Premium Essay

The Expenditure Cycle

In: Business and Management

Submitted By ahnieszka
Words 318
Pages 2
I am going to describe the testing for control over the expenditure cycle.
The expenditure cycle starts with the purchase requisition. The department in need of the service or assets sends a properly approved, serially numbered requisition to the purchasing department.
The risk associated with the purchase requisition is that anyone could potentially make a purchase requisition order for any kind of amount.
Therefore, to mitigate a risk associated with the purchase requisition, it is very important to have the right personnel to approve the purchase order.
When I tested the expenditure cycle, I randomly chose the purchase requisition and I followed every step associated with that cycle and in In addition, I documented every step of my testing by describing every significant detail related to my testing. Also, I performed walkthrough by talking to the right personnel and asking them questions associated with my testing. That help me not only to better understand the entity’s business cycle but made my testing more reliable since I could determine appropriate segregation of duties among the personnel.

The purchasing department should place the order after giving proper consideration to the time and quantity to order. The purchasing department should also obtain competitive bids from various suppliers to make sure the best price is obtained. The purchase order is issued only after proper approval.
For the internal control purposes, it is best that prenumbered purchase order be used. There should be multiple copies that will be used to the requisitioning department, the vendor, the receiving department and the accounting department
The copy of the purchase order sent to the receiving department serves as an authorization to accept the goods when they arrive. A receiving report is prepared by this department and forwarded to accounting department. The goods are…...

Similar Documents

Premium Essay

The Product Life Cycle and Customer Life Cycle

...The Product Life Cycle A product's life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product. If a curve is drawn showing product revenue over time, it may take one of many different shapes, an example of which is shown below: Product Life Cycle Curve The life cycle concept may apply to a brand or to a category of product. Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile. Product development is the incubation stage of the product life cycle. There are no sales and the firm prepares to introduce the product. As the product progresses through its life cycle, changes in the marketing mix usually are required in order to adjust to the evolving challenges and opportunities. Introduction Stage When the product is introduced, sales will be low until customers become aware of the product and its benefits. Some firms may announce their product before it is introduced, but such announcements also alert competitors and remove the element of surprise. Advertising costs typically are high during this stage in order to rapidly increase customer awareness of the product and to target the early adopters. During the introductory stage the firm is likely to incur additional costs associated with the initial distribution of the product. These higher costs coupled with a low sales volume usually make the introduction stage a period of negative......

Words: 2583 - Pages: 11

Premium Essay

Capital Expenditure

...DEFINITION OF EXPENDITURE FOR CAPITAL PURPOSES Previous Definition in Financial Procedure Rules The previous definition of capital expenditure was set out in Part IV of the Local Government and Housing Act 1989. All capital expenditure and financing must be in accordance with the provisions of the LGHA 1989 and the Local Authorities (Capital Finance) Regulations 1997. No leasing or credit arrangement as defined by the LA(CF)R 1997 shall be entered into without the approval of the Director of Finance. Any service using an asset will be charged with a cost of capital employed which represents interest foregone in owning the asset and depreciation, representing the proportion of the asset’s useful life consumed in the year in question. Current Position The LGHA has now effectively been replaced by the Local Government Act 2003 which defines capital expenditure as ‘expenditure that falls to be capitalised under proper practices’. It then goes on to define proper practices as meaning the CIPFA Recommended Practice (SORP) and any specific legislation. Specific legislation relating to capital expenditure tends to be defined in various Capital Finance Regulations. The SORP definition of capital expenditure is therefore supported by statute. However, it does not have a single definition of capital expenditure, but includes references to capitalising expenditure in various parts of the SORP. In the Fixed Assets section of the SORP expenditure that should be...

