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.
What types of decision making and strategic information should the AIS provide in the expenditure cycle?
The AIS should provide decision making and strategic information to: Determine when and how much additional inventory to order. Select the appropriate vendors from whom to order. Verify the accuracy of vendor invoices. Decide whether purchase discounts should be taken.
What are the four basic expenditure cycle activities?
The basic business activities and data processing operations that are performed in the expenditure cycle, including: (1) ordering goods, supplies, and services; (2) receiving and storing them; and (3) approving invoices and paying for them.
What are the three possible exceptions to the receiving process?
Three possibleexceptions to this process are(1)receiving a quantity of goods different from the amount ordered,(2)receiving damaged goods, or(3)receiving goods of inferior quality that fail inspectionIn all three cases, the purchasing department must resolve the situation with the supplier.
What is the first step in the expenditure cycle?
The first step in the expenditure cycle is to order materials, supplies and services for the company. Different individuals or departments in the company track their consumables and create a purchase requisition when they’re low on goods.
How can the expenditure cycle be improved?
Processing efficiency can be improved by: requiring suppliers to submit invoices by EDI; having the system automatically match invoices to POs and receiving reports; eliminating vendor invoices; using procurement cards for non-inventory purchases; using company credit cards and electronic forms for travel expenses; …
What is the most effective technique used to minimize the risk of an inaccurate inventory counts?
What is the most effective technique used to minimize the risk of an inaccurate inventory counts? The use of just-in-time (JIT) accounting systems.
What is the definition of a revenue cycle?
Revenue Cycle Definition. Revenue cycle is a method of defining and maintaining the processes used for completion of an accounting process for recording of revenue generated from services or products provided by the company which include the accounting process of tracking and recording transaction from beginning, normally which starts from …
What are the activities of the expenditure cycle?
Expenditure cycle–consists of activities related to the acquisition of and payment for plant assets and goods and services. Two major transaction classes: 1–purchases transactions 2-cash disbursements
How does adaptation of revenue cycle management help?
Adaptation of Revenue Cycle Management also helps in reducing the time & cost of the management by automating the repeated processes. The study of the cycle helps the management to decide the structure of the process, which will provide the best results and will have the best controls in managing the cycle.
What can cause misstatement of expenditure cycle transaction?
Let us consider factors that may lead to misstatement of expenditure cycle transaction: The auditor must remember inherent limitations of internal control, including the possibility of management override, collusion, errors due to fatigue or misunderstandings, and failure to adapt the control structure to changed conditions (e.g., rapid growth).
