The expenditure cycle is a recurring set of business activities and
related information processing operations associated with the
purchase of and payment for goods and services (JoHo, 2022). b This
cycle focuses on the acquisition of raw materials, finished goods,
supplies and services. Within the expenditure cycle, the external
exchange of information is with suppliers. b The expense data flows
from the expenditure cycle to the general ledger and is then reported
on financial statements and reports. b The primary objective in this
cycle is minimizing the total cost of acquiring and maintaining
inventories, supplies, and various services. As these items are
necessary for the business to function. The four basic expenditure
cycle activities: b Ordering materials, supplies, and services; Receiving
materials, supplies, and services; Approving supplier invoices; and
Cash disbursements.
The linkages between the buyer’s expenditure cycle activities and the
seller’s revenue cycle activities have important implications for the
design of both parties’ accounting information systems. As they have
an equal and opposite effect on each other. The expenditure cycle
has a strong influence on a business's choice of suppliers. The
reduction in purchase and inventory costs can influence who the
business would want to work with.
JoHo. (2022, November 2). Expenditure cycle: purchasing to cash
disbursements - Chapter 13. Retrieved January 5, 2023, from
https://www.joho.org/nl/expenditure-cycle-purchasing-cash-
disbursements-chapter-13
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2021).
Accounting Information Systems (15th ed.). Pearson Education, Inc.
