The Accounting Cycle

The Accounting Cycle

Learning Team B

ACC/340

August 17, 2015

Sara Carpenter

The Accounting Cycle

The expenditure cycle is the portion of the accounting cycle that includes all of the purchases made by Riordan Manufacturing. This cycle spans from the time a purchase by Riordan is made to the payment for the supplies or materials, and can involve numerous people and departments within the company. To begin the expenditure cycle the purchasing department of Riordan Manufacturing would decide what supplies and materials are needed. Before a purchase order is produced, the person in charge of placing the order may research and compare suppliers to find the best price. Pricing the order, agreeing to term and conditions, and placing the order are all parts of the second step of the expenditure cycle. The next step of the cycle involves receiving the merchandise that was purchased, making sure it is properly inventoried and stored. Once the order is received and is checked for accuracy, the receiving clerk will send a notification of receipt to the company’s accounting department for recording. In the final step of the expenditure cycle, Riordan manufacturing will absolve the accounts payable of this purchase by making payment.

Strengths and Weaknesses of Internal Controls

Proper internal controls denote that payments are processed appropriately for the goods and services that have been received by Riordan Manufacturing. Riordan’s invoice shows an almost daily report of the invoices along with appropriate descriptions, amounts, and prices per unit. There is a separation of duties considering that “the operating entities each have their own Finance & Accounting Systems, and they provide input that is consolidated at Corporate,” (Apollo Group, Inc. 2013). This separation of duties is excellent because it shows the operating entities monitoring their activities, but the corporate office in San Jose is monitoring the monitors. Each of those entities...