Course Title: Accounting Information Systems

Course ID: ACN 441

Section: 01.

Semester: Autumn 2021.

Date of Submission: 9th December 2021.

Name: Asif Khan

ID: 1821018

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 TABLE OF CONTENTS

Executive Summary

This report attempts to explore the elements that influence the components of accounting
information systems; revenue cycle, expenditure cycle & its subcomponents, and conversion
cycle of Samsung Group.

The subsystems of revenue cycle that this paper will look into are, in order of occurrence, sales
order, credit/customer service, shipping, billing/accounts receivable and cash
receipts/collections. Authorization controls, segregation of functions, access controls are parts of
internal controls. Revenue cycle can be automated, there is computer-based accounting system
with two extremes; automation and reengineering.

The first part of expenditure cycle is about purchases and cash disbursements procedures. The
subsystems of the procurement cycle part of expenditure cycle are, in order of occurrence,
purchase requisition, purchasing, receiving/inspection, accounts payable and cash disbursements.

The second part of expenditure cycle is about payroll processing. In a payroll system, personnel
department uses personnel action forms to active/terminate employees, change the pay rate of
them and so on. There are computer-based payroll systems as well.

The conversion cycle transforms raw materials, resources, overhead and labor into finished
goods or services for sale. The subsystems of conversion cycle are physical activities; which
concerns the production system, and information activities; which is about the cost accounting
system. The planning, scheduling, and control of the physical product during the manufacturing
process are all part of the production system. The three production methods are, continuous

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processing, batch processing and make-to-order processing. The cost accounting system records
the financial effects of the events occurring in the production process.

That sums up the three transaction cycles, now these will be looked through Samsung Group’s
Accounting Information Systems data.

Revenue Cycle

The revenue cycle in Samsung is a way of defining and retaining the processes used to complete
an accounting system for recording revenue earned from products or services provided by a
company, which includes the accounting process of telematics and recording transaction from
beginning to end, which typically begins with receiving an order from a customer or entering
into an agreement with a customer, and ends with receiving payment from its customers.

Now Samsung Group mostly deals with the manufacturing and service industry. In
manufacturing industry, it begins when a company gets a customer order, which is then
processed by the appropriate department. It keeps products ready for dispatch before beginning
billing, preparing an invoice, and sending it to a customer. The logistics department organizes
transportation and sends items to a client, who subsequently receives the goods and pays for
them. The process ends when the organization receives money and registers the transaction in the
system.

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 Revenue cycle flowchart
Source: Revenue Cycle (wallstreetmojo.com)

This cycle is shorter in the service industry than in the manufacturing industry, and it begins
when they receive a service request or when the organization enters into a memorandum of
understanding with a customer, and it ends when the concerned department provides service and
the company receives payment from the customer. In the event of continuous service in the
service business, the process will operate in accordance with the customer's wishes.

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 Expenditure Cycle

The expenditure cycle in Samsung Group is a series of regular business activities and associated
data processing operations linked with the purchase and payment of goods and services. The
procurement of raw materials, completed goods, supplies, and services is the emphasis of this
section.

The main external flow of information in the expenditure cycle is with the vendors. Expenditure
data is also sent from the spending cycle to the general ledger and reporting function for use in
financial statements and management reports. The major goal of the spending cycle is to reduce
the entire cost of obtaining and maintaining inventory, supplies, and the numerous services
required by the company.

The four basic processes of the expenditure cycle are; ordering materials, supplies, and services;
receiving materials, supplies, and services; approving invoices from suppliers; and cash
disbursements.

Ordering inventory, supplies, or services is the first important corporate action in the expenditure
cycle. This entails first determining what, when, and how much to buy, and then choose which
provider to buy from. Accountants and system administrators must be aware of inventory
management best practices.

The receipt and storage of ordered commodities is the second key commercial activity in the
expenditure cycle. It is the responsibility of the receiving department to accept deliveries from
suppliers. To update the inventory records, information regarding the receipt of requested
products must be conveyed to the inventory management function.

The third major task is to approve payment of supplier invoices. Supplier invoices are approved
for payment by the accounts payable department. When products are received, a legal obligation
to pay suppliers develops. The accounts payable department is responsible for matching a
supplier's invoice with a relevant purchase order and receiving report when it is received. A

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voucher package is created when the supplier's invoice and accompanying supporting papers are
combined.

