...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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...The term cash flows refer to the receipts and payment of cash. A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents is known as a statement of cash flow. Similar to an income statement, a cash flow statement records a company’s performance over a period of time. Consistently, companies will disclose the cash arising are generally required to prepare a statement of cash flow in their annual reports because it contains vital information for lenders and investors who primarily make informed and economic decisions about the companies. Generally during a company’s accounting period their cash flow is categorized and divided into three sections which are: cash flow from operations, financing and investing. The primary reasons these transactions are catergorized and divided is so investors will understand what the transactions are related to and how each section paints a vivid picture of how the company is doing from both a cash standpoint and overall health. The statement of cash flow is very important for companies that are required to prepare and present their financial statement in accordance to with international accounting standards and international financial reporting standards. Cash flows from operating activities represent the cash collected from the primary revenue generating activities and will include all transactions from the operations of business. Operating activities are short term activities which only...
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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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...Coca-Cola VS. PepsiCo When determining which company has the most to offer it is necessary to look at each set of numbers from several different views. For instance this paper will cover vertical and horizontal analysis, profitability, solvency, and liquidity ratios. I will be explaining how each set of results play into the decision making of which company would be best to invest in, by comparing both companies numbers in able to collect the necessary data to make a calculated decision. Coca-Cola and PepsiCo have been in competition since day one, each have a very profitable company. When running the number through and performing a horizontal analysis the numbers show Coca-Cola as being the company that is more financially sound. Not only are Coca-Cola’s current assets at $10,250.00 compared to PepsiCo’s $4,882 current assets, but their liabilities are lower and continued to decrease during the last year. Coca-Cola’s total liabilities in 2004 were $15,104.00, in 2005 their liabilities decreased by $4114.00, compared to PepsiCo’s, whose liabilities in 2004 were $14,464.00 and only continued to increase during the year by $3012.00 bringing their 2005 liabilities to $17,476.00.The rate at which Coca-Cola decreased from 2004 to 2005 was 27.2% compared to PepsiCo’s 20.8% decrease; the speed at which their liabilities decreased brought Coca-Cola to a more financially sound position. Horizontal analysis is a good tool to use when identifying changes in common statements in able...
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...Checkpoint 1: Accounting assumptions, principles, constraints Accounting Assumptions, Principles, and constraints The basic Assumptions of accounting are: monetary unit assumption, time period assumption, economic entity assumption, and going concern assumption. Monetary unit assumption is when records only show data that can be expressed in terms of money. Health of owners, the quality of service, and morale of employees are not included because companies cannot qualify this information in terms of money (Accounting in action). Going concern assumption is when the business is assumed to have a continuous life of existence it will not close or be sold. Since the business is assumed to have a continues life of existence the life of the business is divided into equal periods that when these equal periods are over the accountant prepares the financial statement, this called the time period assumption. this period can be yearly, annually, monthly or quarterly it depends. and finally entity assumption wherein the business considered as a separate and distinct entity apart from the owner. The principles of accounting: the first principles is the cost principle, this dictate the company's assets at their cost. This means the amount spent when the item was obtained whether it was purchased today or 20 years ago. Cost will be recorded as purchased even if the cost has had increase in value over time, this is referred to as historical cost. This basic accounting principle is...
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...Week 9 Capstone Question For the Liquidity of both companies The current ratio is a widely used measure for evaluating a company’s liquidity and short-term debt-paying ability. The current ratio for 2005 current assets = current ratio = 10250 Current liabilities 9836 = 1.04 The current ratio for the Coca Cola Company in 2005 is 1.042:1 While the current ration for Pepsi Co. in 2005 is 1.12:1 The current ratio for 2005 current assets = current ratio = 10554 current asset = 1.12 Current liabilities 9406 current liability The profitability Profit margin is a measure of the percentage of each dollar of sales that results in net income. Profit margin is also called the rate of return on sales. For Pepsi Co. 2005 Profit Margin = Net Income 4078 Net Sales 4977(1716+3261) = 0.819 or 81.9% For The Coca Cola Company 2005 Net income 4872 Net sales 6982= (4701+2281) =0.698 or 69.8% Solvency ratios measure the ability of a company to survive over a long period of time. For Pepsi Co. Debt to total assets Ratio = Total debts 17476 Total Assets 31727 = 0.550 or 55% The Coca Cola Company Debt to total assets Ratio = Total debts 19644 Total Assets 29427 =...
