Examples of cycle counts in the following topics:
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- Companies usually conduct cycle counts periodically throughout an accounting period as a means to ensure that the information in its inventory management system is correct.
- To conduct a cycle count, an auditor will select a small subset of inventory, in a specific location, and count it on a specified day.
- Cycle counts contrast with traditional physical inventory in that a full physical inventory may stop operation at a facility while all items are counted at one time.
- Cycle counts are less disruptive to daily operations, provide an ongoing measure of inventory accuracy and procedure execution, and can be tailored to focus on items with higher value, higher movement volume, or that are critical to business processes.
- Cycle counting should only be performed in facilities with a high degree of inventory accuracy.
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- Physical inventory is a process where a business physically counts its entire inventory.
- Cycle counting, an alternative to physical inventory, may be less disruptive.
- Teams are then assigned and sent to count the stock.
- The teams count the inventory items and record the results on an inventory-listing sheet.
- When analyzing the results, a company must compare the inventory counts submitted by each team with the inventory count from the computer system.
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- Cash flows can be evaluated using the cash conversion cycle -- the net number of days from the outlay of cash for raw material to receiving payment from the customer.
- Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims for a low net count.
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- The accrual method ensures proper reporting on the income statement because the operating cycle doesn't coincide with the accounting cycle.
- Information enters the income statement via the accounting cycle.
- Often, companies have a separate operating cycle for their business.
- It is very rare that the accounting cycle and operating cycle coincide with each other.
- That is why each business transaction during the operating cycle is analyzed to determine which accounting cycle to record it in.
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- At the end of each accounting cycle, adjusting entries are made to charge uncollectible receivable as expense.
- If Smith's USD 750 uncollectible account were recorded in Uncollectible Accounts Expense again, it would be counted as an expense twice.
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- Physically counting inventory ensures that book value and physical value are the same.
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- Current liabilities are usually settled with cash or other assets within a fiscal year or operating cycle, whichever period is longer.
- A current liability can be defined in one of two ways: (1) all liabilities of the business that are to be settled in cash within a firm's fiscal year or operating cycle, whichever period is longer or (2) all liabilities of the business that are to be settled by current assets or by the creation of new current liabilities.
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- The accounting cycle is performed during the accounting period, to analyze, record, classify, summarize, and report financial information.
- As we walk through the steps of the accounting cycle, consider the following example.
- There are eight steps in the accounting cycle and they are as follows:
- To begin the accounting cycle, it is necessary to understand what constitutes a business transaction.
- As we walk through the steps of the accounting cycle, consider the following example.
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- Specific identification is a method of finding out ending inventory cost that requires a detailed physical count.
- It requires a detailed physical count, so that the company knows exactly how many of each goods brought on specific dates remained at year-end inventory.