Check,
 making the remittance advice a Turnaround
Document that serves as input for the Cash Receipts
System.
○​ Journals (Technical Term Definition): Records of chronological entries of
transactions. Documents are the primary data source for journals.
■​ Figure 2-5: Sales Order Recorded in Sales Journal
■​ Explanation: This simple diagram illustrates the sequence: an
Economic Event (like a customer order) is captured in a
Sales Order (document), which is then used to Record Event
in the Sales Journal (a journal).
■​ Special Journals: Used for high-volume, specific classes of
transactions (e.g., sales journal, cash receipts journal, purchases
journal, payroll journal). They are more efficient than a general journal
for these types of transactions.
■​ Figure 2-6: Sales Journal
■​ Explanation: This table is an example of a Sales
Journal, showing columns for Date, Invoice Number,
Customer Account Number, and separate Debit
(Accounts Receivable) and Credit (Sales) columns. It
allows specific sales transactions to be recorded
efficiently, with column totals posted to ledgers
periodically.
■​ Register: A term often used for certain special journals (e.g., payroll
register) or logs (e.g., receiving register, shipping register).
■​ General Journals: Used for non-recurring, infrequent, and dissimilar
transactions (e.g., depreciation entries, closing entries).
■​ Figure 2-7: General Journal
■​ Explanation: This table shows a page from a General
Journal, with nonspecific columns for Date,
Description, Post. Ref., Debit, and Credit, allowing
various types of transactions to be recorded
chronologically.
■​ Journal Voucher System: Often replaces the general journal, using
special source documents (journal vouchers) for single journal entries.
○​ Ledgers (Technical Term Definition): Books of accounts that reflect the
financial effects of transactions after they are posted from journals, showing
activity by account type (increases, decreases, current balance).
■​ Figure 2-8: Flow of Information from the Economic Event to the
General Ledger
■​ Explanation: This flowchart shows the overall flow: a
Customer's Order leads to a Sales Order, which is recorded
in the Sales Journal, then posted to the Accounts
Receivable Subsidiary Ledger, and finally summarised and
posted to the General Ledger. It also indicates periodic
reconciliation.
■​ General Ledgers (GL): Contain highly summarised control accounts
for the firm's accounts. Used for financial reporting.
■​ Figure 2-9: General Ledger
 ■​ Explanation: This table displays examples of General
Ledger accounts (Cash, Accounts Receivable,
Accounts Payable, Purchases) with columns for Date,
Item, Post. Ref., Debit, Credit, and Balance. It shows
the summarized activity and balances for each account.
■​ Subsidiary Ledgers: Contain detailed information for individual
accounts that make up a general ledger control account (e.g.,
individual customer accounts in Accounts Receivable subsidiary
ledger). Provides better control and support of operations.
■​ Figure 2-10: Relationship Between the Subsidiary Ledger
and the General Ledger
■​ Explanation: This diagram visually represents how the
detailed individual balances in a Subsidiary Ledger
(e.g., for Accounts Receivable, showing customer
names and their balances) sum up to equal the single
control account balance in the General Ledger. This
relationship is crucial for verifying accounting data
accuracy.
○​ The Audit Trail (Technical Term Definition): The sequence of documents
and records (both physical and digital) that allows a financial transaction to be
traced from its origin (source document) through all processing steps to its
final entry in the financial statements, and vice versa.
■​ It is crucial for year-end audits, allowing auditors to verify the validity,
accuracy, and completeness of selected accounts and transactions.
The confirmation process (contacting customers to verify balances)
is part of this.
●​ Computer-Based Systems (Files)​

○​ Audit trails in computer-based systems are less visible but still exist.
○​ Accounting records are represented by four types of magnetic files:
■​ Master File (Technical Term Definition): Generally contains account
data. Similar to a ledger in a manual system, it stores permanent data
that is updated by transactions (e.g., General Ledger and Subsidiary
Ledger files).
■​ Transaction File (Technical Term Definition): A temporary file of
transaction records used to change or update data in a master file
(e.g., sales orders, inventory receipts, cash receipts).
■​ Reference File (Technical Term Definition): Stores data used as
standards for processing transactions (e.g., tax tables for payroll, price
lists for invoices, customer credit files).
