Accounting Cycle Description Paper

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Accounting Cycle Description � PAGE * MERGEFORMAT �7�

Accounting Cycle Description Paper

Riordan Manufacturing is an international plastic manufacture who operates four separate facilities. These sites are located in California, Georgia, Michigan, and China. The accounting cycles are performed at each individual facility. Once the accounting tasks are completed they are sent to the corporate offices in California for consolidation. Some of these accounting cycles include general ledger, accounts payable, accounts receivable, order entry, procurement, sales and purchasing history, invoice and shipping, payroll, financial reporting, EDI*, bar code reading, and EDSS. The accounting cycles can be studied under the balance sheets, income statements, budges, economic forecasts, and communications.

Georgia and Michigan are the two locations that have been recently acquired by Riordan. The current finance and accounting (F & A) used at these two sites aren't compatible for consolidation at the corporate offices in California. This is causing server delays and issues within the accounts receivable cycle.

The current issue with the accounts receivable system is that neither Michigan nor Georgia has a software program compatible with the software used at the corporate offices in California. Michigan had purchased their software application from a vendor who is no longer in business. Georgia purchased software completely different from the application Michigan purchased. Neither of software can work cohesively together. This is big trouble for the accounts receivable department because they are unable to consolidate successfully any information that can display any compatibility between the companies. Due to this irregularity financial and accounting departments are receiving information via data files, hard copy reports that must be re-entered, other files that must be converted to be read to correct account codes. This current situation is evident to both Riordan's vendors and customers. It's affecting the invoicing and payments. The company must find a solution to fix the issue within its account receivable department.

Internal control is somewhat broad, but specific enough to protect the company. Some basic accounting controls need to be implemented to assure stockholders that the financial records are accurate. Six control activities are necessary to a company's internal control system. These activities are a good audit trail, sound personnel policies and practices, separation of duties, physical protection of assets, internal reviews of controls and timely performance reports. If controls are not properly implemented, the company could be vulnerable to theft and inaccuracies. Two controls that are key factors in any accounting department are separation of duties and processing controls. For example, if the same employee processes payments and processes bank deposits, this violates separation of duty controls and leaves the door open to embezzlement.

The strength or weakness of Riordan Manufacturing internal control structure can have a significant impact on their financial reporting and their financial well-being. Generally speaking, the Accounts Receivable (A/R) asset is typically one of the largest assets on a company's balance sheet as it accounts for the total amount of money owed to a company by its customers or other business partnerships. For many companies, the A/R department has contact with a number of different departments, making their relationship one of necessity and one that requires strict attention to detail. Errors in A/R processing cannot only affect A/R, but they can have a negative impact other departments as well.

Strong internal controls for Accounts Receivable could include the close monitoring of bank reconciliations, the safeguarding of assets through regular bank deposits, and the proper segregation of duty within the A/R department. Weak internal controls could include the...
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