Question

if someone creates a small lipstick company how would the orginizagion chart look like ? how would we know how to create The Revenue cycle, The Expenditure cycle, The Production cycle and The Human Resource cycle? how would it look like?

Answer 1

The Organizational chart of a small product based chart would be simple considering its size. This will look like the below given chart:

The production and marketing will be the major functions while allied functions such as finance and Human Resources can be handled by the Chief Executive Operation and his/her team.

REVENUE CYCLE

Primary activities

Provide Goods and services to customers

Collect cash in payment for goods and services delivered

Primary Exchanges of Information

External – Customers

Internal – Expenditure Cycle

                        Production Cycle

                        Inventory Control      

                        Human Resources

Primary Responsibilities

Provide right products at the right price and at the right time.

Collect cash on a timely basis.

Each Cycle has its own accounting subsystem. Cycles provide transaction and allocation information to the subsystem

Other areas within the firm are :

Treasurer: financing and investing

Budgeting Director: Planning information (in and out)

Controller: Adjusting Entries, Financial Statement Presentation

THE EXPENDITURE CYCLE

In the Expenditure Cycle, the primary external exchange of information is with suppliers (vendors).

Information flows to the expenditure cycle from other cycles.

The revenue cycle

Production cycle

Inventory control

Various departments

It provides information about the need to purchase goods and materials. Information also flows from the expenditure cycle. When the goods and materials arrive, the expenditure cycle provides information: about the receipt of goods to the parties that have requested them. Information is provided to the general ledger and reporting function for internal and external financial reporting.

The primary objective of the expenditure cycle is to minimize the total cost of acquiring and maintaining inventory, supplies, and services.

THE PRODUCTION CYCLE

The production cycle is a recurring set of business activities and related data processing operations associated with the manufacture of products.

Information flows to the production cycle from other cycles.

The revenue cycle provides information on customer orders and sales forecasts for use in planning production and inventory levels.The expenditure cycle provides information about raw materials acquisitions and overhead costs. The human resources/payroll cycle provides information about labor costs and availability.Information also flows from the expenditure cycle. he revenue cycle receives information from the production cycle about finished goods available for sale. he expenditure cycle receives information about raw materials needs. The human resources/payroll cycle receives information about labor needs.The general ledger and reporting system receives information about cost of goods manufactured.

THE HUMAN RESOURCES MANAGEMENT CYCLE

The HRM cycle is a recurring set of business activities and related data processing operations associated with effectively managing the employee workforce.

The most important tasks performed in the HRM cycle are

recruiting and hiring new employees

training

job assignment

compensation (payroll)

performance evaluation

and discharge of employees (voluntarily or involuntarily).

Additionally, payroll costs are allocated to products and departments for use in product pricing and mix decisions. The payroll system handles compensation ,the other duties are the purview of HR management.

There are five major sources of input to the payroll system.

1 .HRM department provides information about hiring, terminations and pay-rate changes.

2. Employees provide changes in discretionary deductions

3. Various departments provide data about the actual hours worked by employees.

4.Government agencies provide tax rates and regulatory instructions.

5. Insurance companies and other organizations provide instructions for calculating and remitting various with holdings.

Principal outputs of the payroll system are checks. Employees receive individual paychecks. A payroll check is sent to the bank to transfer funds from the company’s regular account to its payroll account. Checks are also issued to government agencies, insurance companies, etc., to remit employee and employer taxes, insurance premiums, union dues, etc. The payroll system also produces a variety of reports.

PRODUCTION CYCLE

REVENUE CYCLE