■​ Archive File (Technical Term Definition): Contains records of past
transactions retained for future reference, forming an important part of
the audit trail (e.g., journals, prior-period payroll).
○​ Figure 2-11: Accounting Records in a Computer-Based System
■​ Explanation: This diagram shows how different computer files
(Master Files, Transaction Files, Reference Files, Archive Files)
interact to create a Digital Audit Trail. It illustrates the flow from a
Source Document to a Transaction File, updating Master Files (AR
 Subsidiary, Inventory Subsidiary, General Ledger Control Accounts),
with valid transactions added to an Archive File (Journal). Errors are
captured in an Error File. This demonstrates how auditors can trace
transactions through the system.
○​ Complex Topic: Digital Audit Trail Explained:
■​ In a computer system, the audit trail is digital. For example, a sales
transaction might start as a manual sales order (source document)
which is then keyed into the system, creating a digital transaction
file. This file is used to update digital master files (like customer
accounts receivable and inventory). Valid transactions are also copied
to an archive file, which acts like a digital journal. An auditor can
trace a balance on the financial statement back to the general ledger,
then to subsidiary ledgers, then to the archive file (journal), and finally
back to the original source document, similar to a manual system.
●​ Documentation Techniques​

○​ Visual documentation is essential for understanding and documenting

systems for designers and auditors.
○​ Five basic techniques: Data Flow Diagrams (DFDs), Entity Relationship
Diagrams (ER Diagrams), System Flowcharts, Program Flowcharts, and
Record Layout Diagrams.
○​ Data Flow Diagrams (DFDs) (Technical Term Definition): Use symbols to
represent the logical elements of a system: entities, processes, data flows,
and data stores. They show what logical tasks are being done, not how or
who performs them.
■​ Figure 2-12: Data Flow Diagram Symbol Set
■​ Explanation: This table defines the standard symbols used in
DFDs: an oval for an external entity (source/destination of
data), a rectangle with rounded corners for a process (data
transformation), a rectangle open on one side for a data
store (accounting records), and arrows for data flows
(direction of data movement).
■​ Figure 2-13: Data Flow Diagram of Sales Order Processing
System
■​ Explanation: This DFD provides a logical view of a sales order
system, showing processes like Receive Order, Check
Credit, Ship Goods, Bill Customer, and how data flows (e.g.,
Sales Order, Approved Sales Order) between these
processes, external entities (Customer, Carrier), and data
stores (e.g., Credit Records, AR Records). It focuses on data
movement and transformation.
○​ Entity Relationship (ER) Diagrams (Technical Term Definition):
Documentation technique used to represent the relationships between entities
(resources, events, agents) in a system.
■​ Figure 2-14: Entity Relationship Diagram Symbols
■​ Explanation: This diagram shows the symbols for ER
diagrams: a rectangle represents an Entity (e.g.,
Salesperson, Customer), and a labeled line connecting two
 entities describes their relationship (e.g., "Assigned,"
"Places," "Supply").
■​ Complex Topic: Cardinality Simplified:
■​ Cardinality (Technical Term Definition): In ER diagrams, it
defines the numerical relationship between occurrences of one
entity and occurrences of another. It tells you how many of one
thing can be related to how many of another.
■​ One-to-one (1:1): Each salesperson is assigned only one
company car, and each car is assigned to only one
salesperson.
■​ One-to-many (1:M): One customer can place many sales
orders, but each sales order is placed by only one customer.
■​ Many-to-many (M:M): One vendor can supply many inventory
items, and one inventory item can be supplied by many
vendors.
■​ Cardinality reflects business rules and policies.
■​ Figure 2-15: Data Model
■​ Explanation: This diagram, an ER diagram, shows the
relationships between entities like Customer AR Record, Sales
Order, Credit Record, and Shipping Log. It uses cardinality
(1:1, 1:M, M:M) to define how these entities relate to each
other in a database, serving as a blueprint for the physical
database structure.
■​ ER diagrams model the data, while DFDs model the processes; they
are related through data stores/entities.
○​ System Flowcharts (Technical Term Definition): Graphical representations
of the physical relationships among key elements of a system, including
departments, manual activities, computer programs, and various types of
records/files. They show how tasks are done and who performs them.
