Question

Acquisitions and Payment Cycles

List the accounts which are significant in acquisitions and payment cycles.

List why these accounts are considered significant and how they are involved in the acquisition and payment cycle.

Answer 1

Accounts which are significant in acquisitions and payment cycles:

1- Purchases / purchases return / purchases discount / prepaid expenses

2- Acocounts Payable

3- Cash / bank

Why these accounts are considered significant and how they are involved in the acquisition and payment cycle:

Its also referred as PPP (purchases, payables and payments). These accounts involved in acquisitions and payment accounting regularly and formes the base of a business. They are important in working capital management, which is part of cash flow and fund flow to take short and long term funding decisions. If business has bank borrowings, than a monthly statement of inventory and accounts payable with other details required to submit to the bank. inventory value is required to arrive business profitability. Monthly accounts payable reconciliation report is required by managers. Monthly Agewise accounts payable report is also required by managers/management.

These accounts are involved in purchases / purchases return / discount / payment accounting of transactions.