Accounting Information Systems: The Processes and Controls, 2nd Edition

SUMMARY OF STUDY OBJECTIVES

Basic features of conversion processes. A company's conversion processes involve the activities related to transforming materials, labor, and overhead into goods or services. The primary functions within the conversion process are logistics and reporting.

Components of the logistics function. The logistics function includes three components: planning, resource management, and operations. Planning involves research and development, capital budgeting, engineering, and scheduling. Resource management involves maintenance and control, human resources, and inventory control (including the determination of the economic order quantity as well as the purchasing, receiving, stores, routing, warehousing, and shipping activities). Finally, operations involves production and quality control.

Cost accounting reports generated by conversion processes. Cost accountants prepare production cost analyses, inventory records, and standard costing information on the basis of conversion activities. Variance reports may be prepared to explain differences between actual and standard costs. The types of reports prepared may vary greatly from company to company, and may depend upon whether a perpetual or periodic inventory system is in place.

Risks and controls in conversion processes. Conversion activities should be well monitored and controlled. Consideration should be given to establishing proper controls related to the authorization of transactions, segregation of duties, ...