As you have learned, business processes are critical concepts to understand as an accountant. Oftentimes, auditors group these processes into one of three key transaction cycles -- revenue, expenditure or conversion. Note that the financial reporting activities that we normally think of such as preparation of balance sheets, income statements, etc., are NOT considered a transaction cycle in the traditional sense.
- Think of a business that you have interacted with as a consumer or employee.
- For the business that you have interacted with, describe its primary focus/industry and what you believe are the critical business processes of that particular business.
- Identify how that particular business generates revenue and what documents that you are aware of that help the business keep track of its revenues. (Perhaps you have received one of these documents as a consumer or seen one as an employee).
- Do you think that the business you are describing uses batch processing or real-time processing for recording its revenues? Why do you think that?
- Based on what you have learned so far in the class, how do you think the information for this particular business might get from the revenue transaction cycle into the general ledger?