Words: 388 - Pages: 2

Premium Essay


...Under United States income tax law, to make a deduction in the current taxable year, a taxpayer must be able to show that a particular cost is a business expense[1] (but not an expense related to personal activities)[2] and not a capital expenditure.[3] Capital expenditures either create cost basis or add to a preexisting cost basis and cannot be deducted in the year the taxpayer pays or incurs the expenditure.[4] In terms of its accounting treatment, an expense is recorded immediately and impacts directly the income statement of the company, reducing its net profit. In contrast, a capital expenditure is capitalized, recorded as an asset and depreciated over time. Contents [hide] 1 Four ways costs can be capital expenditures 2 Illustrative Example 3 See also 4 References 5 External links Four ways costs can be capital expenditures[edit] The Internal Revenue Code, Treasury Regulations (including new regulations proposed in 2006), and case law set forth a series of guidelines that help to distinguish expenses from capital expenditures, although in reality distinguishing between these two types of costs can be extremely difficult. In general, four types of costs related to tangible property must be capitalized:[5] 1. Costs that produce a benefit that will last substantially beyond the end of the taxable year.[6] 2. New assets that have a useful life substantially beyond one year.[3] For example, in Commissioner v. Idaho Power Co.,[7] the taxpayer used its own......

Words: 648 - Pages: 3

Premium Essay

Comparing Capital Expenditures

...Comparing Capital Expenditures In certain industries there are clear leaders. For example, Wal-Mart is a clear leader in the retail industry and Google is a clear leader in search engines. But with smaller companies find ways to thrive in those giant’s shadows. Competition in the coffee industry is hard to distinguish at times, but Starbucks is a brand name that stands out on its own. Coffee competitors have done a good job of differentiating themselves by using environments and product mix. Coffee is the second largest U.S. import, and specialty coffee is forecasted to be an $11 billion dollar a year industry. In order to strive in this industry, companies must have the appropriate buildings, properties and equipment. Capital Expenditures are the cash that is used to buy, revamp or upgrade these physical assets. Capital expenditures are forecasted using CapEx % of gross profits and are allocated proportionally to each division based on the gross margin. This paper will compare the capital expenditures of Dunkin Brands and the Starbucks Corporation (Fig.1). Direct Competitor Comparison SBUX DNKN Market Cap: 49.50B 4.42B Employees: 160,000 1,104 Qtrly Rev Growth (yoy): 0.11 0.06 Revenue (ttm): 14.02B 667.67M Gross Margin (ttm): 0.57 0.79 EBITDA (ttm): 2.59B 313.12M Operating Margin (ttm): 0.14 0.39 Net Income (ttm): 1.51B 106.11M EPS (ttm): 1.97 0.94 P/E (ttm): 33.59 44.29 PEG (5 yr expected): 1.61 1.72 P/S......

Words: 1089 - Pages: 5

Free Essay

Expenditure allocate the expenditure of the country. Budget can be defined as an estimation of income and expenditure for a set period of time. Furthermore, budget is a microeconomic concept that shows the tradeoff made when one good is exchanged for another. . According to Ekstein (1973), budget can been define as detail statement of income and expenditure that have been made or expected to be made. There are several function of a budget which is as a policy tool and instrument. Means that, budget is a tangible of a policy decision whereby budget is a means of establishing policy that been accomplished through the budget’s allocation of government resource. Besides that other function of budget is as a management tool whereby almost all government activities are funded through the budget and since the budget is a continuous process it is an effective tool for the public official because it provides an effective management device at every stage of government activity. Means that, any of the activity planned by government will be reflected based from the budget. As example, in Malaysian budget the governments have their annual plan that been proposed projected revenue and propose the expenditure. It consists of revenue and expenditure for 1 year as a short term plan. There is two type of budget which is operating budget and development budget. Besides that, in budget there are two component of budget which is public expenditure and public revenue. Public Expenditure refers to the......