■​ Figure 2-16: Flowchart Showing Areas of Activity
■​ Explanation: This basic template shows how a system
flowchart is structured with vertical columns, each representing
a distinct physical area of activity or department within an
organization (e.g., Sales Department, Credit Department,
Warehouse, Shipping Department). This helps in visually
depicting the physical flow of documents and responsibilities.
■​ Figure 2-17: Symbol Set for Representing Manual Procedures
■​ Explanation: This table illustrates symbols used for manual
processes: an oval for a terminal (source/destination), a
document symbol for hard-copy reports, a bucket-shaped
symbol for manual operations, an upside-down triangle for
physical files, a parallelogram for accounting records
(journals/ledgers), and arrows for document flowlines.
■​ Figure 2-18, 2-19, 2-20: Flowchart Construction for Manual Sales
Order Processing System
■​ Explanation: These figures progressively build a system
flowchart for a manual sales order process. They demonstrate
how written facts about a system (e.g., a clerk receiving an
 order, checking credit, shipping goods) are translated into
visual symbols within departmental columns, showing the
detailed physical flow of documents, filing, and manual
operations, including the use of an on-page connector (A) to
reduce clutter.
■​ Batch (Technical Term Definition): A group of similar transactions
(e.g., sales orders) accumulated over time and then processed
together.
■​ Complex Topic: Batch Processing Simplified:
■​ Batch Processing: Instead of handling each
transaction as it happens, a company collects a group
of similar transactions (a "batch") over a period (e.g., a
day) and processes them all at once. This is like waiting
to do all your laundry at the end of the week instead of
washing each item individually as you wear it.
■​ Advantages: It's efficient for large volumes of
transactions because it processes them as a single
unit, reducing costs. It also helps with control by
allowing batch totals (like total sales value) to be
checked at different points to detect missing or lost
transactions.
■​ Disadvantages: There's a time lag between when an
event occurs and when it's recorded. Finding errors in
very large batches can be difficult.
■​ Figure 2-21: Symbol Set for Representing Computer Processes
■​ Explanation: This table provides symbols for computer-based
processes: a document symbol (for hard copy), a rectangle
for a computer process (program run), a cylinder for direct
access storage (disk), a tape reel for magnetic tape
(sequential storage), a trapezoid for terminal input/output, and
a display screen for video output.
■​ Figure 2-22, 2-23: Flowchart Construction for Computerised Sales
Order Processing System
■​ Explanation: These figures illustrate building a system
flowchart for a sales order system that combines manual and
computer operations. They show how customer orders are
entered via a terminal in the Sales Department, processed by
computer programs in Computer Operations (editing, credit
checking, updating AR and Inventory files), and then printed as
hard-copy sales orders. The diagrams highlight the physical
separation of departments and the flow of both physical
documents and digital data.
○​ Program Flowcharts (Technical Term Definition): Provide operational
details about the logic of a computer program, showing each step of the
program’s logic and the order of execution. Auditors use them to verify
program correctness.
■​ Figure 2-24: Program Flowchart Symbols
 ■​ Explanation: This table defines symbols used in program
flowcharts: an oval for start/end, a parallelogram for
input/output, a rectangle for a logical process, a diamond for
a decision, and arrows for the flow of logic.
■​ Figure 2-25: Program Flowchart for Edit Program
■​ Explanation: This flowchart depicts the logical steps of an
Edit Program. It shows how the program reads records,
checks for the End-Of-File (EOF), performs a series of
decision tests for errors, marks or writes bad records to an
Error File, and writes good records to an Edited File, looping
until all records are processed.
○​ Record Layout Diagrams (Technical Term Definition): Used to reveal the
internal structure of records within a file or database table, showing the name,
data type, and length of each attribute (field).
■​ Figure 2-27: Record Layout Diagram for Customer File
■​ Explanation: This diagram shows the structure of a Customer
File record, listing individual data attributes such as Customer
Number (the Key), Customer Name, Street Address, City,
State, Zip Code, Credit Limit, and Last Payment Date. It
illustrates how data is organised within a single record.
●​ Computer-Based Accounting Systems (Processing Models)​

○​ Computer-based accounting systems are broadly classified as batch

systems and real-time systems.
