CHAPTER 2
THEORETICAL FOUNDATION
The application of AIS that handles economic events necessary
in material and
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overhead acquisition and payment for the conversion process of business is the
Expenditure Cycle (EC). The explanation contains the cycle’s definition and its
objectives, as well as the documents related to it.
2.3.1.Definition of EC
Romney
and
Steinbart
(2006,
p.
410)
define
EC
as a
recurring set
of business
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activities and related data processing operations associated with the purchase of
and
payment
for goods
and services.
The
foremost
external
exchange
of
information is with suppliers (vendors).
The three underlying business activities in the expenditure cycle are:
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1)Ordering goods, supplies, and services
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The major key decisions made in this first step are identifying what, when, and
how much to purchase, as well as identifying from which supplier to purchase.
Purchase requisition and purchase orders are generated in this initial stage of EC.
2)Receiving and storing goods, supplies, and services
This second major business activity in the EC includes tasks such as:
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i.Accepting deliveries from suppliers.
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ii.Making reports on goods, supplies, and services received.
iii.Storing the goods.
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