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Chap 5 AIS New

Transaction Cycles and Accounting Applications

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16 views20 pages

Chap 5 AIS New

Transaction Cycles and Accounting Applications

Uploaded by

btemesgen06
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter 5

Transaction Cycles and Accounting


Applications

1
The Revenue Cycle: Sales to Cash Collections

• The revenue cycle is a recurring set of business activities and


related information processing operations associated with:
• Providing goods and services to customers
• Collecting their cash payments
• The primary external exchange of information is with
customers.

2
The Revenue Cycle
• Information about revenue cycle activities flows to
other accounting cycles, e.g.:
• The expenditure and production cycles: Receive
information about sales transactions so they’ll know
when to initiate the purchase or production of more
inventory.
• The human resources/payroll cycle: Uses information
about sales to calculate commissions and bonuses.
• The general ledger and reporting function: Uses
information produced by the revenue cycle in preparing
financial statements and performance reports.

3
The Revenue Cycle

4
The Revenue Cycle
• Provides goods and services to customers
• Collects cash in payment for those sales
• Primary Objective:
• Provide the right product
• In the right place
• At the right time for the right price

5
Revenue Cycle Business Activities

1. Sales order entry: The major activities here are Take


Customer Order, Check & Approve Credit, and Check
Inventory Availability.
2. Shipping : The major activities here are Picking & Packing
the Order and Shipping the Order.
3. Billing : The major activities here are Invoicing and
Updating A/R.
4. Cash collections: The major activities here are Collecting
Cash and Deposits them in the Bank.
6
DFD for Revenue Cycle Activities

7
The Expenditure Cycle:
Purchasing to Cash Disbursements
• The primary external exchange of information is with suppliers (vendors).
• Information flows to the expenditure cycle from other cycles, e.g.:
• The revenue cycle, production cycle, inventory control, and various departments
provide information about the need to purchase goods and materials.
• Information also flows from the expenditure cycle:
• When the goods and materials arrive, the expenditure cycle provides information
about their receipt to the parties that have requested them.
• Information is provided to the general ledger and reporting function for internal and
external financial reporting.

8
The Expenditure Cycle

9
The Expenditure Cycle
• Activities and information processing related to:
• Purchasing and payment of
• Goods and services
• Primary objective:
• Minimize the total cost of acquiring and maintaining inventories, supplies,
and the various services the organization needs to function

10
Expenditure Cycle Activities
1. Ordering materials,
supplies, and services
2. Receiving materials,
supplies, and services
3. Approving supplier
invoices
4. Cash disbursements

11
DFD For the Expenditure Cycle Activities

12
General Ledger and Reporting System
• The general ledger and reporting system (GLARS) includes the
processes in place to update general ledger accounts and prepare
reports that summarize results of the organization’s activities.

13
General Ledger and Reporting System
• One of the primary functions of GLARS is to collect and organize data
from:
• Each of the accounting cycle subsystems, which provide summary entries
related to the routine activities in those cycles.
• The treasurer, who provides entries with respect to non-routine activities
such as transactions with creditors and investors.
• The budget department, which provides budget numbers.
• The controller, who provides adjusting entries.

14
General Ledger and Reporting System
• The information must be organized to meet the needs of internal and
external users.
• The system must be designed to produce regular periodic reports and
to support real-time inquiries.

15
General Ledger and Reporting

16
General Ledger and Reporting
• Primary function is to collect and organize
• The accounting cycle activities
• Financing activities
• Investing activities
• Budget activities
• Adjustments

17
General Ledger and Reporting Activities
1. Update general
ledger
2. Post adjusting
entries
3. Prepare
financial
statements
4. Produce
management
reports

18
DFD for the General Ledger & Reporting Activities

19
The End!
"INTELLIGIENCE PLUS CHARACTER ARE
THE GOAL OF TRUE EDUCATION!“

Wish You All the Best!!!


20

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