1.HAILU URGESA..........................................

1301783
2.HAYMANOT AMARE...................................1301784
3.HENOK SHIBE............................................1301799
4.IDRIS KANA................................................1301813
5.INDALE OLANI............................................1301815
6.IYASU ISABA..............................................1301818
7.JALENE LEGESSE.....................................1301824
8.JARA BOGALE...........................................1301827
9.JEMAL ABDU.............................................1301829
10.JEMAL MEHAMMED.................................1301830
 INTRODUCTION
• This chapter is organized into three major
sections. The first is an overview of the
business process and events. This section
describes the five major business process
common to all types of organizations. The
second section describes the in each
business process. The third section presents
the transaction processing cycle.
•To measure the success of a business process, organizations track the
completion of different steps within the process.
i.e., benchmarks -- or evaluate the quality of the process' endpoint.
When an organization determines that a business process is not
achieving the desired goals or outcomes, there are several strategies it
can use for improvements. For example, an organization might to
focus on business process visibility to identify issues in process
performance or execution.
• Organizations also engage in business process mapping to
help boost the effectiveness of their busines operations.
• Business process mapping provides a visual representation
of how different processes function and gives organizations
better visibility into how their business works.
2.1 BUSINESS PROCESS AND EVENTS
 What Does Business Event Mean?

Definition: Events, also called business events or transactions, are

occurrences that can be measured and change a business’ financial
position.
• In other words, an event is a business transaction that affects the
accounting equation and can be reasonably measured.
picture 2.2 business event diagram
Ø Business events are large gatherings where professionals carry
out business-related activities, such as selling services, conducting
research or meeting clients. These events often blend leisure with
professional activities.
• A transaction is an agreement between two entities to exchange
goods or services or any other event that can be measured in
economic terms by an organization.
• Examples include selling goods to customers, buying inventory from
suppliers, and paying employees.
• Many business activities are pairs of events involved in a give-get
exchange.
 2.2. Identifying events in business process

A financial transaction is an economic event that affects the assets and equities
of the firm, is reflected in its accounts, and is measured in monetary terms. The
most common financial transactions are economic exchanges with external parties.
These includes:
üthe sale of goods or services,
ü the purchase of inventory,
ü the discharge of financial obligations, and
ü the receipt of cash on account from customers.
Financial transactions also include certain internal events such as the
depreciation of fixed assets; the application of labor, raw materials, and overhead
to the production process; and the transfer of inventory from one department to
another.
 The three cycles exist in all types of businesses both profit-seeking
and not-for-profit.
1 expenditure cycle
2 conversion cycle and
3 revenue cycle
figure 2.3Transaction cycle diagram
 2.2.1. The Expenditure Cycle

Ø Business activities begin with the acquisition of materials, property, and labor in
exchange for cash
in the expenditure cycle. Figure 2.3 shows the flow of cash from the organization to
the various
providers of these resources. Most expenditure transactions are based on a credit
relationship
between the trading parties.
§ The actual disbursement of cash takes place at some point after the receipt of
the goods or services. Thus, from a systems perspective, this transaction has
two parts:
ü physical component (the acquisition of the goods) and
ü financial component (the cash disbursement to the supplier). A separate
subsystem of the cycle processes each component.
 2.2.2. The Conversion Cycle

The conversion cycle is composed of two major subsystems:

• the production system and
• the costaccounting system.

The production system: involves the planning, scheduling, and control of

the physicalproduct through the manufacturing process.
This includes determining raw material requirements, authorizing the
work to be performed and the release of raw materials into
production, and directing the movement of the work-in process through its
various stages ofmanufacturing.

The cost accounting system: monitors the flow of cost information related
to production.The information this system produces is used for inventory
valuation, budgeting, cost control,performance reporting, and
management decisions, such as make-or-buy decisions.
Manufacturing firms convert raw materials into finished products through
formal conversion cycleoperations. However, the conversion cycle is not
usually formal and observable in service and retail enterprises.
 2.2.3. The Revenue Cycle

Firms sell their finished goods to customers through the revenue cycle,
which involves processing cash sales, credit sales, and the receipt of
cash following a credit sale. Revenue cycle transactions also have a
physical and a financial component, which are processed separately.
The primary subsystems of the revenue cycle are:
* Sales order processing: The majority of business sales are made on
credit and involve tasks such as preparing sales orders, granting credit,
shipping products (or rendering of a service) to the customer, billing
customers, and recording the transaction in the accounts
(accountsreceivable, inventory, expenses, and sales).
*Cash receipts: For credit sales, some period of time (days or weeks)
passes between the pointof sale and the receipt of cash. Cash receipts
processing includes collecting cash, depositingcash in the bank, and
recording these events in the accounts (accounts receivable and cash
 CONCLUSION
• Many business activities are pairs of events involved in a give-get
exchange. These exchanges can be grouped into five major business
processes. Namely, the revenue cycle, expenditure cycle, production
(conversion) cycle, human resource cycle, and financing cycle. The
revenue cycle consists of sales order processing and cash receipts
systems. The major subsystems of the expenditure cycle are
purchases/accounts payable system, cash disbursements system, payroll
system, and fixed asset system. The conversion cycle is composed of the
production system and the cost accounting system.
• The process that begins with capturing transaction data and ends with
informational output, such as the financial statements, is called transaction
processing. Accountants and other system users play a significant role in
the data processing cycle. The data processing cycle consist four steps,
data input, data storage, data processing, and information output
 Reference
• Accounting Information system sixth
edition.
Alan McSweeney, “Introduction to
Business Process Management”, 2010
• M. Staron, W. Meding, “Ensuring
Reliability of Information Provided by
Measurement Systems”, Ericsson