...on the income statement. The cost of intangible assets with indefinite lives is not amortized. Companies generally use the straight-line method for amortizing intangible assets. Depletion is the allocation of the cost of natural resources to expense in a rational and systematic manner and is only used for natural resources. A common type of natural resource is oil. Declining-balance method provides you the highest depreciation expense in the first year, because with this method there is a decreasing annual depreciation expense over the asset’s useful life. According to "Learn Accounting" (2004-2014), "Yes, many companies use two or more methods of depreciation, it is acceptable for companies to depreciate its plant assets by using the straight line method while using an accelerated method on its income tax return.” The two different methods of depreciation that can be used are, one for accounting and another for income tax. Some assets can consist of being depreciated...
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...Deanna Cain XACC/280 CheckPoint: Subsidiary and Special Ledgers Journals The four different special journals consist of the Sales Journal, Cash Receipt Journal, Purchases Journal, and the Cash Payments Journal. Each of the Journals is a very important part in the final outcome. The Sales Journal is chronological entries of all goods sold as well as services provided; which ever the case may be. Keep in mind that the cash sale entries are not entered here. The advantage of using the Sales Journal is that this Journal reflects the history of all sales made by the company; providing dates and customer information for payment. The company would use the Sales Journal when there has been sales made or services have been provided, and the transactions were made by credit (non-cash transactions). The Cash Receipts Journal is where the chronological entries of all cash received for sales and services, therefore credit type sales are not entered in this Journal; they are recorded in the Sales Journal instead. The advantage of using the Cash Receipts Journal is that it is designed to record all cash coming into the company whatever the source may be. The business would use the Cash Receipt Journal when using the accrual accounting system to track the cash it receives in exchange for a sale or a service provided. The business would use the Purchases Journal when purchases are made with credit. This Journal does not record any cash purchases; they are recorded...
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...Technology in Accounting Rabbit XACC/210 - Accounting Information Systems 08/18/2013 Gregory Ellis Technology in Accounting Information systems are changing various aspects of the accounting profession by dictating the ways that businesses operate. Before the use of computers, or AIS, accountants had to use hand-written ledgers and spreadsheets to keep track of business records. This old method of accounting took hours of time, cases of paperwork, and cost the businesses extra money. If an employer needed to found out information on payroll or inventory, they would have to shuffle through cases and files of paperwork. The more time it took to do this, the more money the employer lost. The businesses that can quickly process raw data and display the information managers require, gain a competitive advantage over companies that lack to ability to move data efficiently through the organization. Accounting information systems have sped up the time that it takes for an accountant to view or change crucial data. Accounting information systems are used to perform tasks in such areas as payroll, accounts receivable, accounts payable, inventory, and budgeting in real-time. It is important for any accountant to stay current with all of the new technological advances. According to “Bagranoff, N. A., Simkin, M. G., & Norman, C. S.” (2010), “Career opportunities abound for those with a solid foundation in Accounting Information Systems, including traditional...
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...Accounting Information Systems Maxell XACC/210 August 08, 2014 Donna Tennyson Accounting Information Systems Companies or businesses have different information systems to assist in conducting the corporations’ daily financial operations. The various types of accounting systems employed by accounts receivable, payroll, accounts payable, and accounting in general are vast. These include common ones such as UltiPro, ADP Payroll services, and QuickBooks Payroll. Paychex Inc. is a payroll and human resource service company which serves many businesses in the US. The company services include payroll services, 401(k) plans, group health insurance, HR Administration & Compliance, time and labor management. QuickBooks payroll is used for calculating taxes, filing and paying taxes, and payroll. Companies can also switch to running QuickBooks payroll manually, in a similar fashion to hybrid software. Indeed, manual payroll requires the calculation and filing and paying of your own taxes. Another software is Microsoft excel which is an automated spreadsheet package that can be used for keeping, consolidating and handling data. Other processes that excel programs are used for includes: charting, or graphing data to support users in recognizing data movements, sorting and clarifying data to find specific information. QuickBooks software is developed and marketed by Intuit to perform various accounting task across the different departs of a business. One can gain from Intuit with...
