Miscellaneous Cycles

Question 1

What are transaction cycles that would be miscellaneous?

Answer 1

• Production/manufacturing inventory
• ## Fixed Asset investment/financing activities

Question 2

What are the 5 control activities then looking at transaction cycles?

List examples that would apply to misc. transaction cycles?

Answer 2

1) Segregation of duties:
- Authorization of inventory-related transactions, the custody of inventory, and the accounting record keeping activities

2) Control (physical controls)
- Acces to the inventory should be limited to authorized personnel

3) Authorization
- Transactions should be authorized. The acquisition and distribution of inventory should be consistent with management authorization
- Management should establish general approvals of transactions within specified limits, and specifically approve transactions above those limits
- Any adjusting entry should be authorized

4) Review (Performance Review)
- Actual inventory should be compared periodically to recorded inventory (and any unusual differences should be investigated)
- Appropriate reconciliation should be made of underlying accounting records, along with renumbered receivers, the receiving document
- The company should consider using a perpetual inventory system for items with high cost per unit

5) EDP/IT (Information Processing)
- Key accounting documents should be pre-numbered