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    College of Business & Accountancy

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    Jow Evangelista
    The document discusses transaction cycles for a merchandising firm. It describes the revenue cycle, which involves providing goods/services to customers and collecting cash payments. The expense cycle involves purchasing inventory and supplies as well as paying for goods. Key activities in the revenue cycle are processing customer orders, shipping goods, and billing customers. Key activities in the expense cycle are ordering goods, receiving and storing goods, and paying suppliers. The document also outlines some threats and controls for each cycle.

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    College of Business & Accountancy

    Uploaded by

    Jow Evangelista
    38 views63 pages
    The document discusses transaction cycles for a merchandising firm. It describes the revenue cycle, which involves providing goods/services to customers and collecting cash payments. The expense cycle involves purchasing inventory and supplies as well as paying for goods. Key activities in the revenue cycle are processing customer orders, shipping goods, and billing customers. Key activities in the expense cycle are ordering goods, receiving and storing goods, and paying suppliers. The document also outlines some threats and controls for each cycle.

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    Auditing Report

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    The document discusses transaction cycles for a merchandising firm. It describes the revenue cycle, which involves providing goods/services to customers and collecting cash payments. The expense cycle involves purchasing inventory and supplies as well as paying for goods. Key activities in the revenue cycle are processing customer orders, shipping goods, and billing customers. Key activities in the expense cycle are ordering goods, receiving and storing goods, and paying suppliers. The document also outlines some threats and controls for each cycle.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    38 views63 pages

    College of Business & Accountancy

    Uploaded by

    Jow Evangelista
    The document discusses transaction cycles for a merchandising firm. It describes the revenue cycle, which involves providing goods/services to customers and collecting cash payments. The expense cycle involves purchasing inventory and supplies as well as paying for goods. Key activities in the revenue cycle are processing customer orders, shipping goods, and billing customers. Key activities in the expense cycle are ordering goods, receiving and storing goods, and paying suppliers. The document also outlines some threats and controls for each cycle.

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    Auditing Theory ACC 501

    College of Business & Accountancy

    Revenue and expense cycle GROUP 2

    O V E R V IE W :

    A Brief Overview of Transaction Cycles

    O V E R V IE W : A Transaction Cycle is . . .

    A g ro u p o f re l te d a b u si e ss a cti ti s n vi e ( transactions ), such as : R EV EN U E E X PE N S E FI A N C E N

    CYCLE

    OVERVIEW :

    Transaction Cycles for a Merchandising Firm

    OVERVIEW :
    MERCHANDISE SHIPMENT SALE OF MERCHANDISE

    The Expenditure Cycle RECEIPTS CASH


    PP&E, Investments

    GL & Fin Rpt Cycle

    Purchase of Mdse, & Labor, Etc. Merchandise Receipts

    Cash Disbursements

    OVERVIEW :
    MERCHANDISE SHIPMENT SALE OF MERCHANDISE CASH RECEIPTS

    GL & Fin Rpt Cycle

    PP&E, Investments

    Purchase of Mdse, & Labor, Etc. Merchandise Receipts

    Cash Disbursements

    The Revenue Cycle

    OVERVIEW :
    MERCHANDISE SHIPMENT SALE OF MERCHANDISE CASH RECEIPTS

    The Finance Cycle


    GL & Fin Rpt Cycle

    PP&E, Investments

    Purchase of Mdse, & Labor, Etc. Merchandise Receipts

    Cash Disbursements

    OVERVIEW :
    MERCHANDISE SHIPMENT SALE OF MERCHANDISE

    GL & Financial Reporting


    CASH RECEIPTS

    GL & Fin Rpt Cycle

    PP&E, Investments

    Purchase of Mdse, & Labor, Etc. Merchandise Receipts

    Cash Disbursements

    Background :

    The Company

    Banana and Potato Enterprise (Building tomorrow with piles of books)is a leading book distributor since 2008. The business mainly offers books for children and young adults.

    Background :

    The Company

    It has also adopted the new generations method of commerce B&P enterprise promotes and takes customers order online or thru phone call. Most of the clients are bookstores and school libraries that order in bulks.

    Expense Cycle : Purchasing And Cash Disbursement

    xpense Cycle

    Questions Addressed
    What are the basic business activities and data processing operations that are performed in the expenditure cycle?

    x p e n se C y cle
    What to be made in the expenditure cycle , and what information is needed to make these decisions? What are the major threats in the expenditure cycle and the controls related to those threats?

    Questions Addressed decisions need

    x p e n se C y cle

    What is EXPENSE CYCLE?

    xpense Cycle

    EXPENSE CYCLE

    a recurring set of business activities and related information processing operations associated with the purchase of and or payment for good and

    Is

    xpense Cycle

    OBJECTIVES

    To minimize the total cost of acquiring and maintaining inventories, supplies, and the various services the organization needs to function.

    x p e n se C y cle

    What LEVEL of inventory supplies to carry?

    KEY D E C I S I O N OPTIMAL S is the

    and

    Which suppliers provide the best quality and service at the BEST PRICES?

    xpense Cycle

    KEY D E C I S I inventories ONS Where should


    and supplies be held? How can the organization consolidate purchases across units to obtain optimal prices?

    xpense Cycle

    How technology be used to improve both the efficiency and accuracy of the inbound logistics function?

    KEY D Ecan S I O N S C I information

    xpense Cycle

    Is available advantage discounts offer?

