Accounting Cycles and Processes Study Guide PDF

Accounting Cycles and Processes Study Guide Revenue Cycle (Sales/Collections Process) 1. Basic Steps in the Sales/Collection Process: Understand the sequential flow from customer order to cash receipt. This includes: - Order placement - Credit approval - Shipping - Billing - Cash collec...

Accounting Cycles and Processes Study Guide Revenue Cycle (Sales/Collections Process) 1. Basic Steps in the Sales/Collection Process: Understand the sequential flow from customer order to cash receipt. This includes: - Order placement - Credit approval - Shipping - Billing - Cash collections 2. Key Documents: Familiarize yourself with the purpose and content of documents like: - Sales order - Shipping document - Invoice - Accounts receivable ledger - Cash receipts prelist, return request, and credit memo (from SUA) 3. Risks and Controls: Common risks include unauthorized sales, inaccurate billing, and missed collections. Controls might include credit checks, segregation of duties, and regular reconciliations. 4. Journals and Ledgers: Understand how sales, accounts receivable, and cash receipts are recorded and tracked, and their interactions with the general ledger. Expenditure Cycle (Acquisition/Payment Process) 1. Basic Steps in the Acquisition/Payment Process: Understand the flow from purchase requisition to payment. This includes: - Purchase requisition (class notes) - Purchase order - Receiving report - Vendor invoice - Payment 2. Key Documents: Key documents to know are the purchase requisition, purchase order, receiving report, and vendor invoice. The purchase requisition is covered in the class notes. 3. Risks and Controls: Understand risks such as duplicate payments, unapproved purchases, and inventory theft. Controls include authorization requirements, purchase order matching, and inventory checks. 4. Journals and Ledgers: Familiarize yourself with how purchases and cash disbursements are recorded in ledgers and reconciled with the general ledger. Payroll Process 1. Payroll Forms: Understand key payroll forms such as timecards, payroll registers, and employee earnings records. 2. Risks and Controls: Identify risks like unauthorized wage changes, incorrect hours, and ghost employees. Controls include authorization processes, regular audits, and time tracking systems. 3. Payroll Calculations: Know how to calculate gross pay, deductions, and net pay. You don't need to memorize tax rates. Month-End Process 1. Footing and Cross-Footing: Understand how footing and cross-footing verify totals and cross-check figures. 2. Posting Totals: Know the process of posting column totals and elements from special journals to the general ledger. 3. General Ledger and Subsidiary Accounts: Understand relationships between general and subsidiary ledgers for accurate reporting. 4. Bank Reconciliation: Understand how deposits in transit, outstanding checks, and bank fees are handled. Recognize which items require adjustments via journal entries. 5. Taxes and Withholdings: Familiarize yourself with payroll taxes paid by employees, employers, or both (no need to memorize rates). Year-End Process 1. Preparing Monthly Statements: Know the purpose and process of sending monthly statements and performing account aging.