Describe some businesses that use conversion processes. Do they all use the same sequence of activities? Do they all share the same information structure? Discuss some of the differences in those conversion processes.
Richardson, Chang, and Smith (2014) explains the conversion process includes, “business activities related to maintain inventories of raw material and finished goods, producing finished good from raw material, tracking direct labor and direct equipment costs, and applying overhead” (p. 178). The conversion process affects a wide variety of companies. Manufacturing companies like IKEA, restaurant companies like McDonalds, and full-service car dealerships all create and use some variation of their own process to better help them keep control of their resources and to make continuous improvements.
Of course, not all businesses will have the same sequence of activities/events when describing their conversion processes. Even within the same company, the conversion process can be described either in detail, or broken down further into sub-processes. In figure 7.3 Sunset Graphics, shows their conversion process with looping and swim-lanes showing the process of the inventory manager and then the process of turning in raw materials into a product. Now this process would not have the same sequence of activities as a restaurant when it comes to ordering, prepping, and then delivering food.
There are some similarities when it comes to the actual control of the conversion process. Companies can use both access controls and application controls. Access controls dictate who can change the actual information in the system while application controls produce data integrity. With these controls in place, businesses can implement segregation of duties and improve their overall business process (Richardson, Chang, & Smith, 2014, p. 182).
The only way to truly account for accounting transactions and expenditures is to have some type of basic structure for the conversion process. This should include at the minimum REA(resources events and agents). The basic structure allows any company the ability to separate overhead and direct labor. Companies can add type images to further track expenditures and possible additional resources for management. Hope everyone has a good week and good luck on the midterm.
Richardson, V., Chang, C., & Smith, R. (2014). Accounting Information Systems (2nd ed.). New York, NY: McGraw-Hill Education