Question

In: Accounting

Discuss the flow of cash through the transaction cycles. Include in your discussion the relevant subsystems and any time lags that may occur.

Discuss the flow of cash through the transaction cycles. Include in your discussion the relevant subsystems and any time lags that may occur. 

Solutions

Expert Solution

Cash flows into the firm from sales made to customers. The sales order processing subsystem of the revenue cycle captures the intent of customers to exchange cash for services or goods manufactured. Typically sales are made on credit. The cash receipts subsystem of the revenue cycle captures the actual receipt of cash. Depending on the credit terms and promptness of payment by the customer, the lag between the sales order processing subsystem and the cash receipts subsystem may be days, weeks, or months.

The cash inflow allows the organization to purchase raw materials, pay workers, and buy capital assets necessary to manufacture the product (or to provide services). The raw materials requirements are determined by the production planning subsystem of the conversion cycle. These requirements trigger orders being placed through the purchases/accounts payable subsystem of the expenditure cycle. For credit sales, the cash is ultimately released once the goods are received (or services are performed) and an invoice has been received. The lag between receiving goods and disbursement of cash may be days or weeks. Cash is also disbursed to employees, typically after services are rendered by the employees. The lag is usually no more than one-half a month for salaried employees and as short as one-half a week for hourly wage earners. The payroll subsystem of the expenditure system captures these disbursements to employees.


Related Solutions

In this discussion forum explain the sensitivity of your company/industry to business cycles; whether it lags...
In this discussion forum explain the sensitivity of your company/industry to business cycles; whether it lags or leads the cycle; and if moves with or opposite to the cycle.
Discuss asset pricing anomalies (include in your discussion adefinition, why they occur, and list at...
Discuss asset pricing anomalies (include in your discussion a definition, why they occur, and list at least 5 recently identified anomalies).
Discuss the interrelationship of the cash flow statement to the other financial statements. In your discussion...
Discuss the interrelationship of the cash flow statement to the other financial statements. In your discussion comment and explain operating activities, investing activities, and financing activities. What is the difference between an indirect and a direct cash flow statement? Which is GAAP? (250 words total and no plagiarirm please)
Present a through discussion of wireless networking. Include WiFi, Bluetooth, and Cellular in your discussion.
Present a through discussion of wireless networking. Include WiFi, Bluetooth, and Cellular in your discussion.
Please discuss the three stages of cash flow cycles and how investors and creditors see or...
Please discuss the three stages of cash flow cycles and how investors and creditors see or react to each step.
Many companies experience cash flow problems at some point and time. Discuss any eight steps that...
Many companies experience cash flow problems at some point and time. Discuss any eight steps that firms can employ to address cash flow problems?
Discuss the risk-free rate. In your discussion include you should include a definition, how it is...
Discuss the risk-free rate. In your discussion include you should include a definition, how it is calculated and how and when it is used in finance.                                 Compare and contrast ordinary and preference shares and discuss how their return and value can be calculated.              
Be sure your answer is complete and include any relevant diagrams and examples. 3 paragraphs minimum....
Be sure your answer is complete and include any relevant diagrams and examples. 3 paragraphs minimum. Deciding to commit a crime is a rational decision. Explain why we make this statement. What benefits and what costs do a criminal incur when committing a crime? Using this concept of rationality, what policies can be used to reduce the amount of crime?
Walk me through a Cash Flow Statement. NOT FOR ANY SPECIFIC COMPANY, JUST IN GENERAL. PLEASE...
Walk me through a Cash Flow Statement. NOT FOR ANY SPECIFIC COMPANY, JUST IN GENERAL. PLEASE GIVE A THROUGH ANSWER TO THIS
Discuss glucose transport in epithelial cells, include tight junctions in your discussion.
Discuss glucose transport in epithelial cells, include tight junctions in your discussion.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT