Lecture 5 TRANSACTION CYCLES AND ACCOUNTING APPLICATIONS

Revenue Cycle

The direct exchange of finished goods or services for cash in a single transaction between a seller and a buyer.

Sales Order Processing Subsystem

A component of the revenue cycle that manages the tasks involved in receiving and processing customer orders.

Cash Receipts Subsystem

Part of the revenue cycle responsible for managing the receipt of cash from customers.

Expenditure Cycle

The process of converting an organization's cash into physical materials and human resources necessary for business.

Purchases Processing Subsystem

Subsystem that includes tasks involved in identifying inventory needs, placing orders, receiving inventory, and recognizing liability.

Cash Disbursements Subsystem

Handles the payment of obligations created in the purchases processing system.

Payroll Processing Subsystem

System that manages the payroll activities including calculating wages and distributing paychecks.

Fixed Asset System

Processes transactions related to the acquisition, maintenance, and disposal of a firm's fixed assets.

Journal Voucher

A document used to authorize and identify financial amounts and accounts affected in the general ledger.

GLS Database

The database comprising various files including global ledger master file, journal voucher files, and historical data.

Management Reporting System (MRS)

System designed to provide tailored reports for internal management use to aid in decision-making.

Financial Reporting System (FRS)

System responsible for generating mandatory financial statements for external stakeholders.

Segregation of Duties

Internal control principle that ensures no single individual is responsible for all aspects of any financial transaction.

Internal Control Activities

Procedures designed to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Return Slip

Document that describes items being returned by a buyer to initiate the reverse of a previous transaction.

Audit Trail

A step-by-step record by which accounting entries can be traced to their source.

Accounts Payable (AP)

Liabilities incurred when a company purchases goods or services on credit.

Accounts Receivable (AR)

Money that is owed to a company by its customers for goods or services delivered.

Independent Verification

The process of reviewing and verifying transactions by an independent party to ensure accuracy and completeness.

Automated Accounting System

A system that uses technology to perform accounting tasks and reduce human error.

General Ledger

The main accounting record that maintains a permanent record of all financial transactions.

Depreciation Schedule

A plan that outlines the method and timeline of asset depreciation for accounting purposes.

Cost Center

An organizational unit with responsibility for controlling costs within budget limits.

Profit Center

A division within a company responsible for generating revenues and controlling its costs.