Words: 2240 - Pages: 9

Premium Essay

Business Cycle

...Revenue Cycle Sales order entry The revenue cycle begins with the sales order entry. Web sites provide a way to automate sales order entry. This improves efficiency and reduce cost by company can employ fewer staff. Another way to improve the sales order entry process involves using electronic data interchange (EDI) to link directly with customers. With EDI, retail stores would send their orders directly to sales order system; it can reduce the need for data entry. Retailers can save money; manufacturers can have more accurate sales forecasts to operate production and delivery schedules. Shipping When stock has been determined, the system will create a picking ticket which lists the items, and quantities of each item that the customer ordered. The picking tickets are electronic forms which displayed on portable handheld devices or on monitors built into forklifts. The picking ticket printed by sales order entry triggers the pick and pack process. An automated warehouse system has computers, bar-code scanners, and communications technology. When replacing the bar-code with RFID tag reduce the need to align items with scanners; the tags can be read as the stock moves throughout the warehouse. Automated warehouse systems beside cut cost and improve efficiency in handling stock; it can also enable more customer-responsive shipments. After counts the goods form warehouse, it produces a packing slip and bill of lading. In order to maximize the efficiency and effectiveness of......

Words: 727 - Pages: 3

Premium Essay

Expenditure and Revenue

...Expenditures and Revenues Summary: Palm Beach Sheriff’s Office Bianca Gerena AJS 522 Paula May May 26, 2014 Expenditures and Revenues Summary: Palm Beach Sheriff’s Office The Palm Beach Sheriff’s Office, a statutory government agency, is responsible for providing services to three mandated programs in Palm Beach County, Florida (, 2013). Those programs are Law Enforcement, Corrections Services throughout Palm Beach County’s jails, and finally Bailiff and Court staff. Palm Beach Sheriff’s office is required to respond to law enforcement calls throughout the county and all unincorporated areas of Palm Beach County. Palm Beach Sheriff’s office is also responsible for providing services to certain municipalities throughout Palm Beach County, if a contract exists between the municipality and the Sheriff’s office. The municipality must come to a fee agreement with the Palm Beach Sheriff’s office before a contract is established. The following will elaborate on the Palm Beach Sheriff’s Office revenue and expenditures and the impact of the expenditures on the revenue source. The following will also elaborate on who the key players are in terms of making budget decisions and whether or not there is any influence of political and public policies on the Palm Beach Sheriff’s Office. Finally, recommended organizational financial analysis alternatives for the Palm Beach Sheriff’s Office will be researched. The Impact of the Expenditures on the Revenue Source Palm Beach......

Words: 1743 - Pages: 7

Premium Essay

Accounting Cycle

...Accounting Cycle Description Paper Riordan Manufacture Inc. Accounting Process Team C Acc. /340 Cito Vanegas July 29, 2014 Introduction Riordan Manufacturing Inc. is a leader in their industry which is plastic injection molding. This company could not manually accounting due to the company's wide span corporation. Manually is very time consuming and it is tedious for the high production that Riordan does and services. Riordan Manufacture need to use computer software program to do all Riordan Manufacture accounting needs. This paper will explain how Riordan Manufacture accounting cycle can assist with the strengths and weakness of the internal controls of the cycles. Riordan Manufacture needs to make sure that their company moves forward and smoothly. The Five-accounting cycles The five-accounting cycles are revenue, expenditures, conversion financing, and fixed asset. Revenue is the first-accounting cycle which is the revenue, which includes sales and cash receipts. All sales that Riordan makes form the plastic products that are manufactured needs to be recorded in the accounting information systems. Expenditure is the second of the accounting cycle which includes the expenses of making the product such as material supplies, payroll, and cash disbursements. Conversion is the third-accounting cycle which includes, but not limited to all the plastic production costs to all goods and services that Riordan Manufacture supply. The conversion cycle takes information......

Words: 365 - Pages: 2

Premium Essay

Revenue Expenditures

...Revenue Expenditures & Capital Expenditures Tracey DeSautel November 1, 2014 University of Phoenix XACC/291 In the world of accounting, there are numerous types of expenses that come along with running a business on a day to day basis as well as overall. There are things that break down and add value to the companies assets as well as things that are expensed to run the business on a daily basis. These can break down to two important items and those are Revenue expenditures and Capital Expenditures. Revenue expenditures is the amount that is expensed immediately. Thereby being matched with revenues of the current accounting period. Examples include things such as routine repairs because they are charged to a direct account such as “ repairs and maintenances expenses> these do not extend the life or improve the assets for the company. Capital expenditures are amounts spent to acquire or improve a long term asset. These can be things such as buildings or even equipment. These are usually recorded in accounts classified as “ property, plants and equipment”. These are charged to depreciation expense over the assets lifespan. It breaks down to capital expenditures are for items such as machinery and buildings where as revenue expenditures are for things that create revenue such as advertising and labor. A further look into capital expenditures and examples are that, that do not occur in daily transactions for the company and include such purchases that may include the...

