Accounting Cycle Paper 1

Running head: Accounting Cycle Paper

Accounting Cycle Paper

Suzy Bell

University of Phoenix

Intermediate Financial Accounting One

ACC421

Jeffery T. Albus

July 04, 2011

Accounting Cycle Paper

This main point for this paper is the accounting cycle at Wal-Mart. A brief summary of

the Wal-Mart Corporation needs mentioning first for a better understanding. Then the next part

of the paper reviews and explains part of the accounting cycle for Wal-Mart. Last, to provide a

description of the people, processes, and the systems that one deems essential to the accounting

cycle needs mentioning in the paper.

Wal-Mart has a mission statement that says helping people save money so they can live

better. The vision for Wal-Mart seems clear enough they focus on particular areas where they

head up the industry that reflects on the distinctiveness for the organization. For Wal-Mart low

prices proves the long-term goal of this organization. For years this mantra works for Wal-Mart;

one knows this because Wal-Mart is the number one retailing store in the United States. This is

an American public organization running a large chain of discount department stores. Sam

Walton founded Wal-Mart in 1962 and to this day a member of the family sits on the Board of

directors.

In the world of business every organization uses accounting cycles in recording

transactions and when one prepares the financial statements. For these purposes eight basic steps

need using to prepare a financial statement:

“(1) identifying and measuring transactions and other events; (2) journalizing; (3) posting; (4)

preparing an unadjusted trial balance; (5) making adjusting entries; (6) preparing an adjusted trial

balance; (7) preparing financial statements; and (8) closing” (Kieso, Weygandt & Warfield,

2007, p. 93). “The first step in the accounting cycle is analysis of transactions and selected other

events” (Kieso, Weygandt & Warfield, 2007, p. 93).

The accounting functions of an organization’s main objectives consist of processing

information and preparing financial statements for the end of the organizations accounting

period. Wal-Mart as other companies systematically process financial information, and the staff

prepares the financial statements on a monthly, quarterly, and on an annual basis. A series of

steps needs achieving to meet the primary objectives. The steps of the cycle: (1) to collect and

analyze data from transactions and event; (2) then to journalize transactions; (3) posting to the

general ledger. Wal-Mart follows these steps, but in researching found that Wal-Mart has a habit

of using non-Generally Accepted Accounting Principles financial measures for presenting

information to the press.

Wal-Mart uses the accrual method for the accounting process and maintains a perpetual

inventory system for the stock carried for the financial reporting and tax purposes. Because

under perpetual inventory system, the cost of a quantity of goods sold or purchased is always

recorded at the time of sale or purchase (Doc Share, LLC, 2011). Because of this Wal-Mart

constantly performs physical inventories so as to confirm the accuracy of the inventory stated on

the books, and makes adjustments in the books to reconcile the book inventory to the physical

inventory. This technique used by Wal-Mart refers to the cycle counting. The cycle counting is

necessary because of the difficulty in conducting physical inventory at each store the last day of

the year. The technique will provide management with feedback on the effectiveness for the

inventory management and facilitates the use of experienced personnel that conduct these

physical inventories. Wal-Mart internal audit department sends stores a preparation package that

includes instructions on how to prepare the physical count. The physical count needed

conducting by a team of independent counters (18 to 40 persons), and the representatives from

Wal-Mart’s loss prevention department (one to two persons), internal audit department (one to

three persons) and operations division (one to two persons). Then Wal-Mart’s independent

auditors Ernst, and Young, sent representatives randomly to selected physical counts so one

could test the accuracy of the stores counts. These independent auditors need to count every

inventory item. The results from this physical count became reconciled with the book inventory.

Then Wal-Mart’s internal audit department reconciles the books and the next month records the

results from the physical inventory (Find Law, 2003). This audit reaches only one aspect of the

way Wal-Mart does the accounting cycle.

In conclusion, the main point for the paper is the accounting cycle at Wal-Mart.

A brief summary of the Wal-Mart Corporation needed mentioning first for a better

understanding. Then the next part of the paper reviews and explains part of the accounting cycle

for Wal-Mart because Wal-Mart is too vast to know every detail for the accounting cycle. Last,

to provide a description of the people, processes, and the systems that one deems essential to the

accounting cycle needs mentioning in the paper.

References

DocShare, LLC (2011). Inventory Accounting at Wal-Mart Stores. Retrieved July 4, 2011, from

http://www.docshare.com/doc/119569/Inventory-Accounting-at-Wal-Mart-Stores

FindLaw (2003). U.S. 8the Circut Court of Appeals Wal-Mart Stores v Cir. Retrieved July 4,

2011, from http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=search&case=/data2/

circs/8th/972693p.html&friend=nytimes

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2007). The Accounting Information System. In

Intermediate Accounting (pp. 61-124). : John Wiley & Sons.