Intro for Revenue and Inventory Cycle

The revenue cycle is a process where in an entity utilizes a set of business

activities for the completion and recording of revenue generating services or products
(Meiryani, 2019). On the other hand, the inventory cycle is the process of
understanding, planning, and managing an entity’s inventory levels (Carlson, 2021). As
TRM is engaged in the logistics and distribution industry, such cycles must first be
thoroughly understood in order to properly develop an effective and applicable
accounting information system.
Intro for Accounting estimates, principles, and methods
Accounting principles ensure that entities follow the standard of recording,
recognizing, and presenting economic events or transactions which happen within an
entity. There are different standards for different sized entities such as small to medium
sized enterprise. Also, there are principles and standards which may differ for different
types of businesses. Hence, the need for a proper and applicable accounting estimate,
principles, and methods implemented within an entity. In the Philippines, the Accounting
Standards Council (ASC) opted to adopt the International Accounting Standards (IAS)
and International Financial Reporting Standards (IFRS) which we now call the Philippine
Accounting Standards (PAS) and Philippine Financial Reporting Standard (PFRS)
(Bangkok Sentral Ng Pilipinas, 2006).
PAS 2 requires that inventories be measured at the lower of cost and net
realizable value (NRV) and lists the acceptable methods of determining costs such as
the FIFO and Weighted Average Cost with the exclusion of LIFO which was recently
ruled out. However, TRM utilizes the FEFO or “First Expired, First Out” method of
valuation for their inventories. The rationale for such method lies behind their
inventories which consists of consumable and perishable goods.
References:
Meiryani, A. S. (2019). Revenue Cycle in Accounting Information Systems. International
Journal of Scientific & Technology Research Volume 8. Issue 6. Retrieved from:
https://www.ijstr.org/final-print/june2019/Revenue-Cycle-In-Accounting-Information-
Systems.pdf

Carlson, R. (2021). The Balance Small Business. Retrieved from:

https://www.thebalancesmb.com/example-of-a-bookkeeping-entry-for-inventory-
transactions-392923#:~:text=The%20inventory%20cycle%20for%20a,finished
%20goods%20and%20delivery%20phase.&text=The%20last%20phase%20is
%20the,as%20a%20number%20of%20days.

Bangko Sentral Ng Pilipinas (2006). Bangko Sentral Ng Pilipinas. Retrieved from:

https://www.bsp.gov.ph/Pages/Regulations/GuidelinesOnTheEstablishmentOfBa

nks/Overview.aspx