○​ Complex Topic: Batch vs. Real-Time Systems Simplified:
■​ Batch Systems (Technical Term Definition): Collect transactions
into groups (batches) and process them together at a later time. This
creates a time lag between when an event occurs and when it's
recorded. Think of a weekly payroll run – all employee hours for the
week are collected and processed together at the end of the week.
They generally require fewer resources.
■​ Real-Time Systems (Technical Term Definition): Process
transactions individually and immediately as they occur, with no time
lag. An airline reservation system is a classic example, where each
booking is processed instantly. They typically require more resources
(e.g., dedicated capacity, complex programming for user interfaces).
○​ Table 2-1: Characteristic Differences Between Batch and Real-Time
Processing
■​ Explanation: This table summarises the key differences between
batch and real-time processing, focusing on Information Time Frame
(lag vs. immediate processing), Resources (fewer vs. more hardware,
programming, training), and Operational Efficiency (processing
some records after the event to avoid delays vs. immediate
processing of all records).
○​ Efficiency Versus Effectiveness: System designers must balance efficiency
(cost savings) and effectiveness (timeliness and usefulness of information).
When immediate information is critical, real-time is chosen; otherwise, batch
processing might be more efficient.
○​ Legacy Systems (Technical Term Definition): Older computer systems,
often mainframe-based and batch-oriented, typically using flat files or
hierarchical/network databases, which hinder data integration.
○​ Modern Systems: Tend to be client-server based, processing transactions in
real time, and storing data in relational database tables to facilitate integration
and data sharing.
○​ Updating Master Files from Transactions: Involves changing variable fields
in a master file to reflect a transaction.
■​ Figure 2-28: Record Structures for Sales, Inventory, and
Accounts Receivable Files
■​ Explanation: This diagram shows the structure of three linked
files: AR Master File, Inventory Master File, and Sales
Orders Transaction File. It identifies Primary Keys (PK)
(unique identifiers like Account Number, Inventory Number,
Sales Order Number) and Secondary Keys (SK) (non-unique
identifiers used for linking, like Account Number and Inventory
Number in the Sales Orders file). This illustrates how
transaction data is structured to update master files.
○​ Database Backup Procedures:
■​ Destructive Update (Technical Term Definition): A method where
an existing record in a master file is permanently overwritten with the
new, updated value, destroying the original value.
■​ Figure 2-29: Destructive Update Approach
■​ Explanation: This diagram shows how a master record
(e.g., AR Master File with Current Balance = $100) is
updated by a transaction (Sale = $50). The Update
Program reads both, calculates the new balance
($150), and writes the new value back to the same
disk location, replacing the old value. The original
$100 is lost.
■​ Because destructive update leaves no backup, separate backup
procedures are essential. This often involves copying the master file
before an update or periodically.
■​ Figure 2-30: Backup and Recovery Procedures for
Database Files
■​ Explanation: This flowchart outlines procedures for
protecting database files against damage. It shows that
a Backup Master file is created from the original
master. If the current master is corrupted, a Recovery
Program uses the Backup Master to restore a
pre-update version, and then the original Transaction
file is re-processed to bring it back to the current state.
○​ Batch Processing Using Real-Time Data Collection: A popular approach
for large operations where transaction data is captured electronically at the
source in real time, but then processed in batch mode for operational
efficiency (e.g., updating general ledger accounts).
■​ Figure 2-31: Batch Processing with Real-Time Data Collection
 ■​ Explanation: This hybrid system diagram shows how
Customer Sales Data is entered in real time via a Terminal
(Real-Time Process) to immediately update Customer AR
Subsidiary and Inventory Subsidiary files. However, a Batch
Process is used at the end of the day to update General
Ledger Accounts and the Sales Journal, balancing real-time
data input with batch efficiency for less critical accounts.
■​ Complex Topic: Data Locking and Operational Efficiency:
■​ In systems with high transaction volumes, if all accounts
(including common general ledger accounts) were updated in
real time, a process called data locking would occur. This
means an account record is "locked" while one transaction
updates it, making it unavailable to other transactions. For
frequently accessed accounts like "Cash" or "Sales" in the
general ledger, this could create significant processing delays
and chaos, forcing many users to wait. By updating these
common general ledger accounts in batch mode (e.g., once a
day), individual real-time transactions can proceed quickly
without waiting for others to finish with the shared accounts.
