Revenue Cycle
The Accounting Cycle
Five Cycles of Accounting The accounting cycle consists of five components: revenue, expenditures, financing, conversion, and fixed assets (Bagranoff, Simkin, & Strand, 2008). There are many business activities within a company that will take place in each of these cycles. The revenue cycle incorporates sales and cash receipts. Expenditures are the decrease in cash assets to acquire goods or services necessary to operate. The conversion cycle is a continual process that uses information from the expenditure cycle to expense the company’s items produced (Marshall & Steinbart, 2006). The acquisition of external financing made to investors or lenders will stay within the financing cycle of accounting. Many companies will use financing to purchase fixed assets, which would relate these types of transactions to the company’s financing cycle as well. Riordan Manufacturing adds the revenue earned from goods sold and actual cash received by a company in the asset section of its balance sheet, which will also be in the income statement. It also incorporates expenditure numbers into its Liability section of its balance sheet. Such expenditures include accounts payable and inventory costs. Riordan also ensures consistency of operations and quality control with a common set of procedures that have been developed for management to keep track of its raw materials and finished goods inventories through its conversion cycle (UOPX, 2013). The company has a bank line of credit, long-term debt, and common stock issued, which would fall under its financing cycle. Riordan’s income statement provides a depreciation expense, which means the company holds at least one fixed asset.
The Financing Cycle Like many other companies, Riordan may need external financing to fund some of its business operations. The financing cycle will report and record information in relation to debt and stock transactions for Riordan Manufacturing (Marshall &
Five Cycles of Accounting The accounting cycle consists of five components: revenue, expenditures, financing, conversion, and fixed assets (Bagranoff, Simkin, & Strand, 2008). There are many business activities within a company that will take place in each of these cycles. The revenue cycle incorporates sales and cash receipts. Expenditures are the decrease in cash assets to acquire goods or services necessary to operate. The conversion cycle is a continual process that uses information from the expenditure cycle to expense the company’s items produced (Marshall & Steinbart, 2006). The acquisition of external financing made to investors or lenders will stay within the financing cycle of accounting. Many companies will use financing to purchase fixed assets, which would relate these types of transactions to the company’s financing cycle as well. Riordan Manufacturing adds the revenue earned from goods sold and actual cash received by a company in the asset section of its balance sheet, which will also be in the income statement. It also incorporates expenditure numbers into its Liability section of its balance sheet. Such expenditures include accounts payable and inventory costs. Riordan also ensures consistency of operations and quality control with a common set of procedures that have been developed for management to keep track of its raw materials and finished goods inventories through its conversion cycle (UOPX, 2013). The company has a bank line of credit, long-term debt, and common stock issued, which would fall under its financing cycle. Riordan’s income statement provides a depreciation expense, which means the company holds at least one fixed asset.
The Financing Cycle Like many other companies, Riordan may need external financing to fund some of its business operations. The financing cycle will report and record information in relation to debt and stock transactions for Riordan Manufacturing (Marshall &
References: Bagranoff, N. A., Simkin, M. G., & Strand, C. S. (2008). Core concepts of accounting information systems (10th ed.). New York, NY: John Wiley & Sons. Marshall, R., & Steinbart, P. (2006). Accounting information systems (10th ed.). Upper Saddle River, NJ: Pearson Hall. Thomason, (2013), What are the Five Accounting Cycles? Retrieved from www.ehow.com/info_8178628_five-accouting-cycles.html University of Phoenix. (2013). Riordan Manufacturing. Retrieved from University of Phoenix, ACC340 website.