Lecture 2

Question 1

Define what a business process is.

Answer 1

A business process is a sequence of business activities that use resources to transform specific inputs into specific outputs to achieve a business goal.

Question 2

Describe the business activities that comprise the sale and collection process.

Answer 2

• Quotation – an instigation event
• Sales order – commitment event
• Actual sale/ receive items – economic decrement event
• Returns – reversal event (involves double entry)
• Collections – economic increment event (involves double entry)

Question 3

Describe the business activities that comprise the purchase and payment process.

Answer 3

• Quotation – an instigation event
• Purchase order – commitment event
• Actual purchase/ ship items – economic increment event
• Returns – reversal event (involves double entry)
• Collections – economic decrement event (involves double entry)

Question 4

Identify the REA for business process.

Answer 4

Resources = organizational resources (e.g., trucks, machines, buildings, cash, investments)
Events = events (e.g., sales, purchases, cash disbursements, cash receipts) and conceptual structures (e.g., accounts, product categories, budgets).

Question 5

Identify internal controls for business processes.

Answer 5

Internal controls involve the processes that an organization implements to;
* Safeguard assets
* Provide accurate and reliable information
* Promote operational efficiency
* Enforce prescribed managerial policies
* Comply with applicable laws and regulations

Question 6

Identify business processes and technology

Answer 6

Business processes and technology allow for the business process to have internal controls implemented within the business process. For example, in AIS (accounting information systems) field checks, validity checks and limit and range checks can be added to the business process to ensure correct entry

Application controls = input validation checks (e.g., field checks, limit and range checks etc.)
Access controls = limits who can access and change records (e.g., separation of duties)

Reasonableness checks = compare data in one field to another related field e.g., pay amount may be compared with job code
Completeness checks = to ensure that all required fields are entered before the record is uploaded. For e.g., an online purchase cannot be completed without a delivery address

Question 7

Identify business processes with an analytics perspective.

Answer 7

The preparation of financial statements is not sufficient. Accountants should be business strategists, providing advice and counsel for customers based on analytics.

Questions such as;
* What products generate higher cash flows?
* What customers pay on time? Accounts receivable analysis
* Inventory turnover by product categories/time.