○​ Real-Time Processing of Sales Orders: Processes the entire transaction as
it occurs, leading to benefits like improved productivity, reduced inventory,
faster customer billing, and enhanced customer satisfaction. Can eliminate
physical source documents.
■​ Figure 2-32: Real-Time Processing of Sales Orders
■​ Explanation: This flowchart depicts a purely real-time sales
order system. Customer orders are entered via a Data Input
Terminal, and the system instantly performs a Credit and
Inventory Check by accessing Credit File and Inventory
records. This triggers immediate Bill Customer and Ship
Goods processes, resulting in documents like the Invoice,
Stock Release, and Bill of Lading, all updated and generated
in real-time, often without physical documents.
●​ Data Coding Schemes​

○​ Data Coding (Technical Term Definition): Creating simple numeric or

alphabetic codes to represent complex economic phenomena to facilitate
efficient data processing.
○​ Without codes, entries are lengthy, time-consuming, and error-prone,
impeding sales staff, warehouse personnel, and accounting.
○​ Codes concisely represent information, provide accountability, identify unique
transactions, and support the audit function.
○​ Sequential Codes (Technical Term Definition): Represent items in a
numerical or alphabetical sequence (e.g., pre-numbered source documents
like checks or invoices).
■​ Advantages: Supports reconciliation of batches and detection of
missing transactions.
■​ Disadvantages: No information content beyond order, difficult to
change/insert items.
 ○​ Block Codes (Technical Term Definition): A variation of sequential coding
where specific ranges (blocks) of numbers are reserved for particular classes
of items. Often used for a Chart of Accounts.
■​ Chart of Accounts (Technical Term Definition): A list of all the
accounts used by a company, typically organised by asset, liability,
equity, revenue, and expense categories, each assigned a unique
number. It's fundamental for financial and management reporting.
■​ Figure 2-33: Chart of Accounts
■​ Explanation: This table illustrates a Chart of Accounts using
Block Codes. It assigns specific ranges of numbers (e.g.,
100s for Current Assets, 600s for Operating Expense) to
different account classifications. Within each block, accounts
are sequentially numbered (e.g., 110 Petty Cash, 120 Cash in
Bank). This structure allows for future expansion by inserting
new accounts within their designated blocks.
■​ Advantages: Allows insertion of new codes within a block without
reorganising the entire structure.
■​ Disadvantages: Information content is not readily apparent without
referring to the chart.
○​ Group Codes (Technical Term Definition): Numeric codes with zones or
fields that each have a specific meaning, used to represent complex items
involving two or more pieces of related data.
■​ Example: Store Number, Department Number, Item Number,
Salesperson.
■​ Advantages: Facilitates representation of large, diverse data,
hierarchical structure is easier to remember, permits detailed analysis
and reporting.
■​ Disadvantages: Can be overused, leading to unnecessary
complexity, increased storage costs, and errors.
○​ Alphabetic Codes (Technical Term Definition): Use alphabetic characters,
either sequentially or within block/group coding. Can be pure alphabetic or
alphanumeric (combining letters and numbers).
■​ Advantages: Increased capacity to represent a large number of items
compared to purely numeric codes.
■​ Disadvantages: Difficulty in rationalising sequential alphabetic codes,
and users may have difficulty sorting alphabetically.
○​ Mnemonic Codes (Technical Term Definition): Alphabetic characters that
form acronyms or other combinations that convey meaning and are easy to
remember (e.g., ACCTG for accounting, NY for New York).
■​ Advantages: Code itself conveys high degree of information, users
don't need to memorise meaning.
■​ Disadvantages: Limited ability to represent items within a class,
better for class representation.
●​ Appendix Section A: Secondary Storage​

○​ Magnetic Tape: Most modern systems use reels; data is recorded

sequentially. Offers low-cost storage for large data amounts and is reusable.
■​ Figure 2-34: Records Blocked on a Magnetic Tape
 ■​ Explanation: This diagram illustrates how multiple Records
are grouped into Blocks of Records on a magnetic tape,
separated by Interblock Gaps (IBG). This blocking improves
efficiency by reducing the number of start/stop operations
required when reading or writing data.
