Accounting Cycle

Accounting Cycle

Introduction

Accounting cycle is the process that involves classification, recording, interpretation and presentation of financial data and information to the relevant stakeholders of organizations.  The accounting process is composed of a series of steps that organizations follows so as to come up with the accounting data that helps determine the performance and worthiness of organizations (Helfert, 2001). Some of the major tasks in accounting cycle include recording transactions of businesses, making journal entries, summarizing the accounting information, verification of the accounting information and preparing of the financial statements. Each organization has specific accounting cycle followed during the process of preparing accounting statements. This essay provides the overall accounting cycle at Starbucks Corporation. It provides details of the stages, processes, people and systems that are important in the accounting cycle at Starbucks Corporation.

The Accounting Cycle at Starbucks

The accounting cycle at Starbucks follows a distinct procedure that involves a number of stages, people, processes and systems within the organizations. The main stages that are involved in the accounting cycle at Starbucks includes identification of business transactions, recording transactions, general ledger posting, adjusting entries in the general ledger, trial balancing and preparation of the financial statement.

Identification of Business Transaction

This is the first process of accounting cycle at Starbucks and involves the identification of all the business transactions that has occurred in the organization.  All data relating to different business transactions such as sales, purchases, expenses and income are identified at this stage (Moores & Yuen, 2001). These are retrieved from various departments of the organizations such as sales department, procurement departments and all other departments within the organizations.  The accountants in coordination with other departmental heads facilitates the identification and sorting of these business transactions.

Recording Transactions

After the identification of the business transactions of the organizations, the next step involves recording of the identified data into appropriate journal entry books (Moores & Yuen, 2001). The recording of business transactions at Starbucks take place during the company’s accounting period. The business transactions are recorded into respective debit and credit entries so that they can be posted later to the general ledger. The business transactions are also adjusted appropriately in the journal entries to reflect any changes in revenues and expenses of the company.  This stage of the accounting cycle facilitates the future accounting process of organizations hence should be accurate in recording relevant data and information.

Account Posting

At this stage of account posting, all the previously recorded business transactions are posted to the organizations general ledger books. The posting of journal entries into general ledger book at Starbucks is done at the end of each month. The Starbucks business transactions are posted into the general ledger as they have occurred.  The general ledger of the company is organized in specific order that starts with assets, liability and finally the owner’s equity.  This is followed by different revenues and expense accounts. At this stage the entries in the general ledger is also adjusted accordingly.

Trial Balancing

Trial balancing is an important stage in the accounting cycle as it ensures that there are no errors in the general ledger.  Starbucks uses trial balancing to ensure that there are no errors committed when posting the journal entries into the ledger accounts.  In the trial balancing, all the balances of the various business transactions are arranged in either debit or credit column. The total of the debit and credit balance should be equal.

Preparation of Financial Statements

The last stage of the accounting cycle is the preparation of the financial statements.  Organizations prepare financial statements based on the information obtained from the ledger accounts and trial balance statements (Libby et al, 2004). There are various financial statements that can be prepared by organizations and this might depend on the need and nature of the organization. Starbucks prepare a number of financial statements that include balance sheet, income statements, cash flow statements and the statements of shareholders equity.  At Starbucks, the financial statements are prepared at the end of each financial period which is usually at the end of every six months.  The company therefore prepares its financial statements two times in a year specifically at the end of June and December of every year.

The People, Processes and Systems

Various people, processes and systems are involved at different stages of account cycle of organizations. At Starbucks the account department is responsible for all the processes that take place within the account cycle. The personnel that are involved in the account cycle at Starbucks include account clerks, accountants, accountant analysts, procurement manages, purchasing managers, credit managers, internal auditors, external auditors, the chief financial officers and the chief executive officer. Each of these personnel has various responsibilities at different stages of the account cycle.

The processes involved in the account cycle at the company includes billing, recording of information, adjusting of the journal entries, preparation of the financial statements, posting of the financial statements and presentation of the financial statements (Libby et al, 2004). Another important process in the accounting cycle involves both internal and external auditing of the company’s accounts.

The systems that are integral in the account cycle of Starbucks include communication systems which the personnel involved in the accounting cycle use to pass relevant information to the organizations stakeholders.  Filing systems is also important in the accounting cycle of the company as it ensure that different data and information are stored safely and made available for use during the accounting cycle. The company mainly uses computerized system to collect and store various accounting information and data that are used in preparation of the financial statements of the company.

Conclusion

Accounting cycle is important for organizations since it ensures the determination of the performance and worthiness of a company. The stages that are followed in accounting cycle determine the accuracy of the financial statements of the organization. Starbuck follows strict processes in the preparation of its financial statements and involve different personnel, systems and processes. Starbucks accounting cycle has played an important role towards its improved performance due to its ability to come up with accurate and reliable information that form the basis of making appropriate business strategy aimed at improving its performance in the global market.

 References

Helfert, E. A. (2001). Financial analysis: tools and techniques: a guide for managers. New

York: McGraw-Hill.

Libby, R., Libby, P. A., & Short, D. G. (2004). Financial accounting, Boston: McGraw-

Hill/Irwin.

Moores, K., & Yuen, S. (2001). Management accounting systems and organizational

configuration: a life-cycle perspective. Accounting, Organizations and Society, 26(4), 351-389.

 

 

 

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