Activity 2082

Key Words
Business Process – a set of related, coordinated and structured activities and tasks
performed by a person, a computer, or a machine that helps accomplish a specific
organizational goal
Expenditure Cycle – one of the business processes which originates from purchasing
inventory to reselling it or convert them to raw materials in exchange for cash for a future
promise to pay some money
External parties – they are the primary recipients of financial statement information, which
is outside the organization like the stockholders, creditors, and government agencies
Financing Cycle – is a business process that is associated with accumulating money through
selling shares and borrowing raising cash by selling shares in the company to investors and
borrowing money as well as paying dividends and interest
Key Words
General Ledger and Reporting System – are information-processing operations involved in
updating the general ledger and preparing reports for both management and external
parties.
Give-get Exchange – these are exchange transactions that usually happen, like giving up
cash to acquire inventory and giving salary to employees in such as giving up money to get
stock from a supplier. Another is giving employees a paycheck in exchange for their labor.
Human Resources/Payroll Cycle – a business process, which is associated with hiring,
training, compensating, evaluating, promoting, and terminating employees.
Internal parties – are the people inside the organization, like the managers, employers, and
employees.
Key Words
Production or Conversion Cycle – another business process that is associated with using labor,
raw materials, and equipment to produce finished goods.
Revenue Cycle – is a business process that is associated with selling goods and services in
exchange for cash or even a future promise to receive some money.
Transaction – is an agreement between two parties to exchange goods or services. An example

is selling inventory in exchange for cash or other events that can be measured in economic.
Transaction Processing – is a process of capturing transaction data, processing, storing it, and
producing information like a managerial report or a financial statement.
Accounting Information System
AIS is a subsystem of the information system
It processes financial transactions and non-financial transactions

that affect the processing of financial transactions directly
The AIS has three major subsystems:
• Transaction processing system (TPS) – supports daily business operations with

numerous reports, documents, and messages for users throughout the organization
• General ledger and financial reporting system (GL/FRS) – produces traditional
financial statements and other reports required by law
• Management reporting system (MRS) – provides internal management with special-
purpose financial reports and information needed for decision makings, such as
budgets, variance reports, and responsibility reports
Accounting Function
• The accounting function manages the financial information resource of
the firm. In this regard, it plays two crucial roles in transaction
processing
• First, the accounting function captures and records financial
transactions. These events include the movement of raw materials
from the warehouse to production, the shipments of the finished
products, cash flows into the firm, the acquisition of inventory, and
the payment of financial liabilities
• Second, the accounting function distributes information to
operations personnel for them to coordinate many of their key tasks.
Usually, accounting activities contribute directly to business
operations like inventory control, cost accounting, payroll, billing, AR
and AP, and the general ledger
Organizations need to decide what decisions
they need to make, the information they
need, and the process on how to gather the
data and produce useful information
This data gathering and processing is tied to

the fundamental business process in an
organization
AIS
Flow
of
Information
Business Process Key Decisions Management needs of
information
a. How much a. Cash flow projections
b. Find investors or borrow b. Pro-forma financial
Acquire capital funds statements
c. If borrowing, obtaining c. Loan amortization
the best terms schedule
Sample of
types of data a. Experience a. Job descriptions
Hire and train requirements b. Applicant job history
and procedures employees b. Assessing the integrity and skills
to collect and competence of
and produce applicants
information a. What models to carry a. Market analysis

Acquire inventory b. How much to purchase b. Inventory status
c. How to manage reports
inventory c. Vendor performance
a. Whom to pay a. Vendor invoices

Pay vendors b. When to pay b. Accounts payable
c. How much to pay records
c. Payment terms
• There are five (5) major give-get
exchanges or transaction
Business processing that frequently occur in
Process most companies. They are the
following:
or • Revenue Cycle
Transaction • Expenditure Cycle
• Production or Conversion Cycle
Cycles • Human Resource/Payroll Cycle
• Financing Cycle
• Receiving and answering customer inquiries
• Taking customer orders and entering them to AIS
• Approve credit sales
• Check inventory availability
Major • Initiate backorders for goods out of stock
Activities •
•
Pick and pack customer orders
Ship goods to customers or perform services
in • Bill customers for products shipped or services performed
the •
•
Update (increase) sales and accounts receivable
Receiving customer payments and deposit them in the
Revenue Cycle •
bank
Update (reduce) accounts receivable
• Handle sales returns, discounts, allowances, and bad debts
• Prepare management reports
• Send appropriate information to the other cycles
• Request goods and services that are purchased
• Preparing, approving, and sending purchase orders to
vendors
Major • Receive products and services and complete a receiving
report
Activities • Store goods
in • Receive vendor invoices

• Update (increase) accounts payable
the • Approve vendor invoices for payment
Expenditure • Pay vendors for products and services

• Update (reduce) accounts payable
Cycle • Handle purchase returns, discounts, and allowances
• Prepare management reports
• Send appropriate information to other cycles
Major • Recruiting, hiring, and training new employees
• Evaluating employee performance and promoting
Activities employees
• Discharging employees
in • Updating payroll records
the • Collecting and validating time, attendance, and commission
data
Human • Preparing and disbursing payroll
Resources • Calculate and pay taxes and benefit payments

• Prepare employee and management reports
Payroll Cycle • Send appropriate information to the other cycles
Major • Design products
Activities • Forecast, plan, and schedule production

• Request raw materials for production
in • Manufacture products
the • Store finished products

• Accumulate costs for products manufactured
Production • Prepare management reports
Cycle • Send appropriate information to the other cycles

Major • Forecast cash needs
Activities • Sell stock and securities to investors
in • Borrowing money from lenders

• Paying dividends to investors and interest to lenders
the • Retiring debt
Financing • Preparing management reports

• Send appropriate information to the other cycles
Cycle
Sample
of
Give and Get
Exchange

Activity 2082

Uploaded by

Copyright:

Available Formats

Activity 2082

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Activity 2082

Uploaded by

Copyright:

Available Formats

Key Words

Transaction – is an agreement between two parties to exchange goods or services. An example

It processes financial transactions and non-financial transactions

The AIS has three major subsystems:

• Transaction processing system (TPS) – supports daily business operations with

This data gathering and processing is tied to

information a. What models to carry a. Market analysis

a. Whom to pay a. Vendor invoices

in • Receive vendor invoices

Expenditure • Pay vendors for products and services

Resources • Calculate and pay taxes and benefit payments

Activities • Forecast, plan, and schedule production

the • Store finished products

Cycle • Send appropriate information to the other cycles

in • Borrowing money from lenders

Financing • Preparing management reports

You might also like