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...Accounting Information System Requirements XACC/210 The requirements for developing an accounting information system are not unlike the design of an IT system. There are specific steps to adhere to in order to have a successful outcome. 1. Planning and investigation- It is important to determine what is required by each individual company in order to be successful. A company cannot skip this step and jump into a new system. The outcome would surely fail. 2. Analysis- It is important to take a broader view of current systems to determine what is working and what parts of the system need to change in order to be successful. 3. Design- After step one and two have been achieved, designing the new accounting system is the next logical step in order to realize the company vision. 4. Implementation, maintenance, and follow-up- Next, the company will try the new system out, make the necessary adjustments as time goes by, and ensure that things are working as they were designed to work. The accountant’s role in this process is to advise the company what elements are needed to have an accounting system that will allow them to effectively bring the needed information to the company that is needs in order to maintain a profitable business. They know what type of programs that are effective for general accounting purposes, spreadsheets etc. This knowledge and advice an accountant gives is a vital part of the planning and investigation an organization needs to...
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...Cost of Goods Name XACC/290 Date Instructor Cost of goods sold or COGS is the accumulated total of all the cost used to produce products or services, which have been sold or completed (Accounting Tools). On an income statement the cost of goods sold is subtracted from the revenues to obtain a company’s gross margin. The formula used to calculate the cost of goods sold in simple form is: Beginning inventory plus purchases less ending inventory equals cost of goods sold. Five methods can be used to determine the cost of the inventory items. 1) Periodic method, which a method used mostly by small business due simplicity and cost. In this method, inventory is counted at the end of every period and deducted from beginning inventory and purchases. 2) Average method is based on the average cost of items available for sale during a period. 3) Perpetual method is the most accurate and is widely used. With this method inventory is kept count at all times. 4) FIFO or first-in, first-out, use the cost of beginning inventory or oldest inventory to base calculations on. 5) LIFO or last-in, first-out bases the calculation of cost of the item on the last item purchased. This method is often used to cut tax cost assuming the last item bought was more costly. Many items factor into figuring the cost of an item including, materials, direct labor, overhead, freight, cost of goods from a manufacturer, and even cost of services or billable hours. Freight can be FOB shipping point or destination...
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...Cost of Goods Sold XACC/290 Calculating Cost of Goods Sold There are different ways to calculate the cost of goods sold. The most used and the easiest would be the periodic method of inventory. This is where you take the beginning inventory and add the inventory purchases and then subtract the end inventory then you will get the cost of a goods sold. This is the one that make sense because you take the accounting period and then just use that to get the answer. The only reason this one could come up with some wrong figures is because this does not take into account any items that were lost, stolen or damaged throughout the accounting period. Another method is the first-in, first-out method, also know was FIFO. This method is very simple they assume the oldest units in the inventory are always the first sold. Then the last-in, first-out method is just the reverse also known as LIFO. This means the newest items that are in inventory are the first ones sold. These methods are not very exact. Lastly you have the average cost method which is a good idea, this is taking the average of the cost and then using that to factor in cost of goods sold. So taking the beginning inventory and adding the purchases in dollars and then dividing that by the beginning inventory plus the purchases in units. This will get you the average cost per unit. Then you take the average cost per unit and multiply that by units sold and you will get cost of goods sold. Then you would...
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...XACC-291-Week 2- Reflection Rukaiyah Williams XACC-291 06/28/15 Professor Jana Rideout XACC-291-Week 2- Reflection Small and larger companies daily incur revenue expenditures to upkeep their operating efficiency and productive life of an asset. Expenditures are unavoidable as well as they are very necessary to expand the business. Expenditures are payments of cash or cash equivalent for goods or services. The difference between revenue and capital expenditures is that revenue expenditures are expenses that are immediately charged against revenue as expenses. Regular and periodic repairs are revenue expenditures because they are charged directly to specific accounts. Examples of these accounts would be Repairs and Maintenance Expense. Capital expenditures are expenditures will increase the company’s investment primarily in productive facility. A capital expenditure is an amount spent to attain or improve a long term asset such as buildings or equipment. When recording capital expenditure, it is usually recorded in accounts classified or titled as Property, Plant and Equipment. Generally, because capital expenditures provide income for the company over a period of years, companies are not allowed to deduct the full cost of the asset in the year the expense is incurred. Revenue expenses typically are shorter term expenses because they always required to meet the ongoing operational costs of running a business. (Investopedia, 2015) The contrasting factor of capital and...
