Ans 1: Transaction cycles refer to the holding of goods in the process of accounting for financial transactions. There are a large number of transactions that happen regularly. Based on certain characteristics of transaction cycles, these are grouped into certain categories. This helps in dividing the transaction cycles into smaller numbers.
3 types of transaction cycles that are used in every business includes:
Ans a) Vendor represents the party of the process through which the goods and services are purchased or are made available to the customers. It refers to the party that is paid for the goods and services.
Invoice: It represents the payments that are to be made for the purchases that have been done. Every transaction should have an invoice as a proof for the receipt of goods, before the payment is made.
Ans b) AP Department: AP department refers to the Accounts payable department. The department functions as in charge of the approval of the payment that is related to the company's vendor ad also the transactions that are related to the creditor transactions. The department approves payment based on supporting documents for the transactions.
PO: PO refers to the purchase orders that reissued by the company to the seller. This keeps track of all the information about the goods that have been ordered as well as the quantities.
Rec Report: Rec Rept refers to the recording receipt. This operation involves maintaining a record of inventory as and when inventory is received by providing it a number.
Invoice: In this operation invoices are received and recorded in the ledger.
T: T refers to Transaction documents. It records the transactions when an inventory is purchase as per the invoices.
Ans 3: Flat file model of database contains records but with no relationship that is structured with the other files. It is a model where no files are related to each other. The end-user in this type of database owns their data rather than sharing it with other users. The files can be edited, formatted as per the specific needs of the user. It restricts sharing and allows editing as required by the single user. The potential aggravations a student might face:
Ans. a) Approval of bad debts write offs and reconciliation for subsidiary receivable ledger and the general ledger control account
These two are separate and should be separated so that the person who is approving the write off can still do the reconciliation. It is important that the person who is posting the transactions should be separate from the person who is reconciling them.
b) Distribution of the cheques payroll to the employees and approval of the time cards of the employees
This two actions should be separated so to avoid the fraud collusion. If the person who is approving the paychecks changes the punch in time of the employee than it will be fraud. This a separate person for the purpose should be assigned these tasks for better control.
c) Posting of amounts to both the cash receipts and cash disbursement journals to general ledger.
If only postings are done by a single person, then these activities can be done by the same person. This shows that the internal control is in place.
d) Writing cheques to the suppliers and posting it to the cash account
These tasks should be carried on by different persons. This helps in verifying the check and then being posted by someone else. This will help in placing internal control as someone might write a cheque for higher amount but it can be checked by the person who is posting it in the cash account, so that no extra money is withdrawn.
e) Recording cash receipts in journal and preparing the bank reconciliation
Recording the receipts and preparing reconciliation can be done by one person. The receipts should be made by different person. Recording and creating a receipt cannot be done by one person as it increases the chances of fraud.
Ans:a) Yes, Management is taking the best course of action for announcing a new system. By this method the present work will not be disrupted. If the announcement is done before than employees lay off or postpone the work in anticipation of using the software and doing it easily. This hampers the functioning in the company. Thus, it is better that company continue its function that are happening as they are and in the meantime they can develop and test the software. Once the software is ready they can launch it in the training session. This will provide information to the employees when it is required. Not before and not in the process. Hence, the management of the company has taken the best course for the action for the announcement of the system which it is developing.
b) The development process is smooth. It won’t disrupt the work of architects and they will continue to do the work that is required by them. Also, the normal flow of operations will be carried out by the company. As mentioned also it will help in reducing the hours that employees will waste on predicting about the software. None the less some will put their tasks on hold. The flow of work will be disrupted even before the launch of the system. Once the system is developed, then it can be introduced. With a session of training to employees, it will be easier for them to adopt it accordingly. They then can shift their work to a built software rather than guessing and wasting the time on what kind of software will be launched. How it will be helpful etc. Thus, in my opinion the process of development is smooth for the launch of software.
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