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1.5 Assignment 1 - Transaction Processing System

The document explains the expenditure cycle, conversion cycle, and revenue cycle in business. It describes the key subsystems and processes in each cycle, including purchasing, payroll, production planning, sales order processing, and cash receipts. Money from sales then flows back to the expenditure cycle to purchase resources to make more products.

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Trisha Mae Rodillas
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26 views2 pages

1.5 Assignment 1 - Transaction Processing System

The document explains the expenditure cycle, conversion cycle, and revenue cycle in business. It describes the key subsystems and processes in each cycle, including purchasing, payroll, production planning, sales order processing, and cash receipts. Money from sales then flows back to the expenditure cycle to purchase resources to make more products.

Uploaded by

Trisha Mae Rodillas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Explanation:

In Expenditure Cycle, in order for you to have


resources is to exchange it into the cash. You can see
in the upper of the expenditure cycle the cash in
exchange of the 3 resources needed: Labor, Materials
and Physical Plant. This now enter the subsystem of the
expenditure cycle: Purchasing/ Accounts Payable, Cash
Disbursement, payroll and Fixed Assets, to do the
recording of the purchase and payment of the
resources.
Furthermore, Purchasing/Accounts Payable
recognizes the need to acquire physical inventory and
places an order to the supplier. Cash Disbursement it
is authorizes the payment when the obligation is
created in the purchases system is due. Payroll collects
labor usage data for each employee, computes the
payroll and disburses paychecks. And, Fixed Assets
processes transactions pertaining to the acquisition,
maintenance, and disposal of its fixed assets.
Since, we already have the resources needed to
produce products, it will now go to conversion cycle. This now serve as the end of the Expenditure Cycle 1, as the resources transfer to
the conversion cycle. Conversion cycle, provides value added through its product or services. The resources now undergo with the
subsystem of the conversion cycle: Production Planning and Control and Cost Accounting, before it produces the finished goods.
Because in this subsystem will determined the process and the minimization of cost to produce the product itself.
Moreover, Production Planning and Control discusses the planning, scheduling and control of the physical product through
manufacturing process. It means, this is the foundation in order to produce the product. While , Cost Accounting monitors the flow of
cost information related to the production. This help to minimize the cost and gain more.
Now, we are now producing the finished goods. This now serve as the end of Conversion Cycle when the finished goods will
now forward to the Revenue Cycle, which receives the revenue from outside sources, to sell the finished goods to the customer. As
you give the product to the customer, you have also to record the Sales Order Processing and the Cash Receipts as transparency or
reference file of the company.
Thus, Sales Order Processing is the process where the accountant records the sales order of the customer. And, Cash
Receipts is the collection of the payment of the customer. This is most likely the official receipts that was issued to the customer.
As you sell the product to the customer, the customer has now the obligation to the company to pay. When the customer able to
pay to the purchase of the product the accountant needs to record the cash receipt in the journal. This now serve as the end of the
Revenue Cycle when it already has the sales or collection.
Hence, revenue cycle has the ability to determine the income of the company. When there is an income it will now back to the
expenditure cycle to purchase again the resources needed to produce the product. This now serve of the Expenditure Cycle 2, as the
income will become the capital to purchase the resources needed.
Take note, that the capital should not be spend as much as possible to prevent bankruptcy. It is advisable to spend the income
that the company gain to produce new product.

Rodillas, Trisha Mae T.


“I accept responsibility for my role in ensuring the integrity of my work that I submitted.”

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