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...Accounting Assumptions, Principles, and Constraints XACC 280 It can be said that when dealing with all aspects of accounting one would have their own assumptions of what exactly accounting can be interpreted to be. Along with assumptions, there are certain principles and constraints that are established in the accounting field. A clear explanation of principles, assumptions, and constraints can be done. The assumptions in accounting are first the monetary unit assumption which is the requirement of companies to express transaction data in accounting records in terms of money. Economic entity assumption is the requirement of each entity activities is separated from the activities of the owner and other economic entities. The cost principle is one of the principles of accounting which delegates the business asset information on their own cost for the time it is purchased and for the time it can be held. GAAP (generally accepted accounting principle) is another principle that shows how to give information on the economic events indicated. There are other principles like International and Financial Accounting Standard Board, and Securities and Exchange Commission. To ensure sound financial reporting the purpose of using the principle in the correct way, like the GAAP can help companies accounting stay intact and will also keep information clear and recorded along with the constraints of knowing what can or cannot be done in the company’s accounting. These choices will differ...
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...Checkpoint Accounting Assumptions Principles, And Constraints Diana Michalak XACC/280 Sara Carpenter August 5, 2011 The basic assumptions of accounting consist of four assumptions. Monetary Unit Assumption, which states that “only transaction data that can be expressed in terms of money be included in the accounting records(Ch 7.).” Economic Entity Assumption, which states that “the activities of the entity be kept separate and distinct from the activities of the owner and of all other economic entities. (Ch 7)” The Time Period Assumption which is an assumption that “the economic life of a business can be divided into artificial time periods (Ch 7).” The Going Concern Assumption which states that “the company will continue in operation long enough to carry out it’s existing objectives (Ch 7.).” The Principles of accounting consist of 4 principles. The first principal is The Revenue Recognitions Principle. This principle “dedicates that companies should recognize revenue in the accounting period which it is earned (Ch 7).” The second one is The Matching Principle which dedicates “that companies match expenses with revenues in the period in which efforts are made to generate revenues (Ch 7).” The third is the Full Discloser Principle which requires that companies disclose certain circumstances and events that make a difference to financial statement users (Ch 7).” The fourth one is the Cost Principle which “dedicates that companies record assets at their cost...
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...Accounting Assumptions, Principles, and Constraints Hcemac XACC/280 · There are three major guidelines that are used in the conceptual framework of accounting also known as assumptions, principles, and constraints. Assumptions provide a foundation for the accounting process (Weygandt, Kimmel & Kieso, 2008, p. 297).These include monetary unit assumption which states that only monetary data can be reported, economic entity assumption which states that entities such as the owner’s personal finances and the business must be reported separately and the same rule applies to more than one enterprise, the time period assumption states that a businesses economic life can be divided into time periods such as monthly, quarterly, or annually, and going concern assumption works on the basis that a company will operate long enough to complete its given objectives (Weygandt, Kimmel & Kieso, 2008) . The basic principles of accounting include revenue recognition which states that organizations should recognize revenue with-in the time period that it is earned. The matching principle state that expenses should be match to revenue in the time frame in which effort were made to generate the revenue. The full disclosure principle requires organizations to disclose pertinent information from financial statements to users (including investors) and the cost principle states the organizations must record assts at...