    KEY DECISIONS sufficient

    cash to take of any suppliers to to

    can payments How vendors be managed maximize cash flow?

    xpense Cycle

    The Expenditure Cycle Business Activities

    xpense Cycle
    PAYROLL/ CASH DISBURSEMENT PURCHASES

    VARIOUS DEPT.

    STOCKROOM

    EXPENSE CYCLE
    PAYROLL DEPT. ACCOUNTING DEPT. EMPLOYEES CASH DEPARTMENT RECEIVING DEPT. PURCHASING DEPT.

    SUPPLIER

    xpense Cycle BUSINESS ACTIVITIES 1.Order Goods 2.Receive and Store Goods 3.Pay for Goods

    xpense Cycle B U S IN E S S A C T IV IT IE S

    Order Goods
    T h e fi rst m a j r b u si e ss o n a cti ty vi i n th e exp e n d i re tu cycl e i vo l s n ve o rd e ri g n i ve n to ry o r su p p l e s. n i

    x p e n se C y cle B U S IN E S S A C T IV IT IE S

    Key decisions in this process involve identifying what, when, and how much to purchase and from whom. Weaknesses in inventory control can create significant problems with this process.

    PURCHASE CYCLE
    STOREROOM PURCHASING DEPT. P.O. P.R. D.V. G.L. V.R. ACCOUNTING DEPT.

    R.R.

    SUPPLIER INVOICE

    CASH DEPARTMENT

    RECEIVING DEPT.

    Legend: PR - Purchase Requisition PO Purchase Order DV Disbursement R R r e c e i v i n g R e pV o u c h e r ort VR Voucher Register

    xpense Cycle
    RECEIVE & STORE GOODS The receiving department has two major responsibilities:
    Deciding whether to accept a delivery Verifying quantity and quality

    xpense Cycle
    PAYMENT OF GOODS The objective of accounts payable is to authorize payment only for goods and services that were ordered and actually received.

    xpense Cycle

    PAYROLL CYCLE

    xpense Cycle

    xpense Cycle

    Control Objectives, Threats, and Procedures

    xpense Cycle

    xpense Cycle

    xpense Cycle

    e v e n u e C y cle

    Questions Addressed
    What are the basic business activities and data processing operations that are performed in the revenue cycle?

    e v e n u e C y cle
    What to be made in the revenue cycle , and what information is needed to make these decisions? What are the major threats in the revenue cycle and the controls related to those threats?

    Questions Addressed decisions need

    evenue Cycle

    What is REVENUE CYCLE?

    evenue Cycle

    activities and related information processing operations associated with providing: 1.Goods/Services to customers; and 2.Collecting cash in payment for those sales

    REVENUE C Y CsetE business L of is a recurring

    evenue Cycle

    The the

    major purpose
    revenue cycle is

    REVENUE CYCLE

    facilitate the exchange of products or services with customers for cash .

    of to

    evenue Cycle

    OBJECTIVES
    To determine that recorded sales are authorized and are for shipments actually made non-fictitious customers.

    evenue Cycle

    PROCEDURES
    (1)Review the sales journal, general ledger and accounts receivable trial balance for large or unusual items

    evenue Cycle (2)Trace sales journal entries to copies of sales orders, sales invoices and shipping documents (3)Trace shipping documents to entry of shipments perpetual inventory records

    evenue Cycle (4) Compareprices on sales invoices with authorized price lists or properly executed contracts

    evenue Cycle To determine that existing sales transactions are recorded on a timely basis

    OBJECTIVES

    evenue Cycle (5) Trace shipping documents to resultant sales invoices and entry into sales journal and accounts receivable master file

    PROCEDURES

    evenue Cycle (6) compare dates of recorded sales transactions with dates on shipping records

    evenue Cycle

    OBJECTIVES
    To determine that recorded sales are for the amount of goods shipped and are correctly billed and recorded

    evenue Cycle

    PROCEDURES
    on (7) Re-compute information sales invoices (8) Trace entries in sales journal to sales invoices

    evenue Cycle (9) trace details on sales invoices to shipping documents, price tests and customers orders

    evenue Cycle

    OBJECTIVES
    Determine that sales transactions are properly classified

    evenue Cycle

    PROCEDURES
    (10) Examine supporting transactions for classification. document sales proper

    evenue Cycle

    ACHIEVING

    CONTROL

    SEGREGATION OF FUNCTIONS

    Transaction authorization should be separate from transaction processing

    Transaction Custody should be separate from asset Recordkeeping

    The organization should be so structured that the perpetration of a fraud requires collusion between two or more individuals

    PRESIDENT SALES PROMOTION CUST. SERVICE SALES ORDER CONTROLLER BUDGETING ACCT. MANAGER BILLING ACCTS. REC. GEN. LEDGER

    TREASURER CREDIT CASHIER INSURANCE

    WAREHOUSE PURCHASING SHIPPING RECEIVING STORES

    evenue Cycle

    THREATS

    evenue Cycle

    THREATS
    1.Incomplete or inaccurate customer orders. 2.Credit sales to customers with poor credit. 3.Legitimacy of orders 4.Stockouts, carrying costs, and markdowns.

    evenue Cycle

    THREATS
    5.Shipping Errors Wrong merchandise Wrong quantities Wrong address 6.Thefts of Inventory

    evenue Cycle

    THREATS
    7.Failure to bill customers. 8.Billing errors. 9.Posting errors in updating accounts receivable. 10.Theft of cash

    xpense Cycle

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