Accounting Cycle 13
Accounts Receivable Cycle
Riordan Manufacturing, an industry leader in the field of plastic injection molding, has facilities in California, Georgia, Michigan and China. The accounting functions are carried out in each individual location, and consolidated for processing in the corporate offices in California. The Georgia and Michigan locations, being newly acquired, are using systems that are not completely compatible with the corporate offices. This is causing problems on many levels and within this paper, Learning Team A will discuss the accounts receivable cycle as Riordan Manufacturing would like to achieve.
Learning Team A will discuss the strengths and weaknesses of the internal controls of the accounts receivable cycle, the integration of the cycle into enterprise wide accounting information systems and the different types of information systems that will be needed for the integration. Finally, Team A will present a flowchart showing how the accounts receivable information optimally flows through the company.
Strengths and Weaknesses of Internal Controls
Internal control is somewhat broad in nature, 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 necessary 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. Processing controls will also help to prevent any
Riordan Manufacturing, an industry leader in the field of plastic injection molding, has facilities in California, Georgia, Michigan and China. The accounting functions are carried out in each individual location, and consolidated for processing in the corporate offices in California. The Georgia and Michigan locations, being newly acquired, are using systems that are not completely compatible with the corporate offices. This is causing problems on many levels and within this paper, Learning Team A will discuss the accounts receivable cycle as Riordan Manufacturing would like to achieve.
Learning Team A will discuss the strengths and weaknesses of the internal controls of the accounts receivable cycle, the integration of the cycle into enterprise wide accounting information systems and the different types of information systems that will be needed for the integration. Finally, Team A will present a flowchart showing how the accounts receivable information optimally flows through the company.
Strengths and Weaknesses of Internal Controls
Internal control is somewhat broad in nature, 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 necessary 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. Processing controls will also help to prevent any
References: Dunn C.L., Cherrington J.O., Hollander A.S. (2004). Enterprise Information Systems: A Pattern- Based Approach, 3e. The McGraw-Hill Companies, copyright 2004. Wikipedia (2007). Enterprise Resource Planning. Retrieved on August 20, 2007 from http://en.wikipedia.org/wiki/Enterprise_resource_planning