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...Accounting Assumptions, Principles & Constraints Greg Young XACC/280 03/10/2013 Salena Ford Accounting assumptions provide a foundation for the accounting process. There are three major assumptions; the monetary unit, economic entity, and time period assumptions. The fourth assumption is the going concern assumption. The Monetary Unit Assumption makes it mandatory that only transaction data that can be expressed in terms of money be included in the accounting records. The reason for this is so that a company does not put a dollar value on something that cannot be expressed easily, such as the president of a company. The Economic Entity Assumption states that the activities of an entity be kept separate and distinct from the activities of the owner and of all other economic entities. An example of this would be the assumption that the activities of Budweiser are different from other breweries such as Coors or Guinness. The Time Period Assumption states that the economic life of a business can be divided into artificial time periods. This assumption is stating that companies are able to divide their activities in months or quarters for financial reporting purposes. The Going Concern Assumption assumes that a company will continue to operate long enough to complete their existing objectives. Accounting principles area basically a guideline on how to properly record and report economic events. The revenue recognition principle dictates that companies should...
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...and Indirect Cash Flows Dana Benton XACC 291/C - Principles of Accounting II April 9, 2014 Elizabeth Mullaney Check Point: Direct and Indirect Cash Flows According to our text, the statement of cash flows reports, cash receipts, cash payments, and net change in cash, due to operating, investing, and financing activities during a set period. The four main reasons this report is helpful to investors, creditors, and others to look at, are simple. The report is helpful to look at the company's ability to produce future cash flow, to pay dividends, for the difference between net income and net cash used by operating activities, and cash investing, and financing transactions during a particular time. (Weygandt, Kimmel, & Kieso, 2010) Most companies use the indirect method. The method adjusts net income for items that do not affect cash. This process is easier and costs less to prepare. The process highlights the difference between net income and net cash flow for the operating activities. The direct method shows operating cash receipts and payments. The direct method results in a better understood report. The drawback of the direct method is it requires more information, and most companies see this as extra work, when to outcome is the same. The Financial Accounting Standards Board is a seven member board. The board consists of accounting professionals, which establish and coordinate the standards of accounting and accounting reporting, in the United States. The standards...
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...Capital Expenditures & Revenue Expenditures Veronica rowe XACC/291 Jan 29, 2014 Shontell Chrisman Capital Expenditures & Revenue Expenditures Capital expenditures; a sum spent to procure or development of a long term asset, such as buildings or equipment. Under normal accounting methods the cost is put under equipment, plant, property. Everything except the cost of land can be charged as depreciation expenditure over the useful life of the asset. Capital expenditures are put on financial report as an asset on balance sheet. Capital expenditure rewards are spread over several accounting periods. Capital expenditures can include replacement cost to delivery cost, legal charges and everything in between. Revenue expenditures; are amounts distributed out instantaneously, they match entries of the existing accounting period. Scheduled maintenance is a revenue expense, because they are charged without waiting to an account like maintenance and repairs expenditures. Major repairs do not affect the life of the asset. Revenue expenditures are put on financial report on the income statement. Revenue expenditures may include maintenance charge, repair, and renewal and everything in between. Both are classified as assets. The difference between the source of Capital and Revenue expenditures is special, because Capital is comprised of cost related to fixed assets, and Revenue expenditures affect is temporary, they come often and contains no physical presence, and does not...
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...Recognizing Differences Johnny T Russell XACC/291 Paula Hill 06/22/2014 Abstract There are differences between depreciation, valuation, amortization, and depletion. This short essay will show how they different from each other and whether it is ok to calculate depreciation by using two different methods. Depreciation, depletion, and amortization may have a different way of being presented. Each one is are accounting terms and are listed within the Generally Accepted Accounting Principles (GAAP). Each one is used to distribute the past cost of a particular asset. These allocations are especially helpful when checking the life of the asset. They compare the expenses and the wear and tear of the equipment while in production, or daily operations and or in administrative duties. When measuring these three you also have to take into consideration past cost, salvage value if any, and what is the useful life estimated to be? First is depreciation, this is when you allocate any tangibles that the asset has in the past. You take the past cost and you subtract the normal remaining or what the salvage value could be over its lifetime. You can use the easiest method which is the straight line method. Even though this method comes with a lot of criticism because it says that this method of time than the life or usage of the equipment. You can however use the accelerated method. This method gives you a broader range of how to deal with depreciations. Next...
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