and compare them to detect any abnormalities. Finally, Reasonableness testing might also have helped in detecting the errors in the leased assets. Reasonableness testing is the analysis of account balances or changes in account balances within an accounting period in terms of their “reasonableness” in light of expected relationships between accounts. For example, Ernst & Whinney could have used the number of lease contracts in effect to form expectations about the amount of rent income, the amount
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process. The financial reporting process is governed by accounting rules and standards, managerial incentives, and enforcement and monitoring mechanisms. It is important for a user of financial information to understand the financial reporting environment along with the accounting information presented in financial statements. In this chapter, the concepts underlying financial reporting are discussed with special emphasis on accounting rules. Next the purpose of financial reporting is discussed
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Accounting Final 1. Matching Principle – requires that expenses be matched with revenues. When revenue is recorded you should also record at the same time any expenses that are related to the revenue. Accrual basis of accounting is typically required for the matching principle; it is a type of accounting that records the impact of a business transaction as it occurs. 2. Salvage Value – also known as the estimated residual value or scrap value. It is the expected cash value of an asset at
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GAAP are Generally Accepted Accounting Principles and they impact essentially all items on a financial statement. Publicly traded companies and government entities at all levels are required to stick to GAAP to ensure that they use a uniform set of standards to compile the statements. Private companies, on the other hand, are not coerced into these standards, and therefore can produce non-GAAP statements that depict a different narrative for the company. The use of GAAP on financial statements allows
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Week One Student Guide This week, you learn about the financial accounting concept of accounting for receivables. Types of receivables, notes receivable, and statement presentation and analysis are covered. The assigned readings clarify the difference between tangible and intangible assets along with distinguishing between revenue and capital expenditures, and the entries associated with each. This week, you gain insight into how companies recognize notes receivable and how the methods are
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While general principles of accrual accounting and cash accounting differ on the core issue of when revenues should be recognized, the FASB Accounting Standards is designed to assist firms in establishing a set of consistent and practical criteria by which to recognize revenue. The Revenue Recognition Principle dictates that revenue ought to be recognized when it is realizable and when it is earned. In the case of the transaction between Eye Vision Inc. and Holland Hospital, there are two distinct
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comply, because the cost of non-compliance is still higher that the cost of compliance. Companies are placing more emphasis on internal controls since the Sarbanes-Oxley corporate governance of 2002. They are in search of a higher level strategic accounting officer. This is a clear response to the dynamic changes in regulation that continue to be brought upon organizations. Since 2005, the number of large companies warning regulators that their prior financial statements might not be valid, dropped
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Financial Statements In accounting there are four basic financial statements that are considered standard practice by the generally accepted accounting principles (GAAP). These are the income statement, the retained earnings statement, the balance sheet and the statement of cash flows. While each of these reports is very important in its own regard, they are also intermingled and depend on each other to represent a complete unbiased view of an organizations financial situation. The income
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Marriott International, Inc Annual Report 2011 Accounting Principles 100 June 16, 2012 Marriott International, Inc., a leader in the hospitality industry, extended their attention to customer comfort to their intended annual report audience, and created a communication instrument that stands apart from most others in the typically dull arena of corporate reporting. In 2011, note worthy endeavors included Global Growth which caused an increase in revenues and increase in franchises. Marriott
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of earnings is derived from two separate accounting systems in order to predict prospect cash flows. The two accounting systems put into account are the accounting system found under the implementation of present accounting standards, also known as the mixed attribute system of accounting. The second accounting system is the market data where the data is used as an alternative for a fair value system of accounting. The mixed attribute system of accounting is often characterized as one that integrates
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