group 8 “Let one who seeks wisdom ask from The Lord”

James 1;5

NameName Reg no. Reg no. Gerald Hanyani C1111817 TAlois Jikirosi C1111830 HEastilia Zhande C1111558 MZanele Ncube C1111735 ENatasha Dutiro C1111392 GVongai Mukotami C1111507 GVimbai Terayi C1111327 LTatenda Marume C1111343 DTatenda Gotosa C1111337 XCaroline T Makura C1111814 Q

““It is difficult and tiresome to It is difficult and tiresome to come up with an accounting come up with an accounting information system ”.information system ”.Discuss how the use of cycles Discuss how the use of cycles help in making sense of help in making sense of accounting applications, give accounting applications, give examples and flow charts of examples and flow charts of such cycles in your organisation such cycles in your organisation [20 marks][20 marks]

AIS is exasperating and AIS is exasperating and intricating to come up with intricating to come up with since it processes many kinds since it processes many kinds of accounting transactions of accounting transactions and in so doing generating a and in so doing generating a wide variety of documents wide variety of documents and reports.and reports.

Given the complexity of Given the complexity of designing new systems, system designing new systems, system designers have created a large designers have created a large number of tools for modelling number of tools for modelling accounting applications. Chief accounting applications. Chief among them are process maps, among them are process maps, decision tables and transaction decision tables and transaction cycles.cycles.

1) 1) Transaction cyclesransaction cycles

These are cycles that group transactions related These are cycles that group transactions related to an organisation’s business processes.to an organisation’s business processes.

2) 2) accounting applications accounting applications e.g. pastel, quickbooks, sagee.g. pastel, quickbooks, sage

These are computer-based accounting These are computer-based accounting information systems that assist in the collection, information systems that assist in the collection, storage, transformation and distribution of storage, transformation and distribution of accounting information for planning, decision accounting information for planning, decision making and control.making and control.

Transaction processing cycles are Transaction processing cycles are the subsystems of the overall the subsystems of the overall accounting information system. accounting information system. Thus it is important for us to Thus it is important for us to understand that the integration understand that the integration of these cycles or sub-systems to of these cycles or sub-systems to achieve a common goal make up achieve a common goal make up an accounting application.an accounting application.

To deal efficiently with the To deal efficiently with the knowledge gap in accounting knowledge gap in accounting applications the use of applications the use of transaction cycles have been transaction cycles have been introduced.introduced.

These are :These are :

revenue cycles expenditure cycles conversion cycles financial cyclesfinancial cycles Human-Resource management Human-Resource management

cyclecycle Fixed asset management cycleFixed asset management cycle Cash-disbursement cycleCash-disbursement cycle

Definition;Definition;

It is the cycle that includes It is the cycle that includes accounting transactions accounting transactions which records the which records the generation of revenue generation of revenue from the outputs of the from the outputs of the conversion processes.conversion processes.

R E V E N U E C Y C L E(S U B S Y S T E M )

S a les O rd e r

B illin g / A cco u n tsR ece iv ab le

C ash R ece ip ts /C o llec tio n s

S h ip p in g

1

6

4 /5

3

C red it / C u s to m erS erv ice

2

In this cycle the accounting system In this cycle the accounting system records four economic events, i.e.records four economic events, i.e.

1.1.The organisation receives a request for The organisation receives a request for goods or services and computer based goods or services and computer based systems use an order entry application systems use an order entry application system to record these requests.system to record these requests.2.2.The organisation delivers the goods and The organisation delivers the goods and services. A shipping application system services. A shipping application system records this event.records this event.3.3.The organisation requests payment for The organisation requests payment for the goods or services and this is processed the goods or services and this is processed by the billing system.by the billing system.

4. An organisation uses a cash receipt . An organisation uses a cash receipt application system to record the fourth application system to record the fourth economic event, i.e. the receipt of cash in economic event, i.e. the receipt of cash in payment from the customerpayment from the customer

Role of the revenue cycle

in making sense of accounting applications

Tracking sales of goods and services to the customer.

The revenue cycle seeks to trace the sales of goods to customers for the purpose of monitoring timely and efficient cash collection.

Filling customer ordersThis requires an interface with the inventory control function. The revenue cycle must allow for certain exception transactions e.g. sales returns, which involves increasing inventory and reducing the amount owed the company by the customer.

Forecasting sales and cash receipts

It is accomplished by its ability to analyse sales orders, sales terms, payment histories and other data. For example, sales orders are a good indicator of future revenues and the terms of sale provide information about likely dates of collection on accounts.

DefinitionDefinition

It consist of those transactions It consist of those transactions incurred to acquire materials incurred to acquire materials and overhead items for the and overhead items for the conversion process of the conversion process of the business. business.

1

2

3

45

Expenditure cycle (subsystem)

This cycle processes transaction representing the following economic events;

1. Organisations request goods and services

2. Organizations receive goods and services

3. Recognition of an obligation to pay for the goods and services

4. Use of cash disbursements to record the payment for the goods and services

Role of the expenditure cycle in making sense of

accounting applications

1) 1) Tracking purchases of Tracking purchases of goods and services from goods and services from vendors.vendors.

This cycle tracks the amounts owed by the company to and it seeks to pay creditors at the optimal time.

2) 2) Maintaining vendor Maintaining vendor records.records.Keeps records of reputable Keeps records of reputable vendors who offer quality goods vendors who offer quality goods and services at reasonable pricesand services at reasonable prices

Forecasting purchases Forecasting purchases and cash out flows.and cash out flows.The addition of all outstanding The addition of all outstanding purchase requisitions, purchase requisitions, invoices, and receiving reports invoices, and receiving reports provides an estimate of future provides an estimate of future cash requirements.cash requirements.

A company’s conversion cycle transforms or converts input resources, such as raw materials, labour and overheads, into finished products or services for sale.

Revenue CycleExpenditureCycle

Purchase Requisitions

Marketing System

ConversionCycle

SalesForecast

Sales Orders

Labor Usage

General Ledgerand Financial Reporting System

WorkInProcess

FinishedGoods

Conversion Cycle in Relation to Other Conversion Cycle in Relation to Other CyclesCycles

Role of the conversion cycle in making

sense of accounting applications

Consists of those accounting transactions that record the acquisition of capital from owners and creditors, the use of that capital to acquire productive assets and the reporting to owners and creditors on how it is used.

This can be considered as the most vital and crucial cycle since it is the one that initiates business transactions of all forms. As a subsystem it has inputs, processes and outputs.

Convert raw materials into finished goods.

Manufacturing company buy raw materials inventories, apply labour and overhead to them and produce an output different from the material purchased i.e. finished goods.

Monitor and control manufacturing costsSince the costs of goods sold is likely

to be the most largest expenses in an organisation, the conversion cycle monitor and control these manufacturing costs.

Provide input for budgetCosts are as a subsystem of

conversion provides important control information for the budget process and varies with the size of the company.

Track purchases and sales of inventories.

The conversion cycle seeks to trace the purchase of materials from suppliers for the purpose of meeting production schedules

The three accounting applications that record the events in the financial cycle are the property, the journal entry and the financial reporting systems.

One of the most challenging tasks in your professional career is selecting an accounting software package that matches the needs of the organisation. It should not contain more features than you need which adds to the cost and make it more complex and difficult to use.It should contain features that streamline the operation of your business.And it should be easy enough to customize to suit the unique objectives of the transaction cycles