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Accounting Cycle Definition

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Some of these accounting cycles include general ledger, accounts payable, accounts receivable, order entry, procurement, sales and purchasing history, invoice and shipping, roll, financial reporting, EDI*, bar code reading and DEEDS. 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 Ordain. The current finance and accounting (F & A) used at these two sites aren’t compatible for consolidation at the corporate offices in California.

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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 apartments 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 Radian’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 accessory 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 Ordain Manufacturing internal control structure can have a significant impact on their financial reporting and their financial well-being.

Generally speaking, the Accounts Receivable (AIR) 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 recessing cannot only affect AIR, 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 unrestricted access to sensitive company data, haphazard record keeping, and neglecting to segregate specific accounting functions. The absence of internal control standards in A/R can be a financially crippling detriment- even for companies tit the most trust;rotor individuals at the control helm.

Companies that make the investment in strengthening these controls immediately benefit from greater control of their cash flow and a greater ability to mitigate losses due to accounting errors and general negligence. Ordain Manufacturing has serious control issues in the Accounts Receivable cycle because of their inability’ to operate with all the different systems that all their facilities have; therefore, in order to achieve a cohesively union of their facilities the company needs to complete an entirely overhaul of their Financial and Accounting systems.

The acquisitions of their new locations in Georgia and Michigan, and the facility in China demands that Ordain Manufacturing integrates all their financial and accounting systems in one software that can allow all facilities to access and forward information at a faster and more efficiently manner. Enterprise resource planning (ERP) systems, can integrate all types of accounting transactions and financial applications. The software can include manufacturing, sales, distribution, human resources, and accounting cycles like Accounts Receivable.

The enterprise resource planning (ERR) systems organize transactions in modules and provide links among these modules, the accounts receivable cycle work cohesively amongst all facilities and will be able to generate more revenue. The San Jose corporate office will have the foundation of the system, in where they can keep all the major modules like the general ledger. The other facilities will then be able to process journal entries in the accounting software modules and corporate will be able to updated the information almost immediately.

At the moment the company is sending information via efferent tools like data files, hard copy reports, which have to be re-enter and it’s costly to the operations of the entire company. Ordain is a manufacturing company, therefore, they can benefit from installing a Manufacturing resource planning (MR. II) systems, this system will enable Ordain to forecast and plan manufacturing resources, labor cost, overhead, and integrated it to the financial and accounting functions. The wide-enterprise systems can be costly, in the Capital Budget Executive Summary for fiscal year 2005; the SCOFF of Ordain has proposed a system that will cost $1

The system will completely resolve the issue at Ordain, and although it will be costly, the new systems will expedite process, consolidated the processes and be a good investment for the company. The types of accounting information systems that are necessary to achieve this integration are; hardware, software, data, people and procedures. Computer hardware is probably the first system to be addressed, but the hardware is probably not the most important piece or the only option. Most companies spend more money on people’s wages and salaries than on computer hardware and software combined.

Like any other systems computer hardware must work together with other systems components to accomplish data processing task. Without computer software, the hardware would stand idle. Without data to process, both the hardware and software would be useless. Without procedures, accounting data could not be gathered accurately or distributed properly. And finally, without people, the rest of the system could not operate for long or be of much use (Beggaring, Siskin, and Norman, pig. 32, 2008). The understanding of the systems that can be compatible and supportive of the needs of the company can be difficult.

Accounting information system defined work flow policies and procedures, marking the difference between document management systems and electronic document systems. The investment will be costly in the enterprise-wide accounting systems in the hardware and software along, not to mention the training and the cost for the transition of four locations. Ordain Manufacturing is an international plastic manufacture that operates four separate facilities. These sites are located in California, Georgia, Michigan, and China.

All four facilities need to come up with what its call fixed asset management FAME) long-term assets easy to track and recording what need to be fix or undated the software that will be compatible: data flow diagrams of the financing process to check the accuracy financial statement, cash budget, investment reports, debt and interest reports, financial ratios and finally financial planning model reports. The flow of accounting information’s through Ordain Manufacturing goes through three operating entities. All entities have their own Finance and accounting system, the three operating entities are Georgia, Michigan, and California.

Ordain Manufacturing has a joint venture in People’s Republic at China. The operating entities provide input that is consolidated through Corporate in San Jose. There basic components of each system are General Ledger, Accounts Payable, Accounts Receivable, Order Entry, Procurement Sales and Purchasing History, Invoicing and Shipping, Payroll, and Financial Reporting. San Jose has additional components, DE, Bar Code Reading DEEDS (Executive Decision Support System). Besides each entity having there basic components, they have different Financial and Accounting system.

San Jose, they are licensed to a fully integrated Windows that is based on ERP manufacturing, distribution and financial management software application. Michigan purchased a vendor urbanize software application and the attendant source code. The application operates on a pair of DECK Alpha’s, using the VIM operating system, BAKLAVA work stations. Georgia purchased a vendor that develops the software application, the attendant source code for their Financial and Accounting and manufacturing process applications. The system operates on a pair of Sass’s, using UNIX operating system, uses Windows, and the system is programmed in RPG.

Several Financial and Accounting data is provided by hardcopy reports, and after the data is re- entered. Some data files must be converted to the proper account codes. The Income Statement and Balance Sheet for Ordain Manufacturing is normally not completed until 15-20 days after the month has ended. Auditing is required each month. The Ordain Manufacturing consolidated balance sheet consist of the total current assets, total assets, total current liabilities, total stockholder equity, and the total liabilities and stockholders equity.

The income sheet consist of the gross margin, total operating expenses, profit fore interest and taxes, total non operating expenses and the net profit after taxes. The operating and cash budget is monitored by the fiscal year, which is similar to the income statement it consist of gross margin, total operating expenses, profit before interest and taxes, net profit after taxes, total cash inflows, total cash outflows, and the ending cash on hand.

Last, Ordain Manufacturing has the accounting system, Consolidated Operating Budget- Cost Center IT, calculates compensation and other expenses. Compensation categories are wages and salaries, benefits and bonuses. Some examples that fall under other expenses are contracts, hardware, office supplies, and subscriptions. Ordain Manufacturing is an international manufacturer in the plastic industry, which operates in four separate facilities, and all the locations at the moment are performing their individual financial and accounting operations.

The inability to integrate the current programs and the massive monetary problems that it’s costing the company, should be sufficient enough reasons for Ordain Manufacturing to invest in a Manufacturing resource planning (MR. II) systems, which will enable the company to forecast and plan all manufacturing resources, including labor cost, overhead, and it will allow the integration of all the finance and accounting systems from all their facilities.

Cite this Accounting Cycle Definition

Accounting Cycle Definition. (2018, May 24). Retrieved from https://graduateway.com/accounting-cycle-description-paper/

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