Question

Which technologies used to support the Expenditure Cycle?

Answer 1

Which technologies used to support the Expenditure Cycle?

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Abstract

The expenditure cycle is a recurring set of business activities and related information processing operations associated with the purchase of and payment for goods and services. This focuses on the acquisition of raw materials, finished goods, supplies and services.

The linkages between the buyer’s expenditure cycle activities and the seller’s revenue cycle activities have important implications for the design of both parties’ accounting information system.

A) In the expenditure cycle, the primary external exchange of information is with suppliers (vendors).

Expense data also flow from the expenditure cycle to the general ledger and reporting function for inclusion in financial statements and various management reports.

The primary objective in the expenditure cycle is to minimize the total cost of acquiring and maintaining inventories, supplies, and the various services the organization needs to function.

The four basic expenditure cycle activities

1. Ordering materials, supplies, and services

2. Receiving materials, supplies, and services

3. Approving supplier invoices

4. Cash disbursements

The first major business activity in the expenditure cycle is ordering inventory, supplies, or services. This involves first identifying what, when, and how much to purchase, and then choosing from which supplier to purchase. Accountants and systems professionals need to understand best practices for managing inventory.

B) Materials requirements planning (MRP) seeks to reduce required inventory levels by improving the accuracy of forecasting techniques to better schedule purchases to satisfy production needs.

MRP systems reduce uncertainties about when raw materials are needed and therefore enable companies to carry less inventory.

C) A just in time (JIT) inventory system attempts to minimize finished foods inventory by purchasing and producing goods only in response to actual sales.

JIT systems are characterized by frequent deliveries of small amounts of materials, parts, and supplies directly to the specific locations that require them when they are needed.

D) Purchase Requision (PR) System : The need to purchase goods or supplies often results in the creation of a purchase requisition that identifies the requisitioner.

The requisitioner specifies the delivery location and date needed. It identifies the item numbers, descriptions, quantity, and price of each item requested.

However this technologies can be used to support the Expenditure Cycle and reduce the cost of business for manufacturing the product with efficiencty and maximum profit.

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