1.
The revenue cycle is a process that describes all the steps required to generate revenue from services or
products provided, from the initiation of transactions to the receipt of payment. It is commonly used in
industries such as healthcare and retail. The main components of the revenue cycle are as follows:
1. Pre-registration: Collecting patient or customer information before the service.
2. Registration: Reviewing and recording patient or customer details.
3. Charge Capture: Recording services or products provided.
4. Claim Submission: Submitting claims to insurance providers or customers.
5. Payment Posting: Receiving and recording payments from insurance and patients.
6. Accounts Receivable Follow-up: Reviewing and attempting to collect unpaid accounts.
The purpose of the revenue cycle is to ensure that all revenue is captured properly and effectively.
2. The expenditure cycle is the process that describes all the steps required to obtain the goods or services a
business needs, from ordering to payment. This is important to ensure that business expenses are properly
recorded and paid for. The main parts of the expenditure cycle are the following:
1. Purchase Requisition: The process begins with the creation of a request for the purchase of goods or services.
2. Purchase Order: Creating and sending a purchase order to the supplier for the goods or services.
3. Receiving: Receiving the goods or services and checking them for compliance with the order.
4. Invoice Processing: Reviewing and approving the invoice from the supplier.
5. Payment Processing: Paying the supplier for the goods or services received.
The purpose of the expenditure cycle is to ensure that all expenses are recorded correctly and suppliers are paid
on time.
3. The conversion cycle is the process that describes the steps required to convert raw materials into finished
goods. It is important for manufacturing businesses because it determines the efficiency and productivity of
production. Here are the main components of the conversion cycle:
1. Raw Materials Acquisition: Purchasing raw materials required for production.
2. Production Planning: Arranging plans for production, including the schedule and resources.
3. Manufacturing Process: The actual process of making products from raw materials.
4. Quality Control: Testing finished goods to ensure that they meet quality standards.
5. Packaging and Distribution: Packaging products and preparing them for distribution to customers.
The purpose of the conversion cycle is to ensure that production runs smoothly and that products are delivered
to customers on time and in the right quality.
4. The general ledger and financial reporting cycle is the process of recording, organizing, and reporting a
business’s financial transactions. It is essential to ensure that financial statements are accurate and reliable. Here
are the main components of this cycle:
1. Transaction Recording: All financial transactions are recorded in journal entries, which contain details of each
transaction.
2. Posting to the General Ledger: Recorded transactions from the journals are transferred to the general ledger,
where the accounts are combined to show the business’s overall financial position.
3. Trial Balance Preparation: Creating a trial balance to ensure that all debits and credits balance. This is an
important step to identify any errors in recording.
4. Adjusting Entries: Adding adjusting entries to reflect accrued and deferred items before the financial
statements are prepared.
5. Financial Statement Preparation: Creating financial statements such as the income statement, balance sheet,
and cash flow statement that provide an overall picture of the financial health of the business.
6. Financial Reporting: Reporting financial statements to stakeholders, such as investors, creditors, and
management.
The purpose of this cycle is to ensure that financial information is properly recorded and reported, providing
accurate information for decision-making.