Words: 354 - Pages: 2

Premium Essay

Revenue and Capital Expenditures

...Revenue and capital expenditure are aspects of business management that seem very similar at first. Both revenue and capital expenditure are purely focused on the process of spending money to help a business survive and grow. The key difference between the two is the intention of the expenses and the direction of the money flow. Revenue is for short-term costs that are not used afterwards to make the company grow, such as repairs which are most common. Capital expenditure is for assets that are considered or categorized long-term, such as new vehicles or software, which will be used to make the company stronger. Revenue expenditure is money being spent immediately and exclusively for short-term purposes. These are expenses associated with profit-producing assets, such as repair, that may or may not increase the life of the given asset. Revenue expenditure is more often associated with day-to-day costs the company accrues through its life cycle. Capital expenditure is money is being spent on assets that will increase the company’s ability to pull in profit or operate at a higher performance level. New software technology, vehicles, machinery and tools that will be used for at least 12 months are considered capital expenditure. Capital expenditure, unlike revenue, is looked at more as an investment than a cost, because it is being used to strengthen the company so it can do better business. When purchasing a capital asset, a business either will spread the cost out over the......

Words: 456 - Pages: 2

Free Essay

Revenue Cycle

...REVENUE CYCLE: SALES TO CASH COLLECTIONS ------------------------------------------------- DEFINITION OF REVENUE CYCLE The recurring set of business activities and data processing operations associated with: * Provides goods and services to customers * Collects cash in payment for those sales Primary Objective: * Provide the right product * In the right place * At the right time for the right price ------------------------------------------------- BASIC REVENUE CYCLE ACTIVITIES & GENERAL THREATS BASIC REVENUE CYCLE ACTIVITIES 1. Sales order entry 2. Shipping 3. Billing 4. Cash collections GENERAL REVENUE CYCLE THREATS 1. Inaccurate or invalid master data 2. Unauthorized disclosure of sensitive information 3. Loss or destruction of master data 4. Poor performance GENERAL REVENUE CYCLE CONTROLS 1. Data processing integrity controls 2. Restriction of access to master data 3. Review of all changes to master data 4. Access controls 5. Encryption 6. Backup and disaster recovery procedures 7. Managerial reports 1. ------------------------------------------------- SALES ORDER ENTRY ACTIVITIES AND THREATS | CONTROL | 1. Take order 1. Incomplete/inaccurate orders 2. Invalid orders | 3. Data entry edit controls 4. Restriction of access to master data 5. Digital signatures or written signatures | 2. Check and approve credit ......

Words: 4961 - Pages: 20

Premium Essay

Government Expenditure and Revenue

...Government Expenditure and Revenue by Ooi Soon Beng After studying this chapter, you should be able to understand:  Public Budget  Budget Deficits and Surplus  Expansionary and Contractionary Fiscal Policy  Discretionary and Automatic Fiscal Policy  National Debts and Its Issues and Misconceptions  Problems with Fiscal Policy : Macroeconomics According to Keynes, government has to intervene to stabilize the economy. Stabilization can be achieved in part by manipulating the Public Budget to increase output and employment or to reduce inflation. The Budget outlines the government’s taxation and expenditure plans for the coming fiscal year. The Ministry of Finance are responsible for the preparation of the budget. Sources of Revenues:  Direct taxes on individuals and companies  Indirect taxes on goods and services (gasoline, alcohol, tobacco, etc)  Non-tax revenue (stamp duty, licenses, permits, etc) Malaysia: Sources of Revenue (in RM) 1990 2013 2014 Direct Taxes 35.2% 56.5% 59.1% Indirect Taxes 36.7% 16.6% 17.2% Non-Tax Revenue 28.0% 26.9% 23.7% Total Revenue 29,521m 207,913m 224,094m Source: Ministry of Finance Categories of Expenses:  Operating Expenditure (emolument, pensions, debt servicing, grant to states, subsidies, supplies, scholarships, etc)  Development Expenditure (security, social services, economic services, expenditure on......

