April 24, 2011
Mary C. Derx-Robinson
Accounting Cycle Paper
The accounting cycle is a procedure to record and prepare financial statements for a company. Many steps are part of the accounting cycle, and they must be done correctly to comply with Generally Accepted Accounting Principles (GAAP). Whereas some steps are the same, the company must choses that will best fit the company. Any accounting cycle begins with the transactions. A retail company such as Wal-Mart must identify many transactions and document the transactions for the company. Wal-Mart must purchase products from suppliers to stock into the stores. Once a transaction is complete the stock is sent to a warehouse where the products are distributed by need to each store. Another way a transaction occurs when customers come to the Wal-Mart store and purchase products. When that happens employee such as cashers scan the products at the checkout counter. A perpetual inventory system automatically credits purchases to the Inventory account and debits Cost of Goods Sold. When that happens the transaction is automatically recorded on and updated into the computer. Accounting records are to prepare financial statements, income tax returns and other reports. Even the hiring of an employee is a transaction done by human resources and management.
A store accountant handles the transactions and journalizes the transactions for the accounting recorded. The store accountant makes sure to journalize every transaction by recording the debits and the credits in a leger. A general ledger will contain such things as the “assets, liability, stockholders equity, revenue, and expenses accounts” (Kieso, Weygandt, & Warfield, p. 69) that a company will go accumulate. At a store the accountant will do a special journal and submit this information to the accountant at the main office who will do the general ledger. With computer programs that automatically update the information it is...