○​ Magnetic Disks: Store nonvolatile data directly accessible. Surface formatted
into circular tracks and wedge-shaped sectors. Access time is the time from
request to data being read.
■​ Disk Address: Consists of cylinder number, surface number, and
record (or block) number.
■​ Figure 2-35: How Data Are Stored on a Disk
■​ Explanation: This diagram shows the concentric Tracks on a
disk surface, divided into Record (or block) numbers. It
illustrates how data records are stored in specific locations on
the disk, allowing for direct access to individual records.
■​ Figure 2-36: A Hard Disk Pack
■​ Explanation: This diagram shows a stack of multiple hard
disks (11 Disks) mounted on a central spindle, forming a Disk
Pack. Each disk has two surfaces with multiple Tracks (e.g.,
400 Cylinders), and a set of Read/Write Heads move together
to access the same track across all surfaces, forming a
Cylinder (e.g., Cylinder 100 has 20 tracks).
○​ Optical Disks: Store very large amounts of data (e.g., CD-ROM, WORM,
erasable optical disks).
●​ Appendix Section B: Legacy Systems​

○​ Data Structures: Physical and logical arrangement of data in files and

databases. Involves organization (sequential or random arrangement) and
access method (technique to locate records).
■​ Table 2-2: Typical File Processing Operations
■​ Explanation: This table lists common operations performed on
files, such as retrieving, inserting, updating, reading, finding
the next, scanning with secondary keys, and deleting records.
These operations are used to evaluate the efficiency of
different data structures.
○​ Sequential Structure (Sequential Files): Records stored in contiguous
locations in a specified sequence by primary key.
■​ Figure 2-37: Sequential Storage and Access Method
■​ Explanation: This diagram illustrates Sequential Storage,
where records (e.g., Key 1874, Key 1875) are stored one after
another in contiguous physical locations, ordered by their key
values. Accessing data requires reading through the records in
sequence.
■​ Advantages: Simple, efficient for reading entire files or processing a
large portion (e.g., payroll).
■​ Disadvantages: Not efficient for locating a single record directly.
○​ Direct Access Structures: Store data at a unique disk address, allowing
direct access to specific records.
■​ Indexed Structure (Indexed Random File): Uses a separate index
file containing record addresses, alongside a data file (sequentially or
randomly organised). Records can be dispersed.
■​ Figure 2-38: Indexed Random File Structure
■​ Explanation: This diagram shows an Indexed
Random File where an Index (a separate list of key
values and their physical disk addresses) is used to
locate data records that are stored randomly across the
Physical Disk Storage Device. To find a record, the
system first looks up the address in the index.
■​ Advantages: Efficient for processing individual records,
efficient use of disk storage.
■​ Disadvantages: Not efficient for processing a large portion of
a file.
■​ Virtual Storage Access Method (VSAM) (Technical Term
Definition): Used for very large files requiring both routine batch
processing and moderate direct access. Uses multiple indexes to
narrow down search to a track, then searches sequentially.
■​ Figure 2-39: Virtual Storage Access Method (VSAM) Used
for Direct Access
■​ Explanation: This diagram illustrates how VSAM uses
a multi-level indexing system (Cylinder Index, Surface
Index) to efficiently locate records. To find a specific
key (e.g., 2546), it first identifies the relevant cylinder,
then the surface, and then performs a sequential
search within that track.
■​ Figure 2-40: Inserting a Record into a Virtual Storage
Access Method File
■​ Explanation: This diagram shows how new records
are inserted into a VSAM file. Instead of reordering
existing records in the Prime Area, new records are
placed in a separate Overflow Area, and a Pointer in
the prime area is updated to indicate the new record's
location. This avoids costly physical relocation for every
insertion.
■​ Disadvantages: Slower direct access than indexed random,
inefficient for frequent insertions/deletions due to overflow
areas and periodic reorganisation.
■​ Hashing Structure (Technical Term Definition): Uses an algorithm
to directly convert a record's primary key into a storage address,
eliminating the need for an index.
■​ Figure 2-41: Hashing Technique with Pointer to Relocate
the Collision Record
■​ Explanation: This diagram shows how a Hashing
Technique converts a Key Value (e.g., 15943) into a
direct storage address (Cylinder, Surface, Record #) by
dividing it by a prime number. If two different keys
produce the same address (a Collision), a Pointer is
 used to store and link the second record to a relocated
address.
