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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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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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.
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Government Procurement Policies (Updating and Restating Audit Requirements for Procurement of Supplies, Materials and Equipment by the National Government including Government-Owned or Controlled Corporations (GOCCs).)
COA Circular No. 97-004