Expenditure Cycle of Adam & Co.

Running head: EXPENDITURE CYCLE OF “ADAM & CO.”
EXPENDITURE CYCLE OF “ADAM & CO.”
Name of the Student
Name of the University
Author Note

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EXPENDITURE CYCLE OF “ADAM & CO.”
Executive Summary
This piece of information presents the process of the internal control system, all the process is
evaluated according to the case of Adam & Co. All the weakness and the risks are being
discussed which is in the internal control system. The three cycles are purchase system, cash
disbursement system and payroll system. All the cycles are discussed with the help of a
flowchart diagram and the elements are described according to the relationships of the
departmental system.

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EXPENDITURE CYCLE OF “ADAM & CO.”
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
System flow chart of purchase system:......................................................................................3
System flow chart of cash disbursement system:.......................................................................5
System flow chart of payroll system:.........................................................................................6
Identifying the internal control weakness in the system and its associated risks:.....................8
Purchase System.....................................................................................................................8
Cash disbursement system.....................................................................................................8
Payroll system........................................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

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EXPENDITURE CYCLE OF “ADAM & CO.”
Introduction
The report presents the data of the Adam & Co.’s expenditure cycle. Adam & Co.
usually supplies the industrial products in the wholesale market. The organization has many
network terminals in different locations, which is controlled by the centralized accounting
system. The expenditure cycle procedure comprises of the purchase system, cash
disbursement system and payroll system (Trigo, Belfo and Estébanez 2016). All the process
is being evaluated in connection to the risks and the internal controls, with reference to a
system flowchart. The weakness of the internal control is discussed in the later part in
reference to the Accounting Information System.
Discussion
System flow chart of purchase system:
In the production process, the inventory is being maintained as per the requirement of
the firm. After the product is manufactured, the finished products are delivered to the
consumers (Labonte, Wong and Jin 2018). The main factor through which the inventory is
maintained is by checking the volume of the sales and production. There are some steps
which is followed while purchasing:
 Inventory Requirement: The inventory is checked by the purchasing clerk, to check
whether there is any requirement or not.
 Receiving department: If the inventory is low, then the clerk will give an order to the
vendor (Koeppel and Perry 2019). After that, in the digital purchase order the clerk
will record the items, which he has received.