WGU D217 - Unit 2 Transacitons Exam | Questions
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Terms in this set (25)
Three transaction cycles process the expenditure cycle, the conversion cycle, and
most of the firm's economic activity: the revenue cycle. These cycles exist in all types of
businesses—both profit-seeking and not-for-profit
types. For instance, every business
(1)
incurs expenditures in exchange for resources
(expenditure cycle),
(2)
provides value added through its products or
services (conversion cycle), and
(3)
receives revenue from outside sources (revenue
cycle).
, Expenditure cycle Purchases/accounts payable (AP) system. This
system recognizes the need to acquire physical
inventory (such as raw materials) and places an
order with the vendor. When the goods are
received, the purchases system records the event
by increasing inventory and establishing an
account payable to be paid at a later date.
Cash disbursements system. When the obligation
created in the purchases system becomes due, the
cash disbursements system authorizes the
payment, disburses the funds to the vendor, and
records the transaction by reducing the cash and
accounts payable accounts.
Payroll system. The payroll system collects labor
usage data for each employee, computes the
payroll, and disburses paychecks to the
employees. Conceptually, payroll is a special-case
purchases and cash disbursements system.
Because of accounting complexities associated
with payroll, most firms have a separate system for
payroll processing.
Fixed asset system. A firm’s fixed asset system
processes transactions pertaining to the
acquisition, maintenance, and disposal of its fixed
assets. These are relatively permanent assets that
collectively often represent the organization’s
largest financial investment. Examples of fixed
assets are land, buildings, furniture, machinery, and
motor vehicles.
Conversion Cycle production system and the cost accounting system.
and Answers | Verified Solutions | 2026 Edition |
Pass Guaranteed
Save
Terms in this set (25)
Three transaction cycles process the expenditure cycle, the conversion cycle, and
most of the firm's economic activity: the revenue cycle. These cycles exist in all types of
businesses—both profit-seeking and not-for-profit
types. For instance, every business
(1)
incurs expenditures in exchange for resources
(expenditure cycle),
(2)
provides value added through its products or
services (conversion cycle), and
(3)
receives revenue from outside sources (revenue
cycle).
, Expenditure cycle Purchases/accounts payable (AP) system. This
system recognizes the need to acquire physical
inventory (such as raw materials) and places an
order with the vendor. When the goods are
received, the purchases system records the event
by increasing inventory and establishing an
account payable to be paid at a later date.
Cash disbursements system. When the obligation
created in the purchases system becomes due, the
cash disbursements system authorizes the
payment, disburses the funds to the vendor, and
records the transaction by reducing the cash and
accounts payable accounts.
Payroll system. The payroll system collects labor
usage data for each employee, computes the
payroll, and disburses paychecks to the
employees. Conceptually, payroll is a special-case
purchases and cash disbursements system.
Because of accounting complexities associated
with payroll, most firms have a separate system for
payroll processing.
Fixed asset system. A firm’s fixed asset system
processes transactions pertaining to the
acquisition, maintenance, and disposal of its fixed
assets. These are relatively permanent assets that
collectively often represent the organization’s
largest financial investment. Examples of fixed
assets are land, buildings, furniture, machinery, and
motor vehicles.
Conversion Cycle production system and the cost accounting system.
