Quiz on Transaction Cycles

1. Enumerate the five major transaction cycles and provide their process
flowchart individually. (50 points)

1. Revenue Cycle

2. Expenditure Cycle

3. Production Cycle
4. Human Resources/Payroll Cycle

5. Financing Cycle

2. Explain how the five cycles are interrelated. (10 points),

 The transaction cycles become interrelated as it consists of transactions that
occur consisting of the cycle of steps that complete the exchange of assets or
services between parties where accounting system processed transactions of related
activities such as sale of goods to customers, acquisition of merchandise and
payment to vendors, production of finished products for sale, and payment to
employees for services they had rendered. Identifying transaction cycle is an
important part of obtaining understanding of the client’s internal control because it
helps the auditor gain adequate understanding of the flow of transactions and it
better evaluate the impact of internal control on financial statements.

As what the discussion informed us, these basic exchanges that grouped into five
major transaction cycles has this inclusion.
Revenue and Receipt cycle - sale of goods or services to customer and collection
of cash.
Expenditure cycle - acquisition of goods and services and payment for the goods
and services acquired
Human Resources and Payroll cycle - acquisition of services from employees and
payment for the services acquired
Production cycle - production of entity’s product for sale
Financing cycle - generation of capital funds from outside investors and investment
of capital funds to other profitable activities.

Also, as we remember, the cycles are implemented, it is critical that the AIS be able
to accommodate the information needs of managers and integrate financial and non-
financial data. The general ledger and reporting system get data from all of the
cycles and provides information for internal and external users.