Acc 340 - Accounting Cycle Description

Accounting Cycle Description

ACC/340

Accounting Cycle Description

The use of information technology to help operate a business and create a leading, competitive edge has brought a rise in attention by major businesses to make use of accounting information systems (AIS). AIS is a means of data collection and processing that transforms data into information used for business operations. The end users include accountants as well as management who use AIS as a tool gain efficiency and accuracy. Riordan Manufacturing, a production company of plastic beverage containers, began operations in 1991. With 550 workers and reported annual earnings of $46 million, this Fortune 1000 enterprise thrives from successful sales. There are five accounting cycles and the revenue cycle is the divine approach to Riordan's growth throughout the years.

Accounting Cycles

The accounting cycle begins when the accounting and data processing personnel create transactions from different sources such as vendors, customers, or even employees of the organization. Moreover, a specific cycle of accounting ends with the completion of financial reports and the closing of temporary accounts in preparation for a new cycle. There are five accounting cycles integrated within the accounting cycle. These cycles include the revenue cycle, the expenditure cycle, the conversion cycle, the financing cycle, and fixed assets. Ranging from the processing of sales and cash receipts to the investment activities, these five cycles carry out organization to business operations. Each of these cycles develops data, which represent the information within the financial reports.

Riordan Manufacturing does employ these accounting cycles; however the driving force behind the growth lies within the revenue cycle. Riordan uses the revenue cycle to manage accounting activities from two major transaction groups; sales and cash receipts. During this cycle the company records sales that generate revenue from its products and services purchased by consumers; these sales include activities such as sales discounts, and returns or allowances. The movement of information from the revenue cycle will benefit from the use of accounting information systems.

Integration

There are some key elements that the revenue cycle addresses in decision making. For example, forecasting the results of customizing a customer's order or the inventory necessary to materialize for future orders. The revenue cycle starts when a customer places an order, which generates the need for input or source documentation (Bagranoff, Simkin, & Strand, 2008). This initiates the integration of an accounting information system and business operations. The benefit of AIS integration into the enterprise will keep the revenue cycle organized as well as efficient as the customer order is processed. As the sales invoice is recorded in the sales journal and posted to the account receivables, the process can generate checkpoints while payment processing can tie into revenue recognition. The enterprise will use an electronic data interchange (EDI) to help with the gathering and sending customer information. While the EDI system is relevant it cannot do the whole job on its own.

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