...Accrual vs. Cash Basis Accounting XXXXXXXXXX ACC290 XXXXX, XX, XXXX XXXXXX XXXXXX Introduction In business, there are many different forms and standards to accounting. These standards are governed by rules, laws, regulations and accurate accountability of a particular business account. There are some general differences between general and commercial basis accounting principles, also differences between accrual and cash basis accounting. Those differences will be looked at here. General and Commercial Basis Accounting Principles According to Wikipedia.com, generally accepted accounting principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements. Hubpages.com discusses commercial accounting, also known as profit accounting, defining that it performs primarily by profit and loss. The reporting for a profit organization is directed to the investors. ("The Principles Of Commercial Accounting And Fund Accounting", 2011). Accrual vs. Cash Basis Accounting According to the readings, accrual basis accounting is defined as in which companies record, in the periods in which the events occur, transactions that change a company's financial statements, even if cash was not exchanged. In other words...
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...ACO01– FINANCIAL ACCOUNTING 2 FINAL EXAM ANSWER SHEET 2014 ------------------------------------------------- Name : Student ID : ------------------------------------------------- Test code : Time : 90 minutes TOTAL MARKS: | 1st Invigilator | 1st Examiner | 2nd Examiner | 2nd Invigilator | Part A. Multiple choice questions (40 marks) Please fill in the appropriate circles corresponding to your answers. 1. 2. Ⓐ Ⓑ Ⓒ 3. Ⓐ Ⓑ Ⓒ 4. Ⓐ Ⓑ Ⓒ 5. Ⓐ Ⓑ Ⓒ 6. Ⓐ Ⓑ Ⓒ 7. Ⓐ Ⓑ Ⓒ 8. Ⓐ Ⓑ Ⓒ 9. Ⓐ Ⓑ Ⓒ 10. Ⓐ Ⓑ Ⓒ 11. Ⓐ Ⓑ Ⓒ 12. Ⓐ Ⓑ Ⓒ 13. Ⓐ Ⓑ Ⓒ 14. Ⓐ Ⓑ Ⓒ 15. Ⓐ Ⓑ Ⓒ 16. Ⓐ Ⓑ Ⓒ 17. Ⓐ Ⓑ Ⓒ 18. Ⓐ Ⓑ Ⓒ 19. Ⓐ Ⓑ Ⓒ 20. Ⓐ Ⓑ Ⓒ 21. Ⓐ Ⓑ Ⓒ Part B. Exercises (60 marks) Transaction | Account Titles | Debit | Credit | 1. | Purchased lot | 225,000 | | | Old building | 120,000 | | | Cash | | 345,000 | | Tear down old building | 34,500 | | | Fill and level the lot | 51,000 | | | Construction cost | 1,140,000 | | | Cash | | 1,525,000 | | | | | 2. Ming Yue Co | Land | 154,665 | | | Land improvements | 55,440 | | | Building | 162,030 | | | Closing costs | 19,600 | | | Cash | | 387,850 | | | | | 3. Fineses Co | Depreciation (1 year) = 13,250 | | | | Depreciation expense | 59,625 | | | Accummulated depreciation | | 59,625 | | | | | 4. | Cash | 35,000 | | | Accummulated depreciation | 59,625 | | ...
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...ACO01– FINANCIAL ACCOUNTING 2 FINAL EXAM ANSWER SHEET 2014 ------------------------------------------------- Name : Student ID : ------------------------------------------------- Test code : Time : 90 minutes TOTAL MARKS: | 1st Invigilator | 1st Examiner | 2nd Examiner | 2nd Invigilator | Part A. Multiple choice questions (40 marks) Please fill in the appropriate circles corresponding to your answers. 1. 2. Ⓐ Ⓑ Ⓒ 3. Ⓐ Ⓑ Ⓒ 4. Ⓐ Ⓑ Ⓒ 5. Ⓐ Ⓑ Ⓒ 6. Ⓐ Ⓑ Ⓒ 7. Ⓐ Ⓑ Ⓒ 8. Ⓐ Ⓑ Ⓒ 9. Ⓐ Ⓑ Ⓒ 10. Ⓐ Ⓑ Ⓒ 11. Ⓐ Ⓑ Ⓒ 12. Ⓐ Ⓑ Ⓒ 13. Ⓐ Ⓑ Ⓒ 14. Ⓐ Ⓑ Ⓒ 15. Ⓐ Ⓑ Ⓒ 16. Ⓐ Ⓑ Ⓒ 17. Ⓐ Ⓑ Ⓒ 18. Ⓐ Ⓑ Ⓒ 19. Ⓐ Ⓑ Ⓒ 20. Ⓐ Ⓑ Ⓒ 21. Ⓐ Ⓑ Ⓒ Part B. Exercises (60 marks) Transaction | Account Titles | Debit | Credit | 1. | Purchased lot | 225,000 | | | Old building | 120,000 | | | Cash | | 345,000 | | Tear down old building | 34,500 | | | Fill and level the lot | 51,000 | | | Construction cost | 1,140,000 | | | Cash | | 1,525,000 | | | | | 2. Ming Yue Co | Land | 154,665 | | | Land improvements | 55,440 | | | Building | 162,030 | | | Closing costs | 19,600 | | | Cash | | 387,850 | | | | | 3. Fineses Co | Depreciation (1 year) = 13,250 | | | | Depreciation expense | 59,625 | | | Accummulated depreciation | | 59,625 | | | | | 4. | Cash | 35,000 | | | Accummulated depreciation | 59,625 | | ...