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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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...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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...Cost of Goods XACC/290 Cost of Goods The cost of goods sold is a category of expense for merchandising organizations. It is defined as the total amount of merchandise sold during an accounting period (Kimmel, Weygandt, & Kieso, 2011). To calculate the cost of goods sold, it would depend on which type of system the merchandising company is using. If they are using a perpetual system, which means that the organization uses daily detailed entries for the cost of their inventory’s purchase and sale, they would be journalizing each selling price of merchandise (Kimmel, Weygandt, & Kieso, 2011). For example, for inventory sold, an accountant would debit Accounts Receivable or Cash and Sales Revenue is credited for that merchandise’s selling total price (Kimmel, Weygandt, & Kieso, 2011). Subsequently, the accountant would also debit the Cost of Goods Sold and credit Inventory for the cost of that merchandise sold. The second system that can be used by a merchandising company would be the periodic system. In a periodic system, the organization does not keep a daily, detailed inventory record. They instead calculate the cost of goods sold at the end of their accounting period. To determine the cost of goods sold they use the equation – beginning inventory plus the cost of goods equals the cost of goods available for sale (Kimmel, Weygandt, & Kieso, 2011). They then take this total and minus it from their ending inventory. This will give the company...
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...Internal Controls Ashly Rea XACC/280 September 22, 2012 Adrienne Cooper Internal Controls If you cannot trust your employees to protect your revenue, whom can you trust? In most cases the answer is not whether you can trust your employees but how effectively you are monitoring them. Internal control means doing just that, setting up methods and measures within an organization to establish control. Companies such as Tyco and Enron are examples of company destruction from a lack of internal control. With a strong internal control in place companies are able to protect their assets. This includes employees engaging in theft or robbery and takes care of any unauthorized use of any of the assets. Companies are also able to have reliable accounting financial records. Internal control helps to ensure accuracy in the work. In order for internal control to be functional there are specific control principles in place. Depending on the size and functions of the business, these principles can alter slightly. The majority of companies follow four internal control principles. These four principles are establishing responsibility, segregation of duties, using physical, mechanical, and electronic controls, and independent internal verification, It is impossible for one person to make sure all areas of the business are perfect. In order to be the most efficient, companies need to assign the responsibility to certain employees. It makes it easier and more...
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...Internal controls: an overview XACC/280 Internal controls are absolutely essential to the functioning of any public company, and without them companies are doomed to economic turmoil and even collapse. Simply put, internal controls are the various methods that a company uses to “Safeguard its assets from employee theft, robbery, and unauthorized use” and “enhance the accuracy and reliability of its accounting records” (Weygandt, Kimmel, and Kieso, pp. 340). As the text implies, without these controls the corporation would be vulnerable to any number of external and internal problems. In fact, the Sarbanes-Oxley Act (SOX) has many regulations to ensure the creation and maintenance of these internal controls, with severe penalties to those companies that do not do so. When the government passed the SOX in 2002, it was intended that SOX force “companies to pay more attention to internal controls” (Weygandt, Kimmel, and Kieso, pp. 341). This was in direct response to several corporate scandals that involved corrupt business practices, poor accounting, and non-transparent public financial statements, and inevitably the loss of billions in investor dollars. These laws help to ensure that internal controls are developed using “sound principles of control over financial reporting” and that they “must continually verify that these controls are working” Weygandt, Kimmel, and Kieso, pp. 341). All of this means that they are a watchdog ensuring that companies are honest and forward...
