Transaction

Cycles
 Learning Objectives
1. Define the transaction cycle.
2.Describe the revenue and receipt cycle.
3.Identify the forms or documents used by the different
departments.
4.Identify and describe the functions of the departments
in revenue and receipt cycle.

Happy Learning

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1 Transaction Cycle
Transaction cycles are the means through which
an accounting system processed transactions of
related activities such as sale of goods to
customer, acqusition of merchandise and
payment to vendors, production of finished
product for sale, and payment to employees for
services they had rendered. 3
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Transaction – agreement between

two entities to exchanged good or
services or any other event that
can be measured in economic
terms by an organization.

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Different categories of Transaction Cycles

◉ Revenue and Receipt Cycle

◉ Expenditure and Disbursement Cycle
◉ Human Resource (Personnel) and Payroll
Cycle
◉ Production or Conversion Cycle
◉ Financing and Investing Cycle

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Revenue and Receipt Cycle
It encompases both the sale of goods
and services and the collection of
cash. 6
Forms or Documents received, initiated
and processed in Revenue Cycle
◉ Customer order ◉ Remittance advice
◉ Sales order (order ◉ Customer check
slip) ◉ Remittance listing
◉ Shipping document ◉ Bank deposit slip
or bill of lading ◉ Bank Reconciliation
◉ Sales Invoice (billing
statement)

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Functions of different deparments in
Revenue Cycle
Sales Department Credit Department
 Accept customer order.  Review sales order and
 Prepare sales order, investigate customer credit
diistribute copies, and information.
retan copy unfilled order  Initial copy of sales order if
file. credit is approved and
forward the order to
Inventory Control. If credit is
denied, notify the Customer
Order department.
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Functions of different deparments in
Revenue Cycle
Inventory Control Department
 Review sales order.
 Initial copy of sales order to
authorize the release of goods
from the warehouse.
 Forward goods and a copy of
the sales order to Shipping, and
retain a file copy of the sales
order.

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 Functions of different deparments in
Revenue Cycle
Shipping Department
 Compare sales order from  Release goods to carrier and
Inventory Control with sales obtain receipt.
order from Customer Order.  Notify Customer Order
 Examine goods from department that goods have
warehouse and compare with been shipped.
sales orders.  Forward copy of sales order
 Prepare goods for shipment and and shipping documents to
complete shipping documents. Billing; retain file copy of sales
order and shipping documents.
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Functions of different deparments in
Revenue Cycle
Billing Department
 Compare documents from Shipping with sales order from
Customer Order.
 Prepare sales invoice, send copy to customer and to
Inventory Accounting along with copy of sales order and
shipping documents, and retain file copy.
 Prepare daily sales summary, send copy to General
Accounting, and retain file copy.

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Functions of different deparments in
Revenue Cycle
Accounting Department
 Inventory Accounting: Enter cost information on sales
invoice, update inventory records, and forward sales
invoice and related documents to General Accounting.
General Accounting: Record sale and forward sales invoice
and related documents to Accounts Receivable.
 Accounts Receivable: Post sale to customer's account and
file sales invoice and related documents.

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Thanks!

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