Words: 2314 - Pages: 10

Premium Essay


...Cash Receipts Cycle Upon the due date, the company collects payment from its clients usually they pick-up the payment every Friday. However, there are instances of special arrangements for collection for specified day of the week. The collector or messenger collects the payment from its clients and issues a duplicated copy of official receipts. The original is given to the clients as its copy. Before the end of the same banking day, the collector/messenger goes to their depository bank, prepares a deposit slip and deposits their collection. The authorized duplicate copy of the deposit slip is then attached to the copy of the duplicate official receipt and turned over to the accounting department. The accounts receivable clerk will reconcile the payment transaction. She checks if the validated duplicate copy of the deposit slips corresponds to the duplicate official receipt. If it matched, this will trigger the posting of payment of the client in the official receipts and updates the invoicing book and accounts receivable ledger. At the end of each week, the collector and the accounting staff prepares a weekly collection report and summary of accounts receivable aging report respectively that will be given to the accounting manager. The aging reports are for internal purposes and to see how many collection the company made. At the end of each month, the accounting manager does bank reconciliation to update the company’s book. She reconciles the passbook with the cash in......

Words: 1077 - Pages: 5

Free Essay

Tourism Cycle

...THE TOURISM LIFE CYCLE: AN OVERVIEW OF THE CRETAN CASE Dr Konstantinos Andriotis 1 Hellenic Open University, Greece. Abstract: The increasing demand of international tourists for holidays has resulted in a rapidly increase of the number of tourist destinations. To explain destinations development the life cycle approach has been widely adopted. According to Butler (1980) destinations pass through a predictable sequence of six stages. These stages are: exploration, involvement, development, consolidation, stagnation and decline or rejuvenation. In each life cycle stage there are changes in the morphology, the types of tourists visitation, and residents’ attitudes towards tourism. th Through the presentation of historical data from the start of the 20 century up to now it is the aim of this paper to document these changes by providing evidence from the island of Crete. Five stages of tourism evolution are evident, namely: the era of ‘wealthy’ explorers, the era of cruisers, the Second World War and the Civil War, the reconstruction of the tourism industry, and the era of mass organised tourism. The findings confirm that today the island is on the maturity stage, tourism has resulted on substantial changes on the island’s coastal resorts and various attempts are required by the private and the public sectors to avoid decline. Keywords: Tourism, Tourism Destinations, Life Cycle INTRODUCTION Various studies (e.g. Gilbert, 1939; Defert, 1954; Stansfield, 1978; Young, 1983)......

Words: 5114 - Pages: 21

Premium Essay

Business Cycle

...In general the economy tends to experience different trends. These trends can be grouped as the business/trade cycle and may contain a boom, recession, depression and recovery. A business/trade cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real Gross Domestic Product (GDP) and other macroeconomic variables. Samuelson and Nordhaus (1998), defined it as ‘a swing in total national input, income and employment, usually lasting for a period of 2 to 10 years, marked by widespread expansion or contraction in most sectors of the economy’. These fluctuations in economic activity usually have implications on employment, consumption, business confidence, investment and output. The Keynesian Approach, this theory shows how the collaboration of multiplier and accelerator can lead to regular cycles in aggregate demand. The Keynesians believe that economic activity is generally unstable and is subject to inconsistent shocks, usually causing the economic fluctuations and are attributed to the changes in autonomous expenditures especially investment. The Keynesian approach is pretty simple; higher investment will lead to a larger rise in income and output in the short run. This means that consumers will spend some of their income on consumption goods. This will give rise to further increase in expenditure. Ceteris paribus an initial rise in autonomous investment produces a more than proportionate rise in income. The......

Words: 1663 - Pages: 7

Mittlerer Osten | Família | Multimedia, Internet i Biuro