The final task is to pay suppliers. Paying suppliers is the responsibility of the cashier, who
reports to the treasurer. Payments will be made when accounts payable provides a voucher
packet to the cashier. Although many payments are still made by check, EFT and FEDI are
becoming more popular.

Expenditure cycle: Purchases and Cash Disbursement Procedures Flowchart

(Source: https://player.slideplayer.com/91/14901914/slides/slide_1.jpg)

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Payroll processing is a distinctive purchasing method in which the company buys labor instead
of raw materials or completed items for resale. Payroll processing, on the other hand,
necessitates particular procedures for the following reasons:

A company can create broad purchasing and payout policies that apply to all vendors and
inventory items. Payroll practices, on the other hand, vary widely depending on the type of
employee. Hourly employees, salaried employees, piece workers, and commissioned employees,
for example, require separate procedures. Payroll processing also necessitates unique accounting
methods for employee deductions and tax withholdings that do not apply to trading accounts.

Expenditure cycle: Payroll Processing and Fixed Asset Procedures Flowchart

(Source: https://www.amazon.com/Accounting-Information-Systems-published-
Learning/dp/B00E28Z7G8)

A continual stream of acquiring and disbursing transactions characterizes general expenditure

activities. As a result, companies create purchasing systems to handle their typical levels of
activity. Payroll activities, on the other hand, are one-time occurrences in which employees are
paid weekly, bimonthly, or monthly. The process of preparing large numbers of payroll checks

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on a regular basis, in addition to the standard trade account checks, might cause the general
purchasing and cash disbursements system to become overburdened.

Writing checks to employees necessitates additional safeguards. Payroll fraud can be encouraged
by combining payroll and trade transactions.

Conversion Cycle
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The conversion cycle at Samsung transforms raw materials, labor, and overhead into completed
products or services for sale. All businesses, including those in the service and retail industries,
have a conversion cycle in theory. Manufacturing companies, on the other hand, are the most
formal and visible.

The conversion cycle is one of four accounting transactions cycles that records a single economic
event – the consumption of labor, materials, and overhead to produce a product or service.
Inventory records are kept in the inventory system. They're used by manufacturers to keep track
of their raw materials and final goods inventories. They are used by merchandisers to ensure that
commodities are available for resale. The inventory system handles two types of transactions:
inventory acquisition and sale, which originate in the revenue and expenditure cycles.

Conversion cycle relative to other cycles

(Source: https://www.amazon.com/Accounting-Information-Systems-published-
Learning/dp/B00E28Z7G8)

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Customer orders from the revenue cycle and/or sales predictions from marketing activate
production. These data are used to determine a production goal and create a production plan that
guides production activities. Purchase requisitions for raw materials required to satisfy
production goals are directed to purchasing procedures, which generate purchase orders for
vendors. The payroll system receives the labor utilized in production and processes it. The
general ledger and financial reporting system receive manufacturing costs connected with
intermediate work-in-process and finished goods.

The conversion cycle's cost accounting activities track the financial consequences of physical
events that occur during the manufacturing process. When the production planning and control
department submits a copy of the original work order to the cost accounting department, the cost
accounting process for that production run begins. This causes a new record to be added to the
WIP file, which is the subsidiary ledger for the WIP control account in the general ledger,
signaling the start of the production event.

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 Conclusion

The transactional cycles in accounting information systems are classified into three sub cycles,
the revenue cycle, expenditure cycle and conversion cycle, this paper tried to exhibit these cycles
in relation to Samsung Group. Samsung has a substantial global consumer electronics market
share. But due to a lack of public information concerning Samsung’s Accounting Information
Systems, the report is flawed.

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 References

A. Hall, J. (2010). By James A. Hall: Accounting Information Systems Seventh (7th) Edition (7th

Edition). Cengage Learning. https://www.amazon.com/Accounting-Information-Systems-

published-Learning/dp/B00E28Z7G8

Expenditure cycle: purchasing to cash disbursements - Chapter 13. (2021, April 24). JoHo.

Retrieved December 9, 2021, from https://www.joho.org/nl/expenditure-cycle-

purchasing-cash-disbursements-chapter-13

Interim Reports │ Financial Information │ Investor Relations │ Samsung Global |. (2021,

December 1). Samsung Global. Retrieved December 9, 2021, from

https://www.samsung.com/global/ir/reports-disclosures/business-report/

Thakur, M. (2021, September 8). Revenue Cycle. WallStreetMojo. Retrieved December 9, 2021,

from https://www.wallstreetmojo.com/revenue-cycle/

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