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...l Chapter 4: Recognizing Differences Differentiate between valuation, depreciation, amortization, and depletion. Is it appropriate to calculate depreciation using two different methods? Why? Valuation can be defined as determining a value. Valuation involves assets should be documented at the current market price regardless of whether the actual value is above or below cost. There are two common valuation options which are fair-market-value and historical cost (net depreciation). The allocation of cost of a plant asset to expense over its useful or service life in a rational and systematic manner is known as depreciation. Depreciation is not a process of valuation, nor is it a process that results in an accumulation of cash. There are three methods that can be used for depreciation. Amortization is the systematic write-off of an intangible asset that has a useful life. This can be found 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)...
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...Capstone Response Nikki Pinkerton XACC/290 November 29, 2015 Dan Adams Capstone Response After reviewing Sarbanes-OXELY Act (SOX) which was established in 2002 we are able to see how this process affects the practice of accounting. SOX is designed to work with the internal controls that we have learned about this past week. Its main purpose is to ensure that auditors have no connection with the company they are auditing. No connection of any kind. Enron was one of the many companies committing fraud when the company was defunct and went bankrupt, this is why the SOX act was created. The requirements for under the SOX include statement of management’s responsibilities, allowing sufficient internal controls. This assessment is completed by management usually toward the end of the fiscal year. They will also the effectiveness of internal controls and procedures inside and outside. Sox ensures that all organizations are being checked and audited sparingly in order to aid in the consistency and accuracy of the information. Since this act was put in place in the year 2002 it has implanted stricter guidelines for organizations and is making the cover up of fraud much more difficult. Using external audits as the result of the SOX accounting scandals has come to an end. This process has ensured that all auditors have absolutely zero connection to the company that is being audited. I am sure they have to under go a very extensive back ground inspection...
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...August 10, 2014 XACC 291 Assignment 2 E9-1 1 A. The acquisition cost for the plant asset will contain all spending needed to obtain the asset and make it prepared for its own purpose. 1B. 1. Land 2. Factory Machinery 3. Delivery Equipment 4. Land Improvement 5. Delivery Equipment 6. Factory Machinery 7. Prepaid Insurance 8. License Expense E9-7 A. 1. Straight Line Method 2011: $3,500 2012:$ 3,500 Accumulated Depreciation 2011: $26,500.00 2012: $23,000.00 2. The Units of Activity Method $0.28 per mile 2011 $4,200 2012. 360 3. The double-declining method 2011: $7,500 2012:$5, 625 B. 1. Dec 31 Depression Expense 3,500 Accumulated Depression 3,500 (To record the annual depression on truck) 2. Brainiac Company December 31, 2011 Balance Sheet Equipment: $30,000 Less Accumulated Depreciation: $3,500 Net property, plant, and equipment: $26,500.00 E9-12 Adjusting Entry Dec.31 Amortization Expense: Patent 12,000 Patients 12,000 Problem 9-7B A. Jan.2 Cash...
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...Information Systems Department Week One Checkpoint Name XACC/280 Date Information Systems Department There is Information system with in every business organization. Be it a computer based or hardship bases. There are some types if not both types of information systems. Information systems are where the technology is used between both operations. This technology helps everyone stay on top of what is going on. It helps to keep everyone posted and up to date. There are several types of systems to the Information System to be made up. You will need all of them to get a great business or a large business to run properly. Two of these examples are The Wal-Mart check out person, and the Credit Card application analysis. The Wal-Mart check out person will be in the Transaction processing system type. Their job description would to process transaction and their data for the business to see what and how much they are exactly selling. They need this person to finalize everything for the corporation to see what they have sold. The Credit Card approval analysis is in the Expert System type, and make the decision on whether to give the person a credit card or not. But this is based on a credit score that the person has so they basically are just telling the person what the computer says. They need this person in business to make sure people with good credit scores can keep up with their good credit by buying things from this card; and people with bad credit cannot hurt themselves...
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