■​ Advantages: Rapid access speed.
■​ Disadvantages: Inefficient use of storage space, susceptible
to collisions (different keys mapping to same address).
■​ Pointer Structure: Records contain pointers (logical addresses) that
connect them to other records, creating linked lists.
■​ Figure 2-42: A Linked-List File
■​ Explanation: This diagram illustrates a Linked-List
File where each record contains a Pointer (an arrow)
that indicates the location of the next logical record in
the sequence. Records can be physically dispersed,
but the pointers maintain the logical order.
■​ Figure 2-43: Types of Pointers
■​ Explanation: This diagram illustrates three types of
pointers: Physical Address Pointer (direct disk
location), Relative Address Pointer (position within a
file, requiring calculation), and Logical Key Pointer
(primary key, requiring a hashing algorithm to find the
physical address).
○​ Batch Processing Using Sequential Files: Each program is a "run." Files
processed sequentially. Effective for high activity ratios (e.g., payroll where all
records are processed).
■​ Figure 2-44: Batch System Using Sequential Files
■​ Explanation: This extensive flowchart shows a batch
processing system using Sequential Files (represented by
tapes). It includes multiple "runs": Keying source documents,
an Edit Run to identify errors, Sort Runs to order the
transaction file by different keys, and Update Runs to post
transactions to master files (AR and Inventory). It also shows
the flow of errors and backup procedures.
■​ Figure 2-45: Record Structures for Sales, Inventory, and
Accounts Receivable Files
■​ Explanation: This figure reiterates the record structures for
Sales Orders, Inventory, and Accounts Receivable files,
explicitly identifying Primary Keys (PK) and Secondary Keys
(SK) in the context of sequential file processing, where
transaction files must be sorted by these keys to match master
files for updates.
■​ Sequential File Update Logic (Figure 2-47): A complex process that
compares transaction (T) and master (M) record keys.
■​ Start-Up: Reads first T and M records.
■​ Update Loop: Compares T and M keys.
■​ T = M: Transaction matches master, update M, read
next T.
■​ T > M: Current master processing complete, write
updated M, read next M.
 ■​ T < M: Error condition (T record out of sequence),
triggers error procedure.
■​ End Procedures: Copies remaining M records to new master,
terminates process.
■​ Figure 2-47: Program Flowchart of Sequential File Update
Logic
■​ Explanation: This detailed program flowchart shows
the complex logic of updating sequential files. It
includes Start-up, an Update Loop (with decision
points for T<M, T=M, T>M), and End Procedures. It
illustrates how the system reads and compares
transaction and master records, updates the master,
and handles out-of-sequence errors.
■​ Figure 2-48: Sample Transactions and Master File Records
■​ Explanation: This figure uses sample data to illustrate
the Sequential File Update Logic. It shows a
Transaction File and a Master File with records and
their keys, demonstrating how the system processes
them in a specific order, which records are updated,
and where an out-of-sequence transaction (T10 before
T7) would cause an error (T < M).
■​ Sequential File Backup (Grandparent–Parent–Child): A new
master file (child) is created during each update, retaining the original
(parent) and previous version (grandparent) as backups.
○​ Batch Processing Using Direct Access Files: Simplifies the system by
eliminating sort programs.
■​ Figure 2-46: Batch Processing Using Direct Access Files
■​ Explanation: This flowchart shows a more streamlined batch
processing system compared to the sequential file system, as
it uses Direct Access Files (represented by disk symbols).
The key difference is the elimination of sort programs, as direct
access files don't require pre-sorting, simplifying the flow from
Edit to Update to Billing and Reporting.
■​ No Automatic Backup: Destructive update means separate backup
procedures are needed.
■​ Direct Access File Update Logic (Figure 2-49): Simpler than
sequential, as record sequencing is irrelevant, and the operating
system handles searching/retrieval.
■​ Figure 2-49: Logic for Direct Access File Update
■​ Explanation: This program flowchart depicts the
simpler logic for updating Direct Access Files. It reads
transaction (T) records one by one, searches for and
retrieves the corresponding master (M) record, updates
it in memory, and writes the updated value back to the
original location on the master file. Record sequencing
is irrelevant, simplifying the process.