Transaction Cycle – the sequence of procedures applied in processing a particular
type of transactions
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Revenue (Sales and Collections) Cycle
Acquisition (Purchases and Disbursements) Cycle
Payroll Cycle
Investing Cycle
Financing Cycle
The Cycle Approach acknowledges the interrelationship of accounts in gathering
evidence about assertions in the financial statements.
Revenue Processing
“Different entities may have different revenue processes”
Basic Revenue Transaction Process for Merchandisers
1.
2.
3.
4.
5.
6.
7.
Controlling Customers’ Orders
Credit Approval
Issuing the Merchandise
Product Shipment
Customer Billing
Adjustments
Collection of Receivables
Controlling Customers’ Orders
The customer sends
a purchase order
Sales order processing
by the sales function
Check inventory stock
status
Documents:
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
Customer’s Purchase Order
- request for goods indicating the types,
quantities, and agreed prices
Sales Order
- Response to the buyer’s purchase order
Generate back order, if
necessary