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...Brandywine Homecare Renne Brown Dr. Merle Point-Johnson HSA525 Healthcare Financial Management January 22, 2012 Brandywine 1 1. Construct Brandywine’s 2007 income statement The income statement summarizes the operations (i.e.the activities) of an organization with a focus on its revenues, expenses, and profitability (Gapenski, pg. 74,2008). The income statement of Brandywine Homecare is presented in Table1: Brandywine Homecare Income Statement 2 Revenues: $12million Expenses: $ 9 million Depreciation $1.5million Total Expenses ...
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...sum of: (1) Earnings during a given period from services performed by the grantee and goods and other tangible property delivered to purchasers, and (2) amounts becoming owed to the grantee for which no current services or performance is required by the grantee. Acquisition cost of an item of purchased equipment means the net invoice unit price of the property including the cost of modifications, attachments, accessories, or auxiliary apparatus necessary to make the property usable for the purpose for which it was acquired. Other charges such as the cost of installation, transportation, taxes, duty or protective in-transit insurance, shall be included or excluded from the unit acquisition cost in accordance with the grantee's regular accounting practices. Administrative requirements mean those matters common to grants in general, such as financial management, kinds...
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...Accounting period: the annual reporting period (or fiscal year) Accounting priciples: are fundamentals theories, truths and propositions that serve as the foundation for financial accounting and reporting Accounting standards: establish the authoritative guidance on how companies should account for and report specific transactions events and arrangments in their financial statements Accrual accounting: measures the reports and economic effect of a companies transactions evente etc in the periods in which those effects occurred, even if the cash recipt and payment occured in a different period Accruals: when economic effects are recognized in the current period, even though the cash flows will occur in a later period they are reffered as accurals Business cycle: is the yearly period from the lowest sales through highest sales and back to lowest sales. Comparability: of accounting information helps identify and explain similarities and differences between two or more sets of economic facts Complete representation: provides users with full disclosure of all the information necessary to understand the information being reported, with all necessary facts, descriptions and explanations Conceptual framework: is a foundation of objectives, concepts, priniciples, and definition that leads to high quality financial accounting standards and the appropriate application in accounting practice. confirmatory value: if it provides feedback to confirm or correct prior prediction and expectations ...
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...period. Net income can be distributed among holders of common stock as a dividend or heal by the firm as an addition to retained earnings. As the profit and earnings used income, net earnings, and net profit for net income. However, net income called the bottom line because it’s typically found on last line of the company income statement. One of the most important concepts to understand is that net income is not a measure of how much cash a company earned during a given period. Revenues-expenses= net income $12,000,000 - $7.7 million = $4.3 million (net income) Total profit margin tells how profit a company makes for evaluation dollar generates in revenues. It is the percentage of revenue that a company keeps as profit after accounting for fixed and variable costs. It is calculated by dividing net income by revenue. Net income/total revenue=total profit margin $7.7 million/$12,000,000=$4.3 million Cash flow is the movement of cash into a business. It is usually measured during a specific time. Measurement of cash flow can be used for on a company’s value. It refers to the total of all flows involved or a subunit of the flows. There are three activities in cash flow and they...
