Question

Please do it by type not pics.

1.Understand how the accounting cycles (revenue, expenditure, production, HR/payroll, general ledger) interact in a business organization. Within this context draw a simple inflow and outflow diagram illustrating these cycles and the interrelationships among them.

Answer 1

Solution:-

Accounting cycles:-

A transaction is:

• An agreement between two entities to exchange goods or services; OR
• Any other event that can be measured in economic terms by an organization.

The business transaction cycle is a process that:

• Begins with capturing data about a transaction.
• Ends with an information output, such as financial statements.

Many business processes are paired in give-get exchanges. Basic exchanges can be grouped into five major cycles:

• Revenue cycle
• Expenditure cycle
• Production cycle
• Human resources/payroll cycle
• Financing cycle

Every transaction cycle:

• Relates to other cycles.
• Interfaces with the general ledger and reporting system, which generates information for management and external parties.

The Revenue Cycle:-

• Gets finished goods from the production cycle.
• Provides funds to the financing cycle.
• Provides data to the general ledger and reporting system.

The Expenditure Cycle:-

• Gets funds from the financing cycle.
• Provides raw materials to the production cycle.
• Provides data to the general ledger and reporting system.

The Production Cycle:-

• Gets raw materials from the expenditure cycle.
• Gets labor from the HR/payroll cycle.
• Provides finished goods to the revenue cycle.
• Provides data to the general ledger and reporting system.

The HR/Payroll Cycle:-

• Gets funds from the financing cycle
• Provides labor to the production cycle.
• Provides data to the general ledger and reporting system.

The Financing Cycle:-

• Gets funds from the revenue cycle.
• Provides funds to the expenditure and HR/payroll cycles.
• Provides data to the general ledger and reporting system.

The General Ledger and Reporting System:-

• Gets data from all of the cycles.
• Provides information for internal and external users.