Accounting Cycle Description
The five accounting cycles in an organization are: The revenue cycle, expenditure cycle, financing cycle, fixed assets cycle, and the conversion cycle. The revenue cycle is the set of activities in a business bringing about the exchange of goods or services with customers or consumers for cash, such as sales orders, accounts receivables, cash receipts (Hall, 2004), and cost of goods sold. The expenditure cycle is an external exchange of information between vendors and the company. The expenditure cycle takes information from the revenue cycle, production cycle, and other cycles (Romney & Steinbart, 2006). The expenditure cycle includes inventory, accounts payable, payroll, and cash payments. The conversion cycle is very important to businesses. The conversion cycle tells how quickly a business can convert products into cash through sales. The financing cycle determines how long of time needed for the company to raise financial resources to the time of the repayment of dividends, stocks, and other debts (Financing Cycle, n.d.). Fixed assets maintain records of the original cost of an asset, the depreciation amount of the asset, and the disposal amount of said asset. Riordan Manufacturing Company sells plastic bottles, fans, heart valves, medical stents, and custom plastic parts. The Riordan Company uses the revenue cycle by increasing sales force promotions, offering price discounts and customer group services to existing customers and to new customers, Riordan Manufacturing Company plans to implement public relations activities, trade shows, brand development, and also giving sales force promotions (Riordan, 2006). Riordan Manufacturing has started recently to consolidate information and update systems. In doing so, they are eliminating some of the problems/issues that they have had with internal controls. Historically, the sales department has allowed each salesperson to maintain their own set of customer records, and has allowed each to use whatever
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