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...responsible for monitoring when contracts are signed and when the payments for those contracts are assured. Obviously he failed in his job because he was incarcerated on April 24, 2006. The accounting department recorded its sales in the current quarter while these sales should be recorded next quarter, which took place at the fourth quarter of 1998 and the second quarter of 2001. According the evidence and the proclamation of prosecutors from the DOJ and SEC, the CA accounting department did not follow the GAAP. However, Richard asserted that this way of accounting was not as costly and significant as the WorldCom or Enron corruption cases because these two companies went bankrupt. Richard is also very confident that once released from prison, he will be able to continue his accounting career. The process in which CA recorded its sales revealed numerous inaccurate accounting principles and concepts. According to the article, the accounting department recognized revenue while the contract was signed. It follows the accrual concept that revenue is recognized not only when cash transactions occur. Since the contracts were signed, the revenue could be received earlier or later. Accural accounting helps to provide a more accurate picture of current company conditions. However, CA’s accounting strategy was to recognize next quarter revenue in the current quarter, which increased the revenue in the current quarter. Despite knowing that next quarters revenue would decrease, CA accountants...
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...Generally Accepted Accounting Principles Jack Carmine HSC/571 February 3,2014 Generally Accepted Accounting Principles The health care industry is a business but unlike most business; the primary goal of health care organizations is to provide medical care to patients. The secondary goal is to have the financial means to provide care by earning a profit. The financial statement of an organization measures how the business did in the past, present, and has the potential to predict the future status. All businesses need to keep track of revenue and cost, including a having a consistent method to share and present information to stakeholders and outside entities. Generally Accepted Accounting Principles (GAAP) is the standards, procedures, and rules organizations use to record and report financial information and ensures consistency in financial statements. The Financial Accounting Standards Board (FASB) establishes the standards and rules of GAAP (Finkler, Kovner, & Jones, 2007). A few of the most common GAAP are reviewed in this paper. Financial accounting yields four financial statements. “The statements are … balance sheet, statement of operations (or income statement of revenues and expenses, statements of cash flows,[and] statement of changes in new assets (or statements of changes in net assets)” (Cleverley, Song, & Cleverley, 2011,p.182) . GAAP is used to form the structure...
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...A. Davis, Jr. ACC/542 October 21, 2013 Irene Branum Preface In the last few weeks the accounting firm, Team D has looked into characteristics of Kudler Fine Foods and provided recommendations to update and replace existing components of the IT system. These recommendations made can yield in the company’s increased productivity, profitability, and remove potential threats. Team D determined that industry specific software is useful in comparison to customized software. Four main modules such as payroll, account payable, accounts receivable, and inventory were developed as well as enhancement of each flowchart based on the appropriate system. Team D examined the database completeness at Kudler’s intranet and developed a pivot table; therefore, making the decision-making process easy. External and internal risks were analyzed and internal control points were developed by incorporating both risks and controls into a flowchart. Team D also showed why findings and recommendations are more useful to the company in comparison to SAS70 and SAS94 audits. The team identified events that will lessen the dependence on auditing through computer and showed a brief description how the audit should be conducted. System Integrity and Validation Kudler Finer Foods has looked for recommendations regarding the company, to include computer information system, automated process of an accounting information system, data table analysis, internal control and risk evaluation, and auditing procedures...
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...I. Introduction The Royal Mint has a unique manufacturing operation in the United Kingdom and also designated as an executive agency responsible to the treasury to the “Her Majesty's” Government. Its objective is to provide the government with coinage at a competitive price and its manufacturing requirement ranges from high volumes of standard coinage to individual service medals or commemorative coins. In the case of the Royal Mint, they follow a unique cost ceiling that their cost base must always be less than the face value of the coins being produced. In order to follow that unique cost ceiling, the researchers follow the concept of simultaneous design by being involved in initiatives to improve materials being used in both coins and dies. Then due to high inflation rate, the face value of the coin is exceeding the cost base of the raw material and with the help of using the concept of simultaneous design, the Royal Mint quickly mitigated the risk by changing the composition of the 2 Pound and 1 Pound coins to a steal core with an electroplated copper outer layer and has significantly reduced the unit cost and it added expected lifetime by using a less expensive metal base. II. Background The Royal Mint has a cost ceiling that the cost base of the material must be less than the face value of the coin being produced. In order to follow that unique cost ceiling, the Royal Mint implemented the Concept of Simultaneous Design to research on how to further improve...
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...CHAPTER 17 PROCESS COSTING 17-1 Industries using process costing in their manufacturing area include chemical processing, oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips, beverages, and breakfast cereals. 17-2 Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. Often, only two cost classifications, direct materials and conversion costs, are necessary. Direct materials are frequently added at one point in time, often the start or the end of the process. All conversion costs are added at about the same time, but in a pattern different from direct materials costs. Conversion costs are often added throughout the process, which can of any length of time, lasting from seconds to several months. 17-3 Equivalent units is a derived amount of output units that takes the quantity of each input (factor of production) in units completed or in incomplete units in work in process, and converts the quantity of input into the amount of completed output units that could be made with that quantity of input. Each equivalent unit is comprised of the physical quantities of direct materials or conversion costs inputs necessary to produce output of one fully completed unit. Equivalent unit measures are necessary since all physical units are not completed to the same extent at the same time. 17-4 The accuracy of the estimates of completion depends on the care and skill of the estimator...
