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Accounting Cycle/Bank Reconciliation - Assignment Example
Finance & Accounting
Pages 4 (1004 words)
A manufacturing company and a retail company would have different accounting cycles because they are involved in different businesses.A manufacturing company is involved in purchasing raw materials and then producing finished goods…
A retail company purchases items from wholesalers and manufacturers, and sells those items to customers. The main difference between the accounting cycles will come in inventory valuation and recording. Inventory management of retail companies will be more complex than manufacturing companies because retail companies rely on their inventory heavily. Any difference in inventory valuation and recording will have significant affect on the income statement of a retail company. Revenues are also recognized at different times in retail and manufacturing companies. This is why it is safe to conclude that accounting cycles are different for a manufacturing and a retail company. Another difference in the accounting cycles of two types of companies might come in recording depreciation of equipment. Retail companies usually do not have a high depreciation rate but manufacturing companies have to record depreciation of all their manufacturing equipment which has a potent effect on the overall financial statements. The steps of the accounting cycle are not usually same for all companies because different companies operate and do business in a different manner. Transactions, depreciation, inventory valuation, etc will all be different for different firms and this is why steps of accounting cycle will not be same for all companies. ...
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