Accounting Cycle Description Paper Essay Sample

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Currently we see that Riordan has three operating locations, each of these locations have their own accounting departments that each keep their own records. These records are all combined in the corporate office at the end of each period. Each accounting department contains the following system components, General Ledger, Accounts Payable, Accounts Receivable, Order Entry, Procurement, Sales and Purchasing, Invoicing and Shipping, Payroll, Financial Reporting, EDI, Bar Code Reading, And Executive Decisions Support System. In this paper we discuss the accounting cycle for Riordin Manufacturing.

There are five accounting cycles. Each cycle is important in its own right to the general book keeping of virtually any organization. The five cycles are revenue, expenditure, conversion, financing, and fixed asset. The revenue cycle includes sales and cash receipts. Sales includes, “all revenue earned from goods and services purchased by consumers. Also included are sales discounts, returns or allowances” (Thomason). Cash receipts “represent the actual cash received by a company” (Thomason). Additionally, the revenue cycle includes sales discounts, returns and allowances.

The expenditure cycle encompasses purchases of goods and services necessary to run the business. The conversion cycle covers the production of goods and uses the information from the expenditure cycle to accurately expense produced goods. The financing cycle records and reports on things such as debt, stocks, dividends, and any other financing operations. The fixed asset cycle deals with the purchase, sale, and depreciation of assets used in production such as equipment and property. Together, these five cycles encompass the whole of accounting for an organization. For Riordan Manufacturing, the revenue cycle includes all of the sales of the products that are manufactured.

Generally speaking, this includes the sale of a wide variety of plastic products used for a similarly wide variety of applications. Also accounted for in the revenue cycle are any sales discounts given to customers and any returns and allowances. Internal controls on this cycle include things like segregating duties, providing and keeping receipts, making timely deposits and more. These controls are strong in the sense that receipts can now be stored electronically and segregating duties lessens the chance of human error or intentional fraud. Conversely, these controls aren’t particularly strong given the wide variety of discounts available as well as the volume of returns and allowances for such a large manufacturer. As a result consistent auditing is necessary to ensure accuracy and honesty in the revenue cycle. Riordan Manufacturing Company has an accounting information system (AIS) that is intertwined with Enterprise Resource Planning (ERP) that makes the program into the Enterprise- Wide Accounting System.

The Accounting Information System and Enterprise Resource Planning (ERP) are associated with finances and accounting. The computer-based system is where an individual can collect raw data to input, store it, and process the financial and accounting data. The management will open up the revenue cycle inside the system. The revenue entry will have invoices, sales orders, cost of goods sold, account receivable, cash payment, fees earned, unearned revenue, rent revenue, interest revenue, service revenue, and freight on board shipping and handling. When management wants to review the general ledger, he or she will see all the assets, liabilities and owners’ equity. The manager can review and print out the Income Statement. The Income Statement will have the operating expenses and non-operating expenses along with all of the earnings for a given period.

The combination of the two information systems will go hand in hand with one another. A good example of the Accounting Information Systems is the Peachtree Accounting Software. This software allows the users to select the accounting system of choice: Cash basis or Accrual Basis. Afterwards he/she cannot change the method. Riordan Manufacturing will choose the accrual basis since; it recognizes the firms recognize revenue when earned, even when they are incurred. The software is excellence in producing the Income Statement. The user will enter in all the necessary information when it comes to accounts, customers, and so forth on in order to have correct information without having the company waste money. The Enterprise Resource Planning (ERP) used by Riordan Manufacturing is to “support optimization of operational management strategies. The ERP software solution consists of integrated modules that enable effective management of customer relationships, quotes, projects, costs, material and resource planning.

The product engineering and manufacturing, business performance, finance and global issues, where supply chain collaboration (“ “, 2015)” is key to Riordin Manufacturing success. The systems are different, but they are intertwining into Enterprise-Wide Accounting Systems. The revenue cycle gives Riordan Manufacturing a good stand point on growth in the Income Statement on all there plastics sales around the world.. For a company to produce the financial reports and financial statements that are needed for management to study gain/loss and make future business decisions, the accounting information must all be input and processed.

We will start with the journal entries and then the adjustments to the entries to show things like the accrual and cash out from the accounts payable and receivable departments. From here we can see the amounts in the general ledger accounts, since newer input systems link the journal entries to the G/L codes we will not need to code the transactions the inputs are already set. So now we can generate repots to see how the changes over the period affected each account. From here we can generate our trial balances for the period and make any other adjustments necessary. After this we will then generate our financial statements, like the Balance sheet an income statement that we see in the Riordan Manufacturing.


Thomason, K. (n.d.). What are the Five Accounting Cycles. Retrieved February 1st, 2015, from eHow: (2015). Retrieved from Bagranoff, N., Simkin, M. G., & Strand, C. (2008). Core Concepts of Accounting Information Systems [University of Phoenix Custom Edition eBook]. Newyork, NY: Wiley. Retrieved from University of Phoenix, ACC/340 Accounting Information Systems website.

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