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...Memo of law Question/Issue Presented What evidence can be found during a legal discovery and how does this affect the record-keeping policy of a business organization? Applicable Law and Ethical Standards Newby v. Enron Corp. , 2002 U.S. Dist. LEXIS 28397 (S.D. Tex. May 1, 2002) Newby v. Enron Corp. (In re Enron Cor... , 2003 U.S. Dist. LEXIS 1668, Fed. Sec. L. Rep. (CCH) P92404 (S.D. Tex. Jan. 28, 2003) United States v. Arthur Andersen LLP , 2002 U.S. Dist. LEXIS 26870 (S.D. Tex. May 24, 2002) 18 USCS § 1512 Discussion/Analysis (of Law and Facts) During a legal discovery which includes the procedures of Deposition, Interrogatories and Production of Documents there can be different evidence found depending on the area of work the business organization is involved in. An example could be that a company tried to create false documents with the intent to seem like a good investment or to avoid paying taxes. During a deposition evidence can be found that people questioned tell conflicting stories. It is crucial to be able to deliver the right documents requested during a discovery. Therefore, it is important to have an organized record-keeping policy for any organization. Furthermore, a business should keep its records as correct as possible and not be tempted to give in to fraud, changing documents or destroying important documents. A company should follow the law to keep the required documents. It would be a crime to hide, destroy and/or withhold subpoenaed...
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...TOOLBOX: 1) Inventory Management - Inventory Turnover Ratio = Costs of Goods Sold/ Inventory If inventory turns over 6 times, how many days does it stay on the shelves or in the warehouse? These are annual figures: 365/7 = 60 days on the shelves. Need a better specific Mission Statement. 2) Costs that do no change with volume of output are called -Fixed Costs Costs that change when volume changes are called -Variable Costs 3) Fishbone Analysis 4) Low Urg/Low Impt – Low Urg/High Imp High Urg/Low Impt – High Urg/High Imp 5) Present Value and Future Value PV x C^n = FV When comparing investments....pick the one that has a larger present value. 6) PORTER 5 Porter 5 does not cover the opportunities part of the SWOT ad Market Growth Potential. 7) HILO METHOD: Finds Slope (FC, VC) [(Total Cost From Later Year - Total Cost from Year Before Later)] / [(Units from Later Year /-Units from Year Before Later)] = VC FC = Total Cost – (VC)(UNITS) 2012 Units: 800 Total costs: 7000 2011 Units: 500 Total costs : 6100 [7000/6100] / [800/500] = $3/unit ( VC 3(800) 2400 ... 7000-2400 FC= 4600 8) BREAKEVEN POINT BE = [FC/[P-VC] BE ( Given a total profit ) = [FC+TP]/[P-VC] QUESTION: How many units must you sell to earn $100 000 in profit 4600+ 100 000/ [5-3] = 104600/2 = 52 300 9) FINANCIAL STATEMENT BALANCE SHEET - ASSETS = LIABILITIES + EQUITY INCOME STATEMENT- NET INCOME = REVENUE MINUS EXPENSES CASH FLOW STATEMENT ...
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...ACCT310 - 1304B – 07 Andre’s Hair Styling American Intercontinental University Online December 1, 2013 ABSTRACT The following information is going to contain information from Andre’s hair styling. The information is going to detail the contribution margin, the annual break-even point, as well as the operating income. Fixed costs consist of the barbers so to figure that out we must take their nine dollars and ninety cents an hour that they are paid and multiply that by the barbers forty hour work week and then multiply that by the fifty weeks that they work a year and then again multiply by the five different barbers that are working at Andre’s Hair Styling; we then get ninety-nine thousand dollars as the outcome. ($9.90*40 hours a week*50 weeks a year* 5 barbers) = $99,000 which added together is one hundred and twenty thousand dollars. Other expenses for Andre’s Hair Styling consists of the remaining fixed costs per month which is one thousand seven hundred and fifty and then multiply that by twelve months and we get twenty-one thousand dollars a year for other fixed expenses. ($1,750 fixed expenses * 12 months in a year) = $ 21,000 Now that we have done all of that calculations to begin answering the questions at hand we will go from 1-4. 1. The first task is to find the contribution margin per hair cut at the same time assuming that the barber’s compensation is a fixed cost. So we take the following in mind. Andre’s hair styling is charging twelve dollars...
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