Advantages Of Accrual Accounting In Malaysia Government

Advantages Of Accrual Accounting In Malaysia
As Audit General of Malaysia Government, the government does not fully adopt accrual accounting.
Government will follow and under full accrual accounting through providing a more comprehensive
and up–to–date picture of the Government's financial situation. Full accrual accounting strongly
supported by National and international accounting Standards bodies and Audit General.
To fully adopt the full accrual accounting, senior levels of government urges governments to adopt
full accrual accounting under recommendation The Public Sector Accounting Board of Chartered
Accountants. The Auditor General has strongly recommended full accrual accounting as "...superior
to the Government's current accounting policies." Reason for implementing full accrual accounting
will improve transparency and accountability because the Government's balance sheet will provide a
more comprehensive and clear vision picture of the Government's assets and liabilities; and the
annual ... Show more content on Helpwriting.net ...
Under full accrual, the cost of these non–financial assets will now be recorded. Under modified
accrual accounting, the full purchase price of a capital asset was shown as an expenditure item in the
year of purchase and therefore had an immediate impact on the annual budgetary balance. Under full
accrual, the annual cost of owning a capital asset will be the estimated depreciation (or amortization)
in the value of the asset according to Generally Accepted Accounting Principles. Full accrual
accounting therefore spreads the cost over the useful life of the asset. Similarly, under modified
accrual, the cost of an item held in inventory is recognized in the year in which the item is purchased
while, under full accrual, it is recognized as an expense in the year in which the item is used. For
example The Government decided to buy new
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Period-End Accruals Case
) There was a lack of adequate cut–off procedures to ensure the timely recording of certain period–
end accruals. This resulted in an audit adjustment of $3,578,000. The benchmark for overall
materiality is $3,508,000, I would consider the audit adjustment of $3,578,000 a material
misstatement. Control environment, principle 2 the board of directors and management exercise
oversight of development and performance of internal controls. Due to the severity and material
weakness of lack of adequate cutoff procedures to ensure timely recording of period end accruals.
Management and the board of directors should evaluate performance of internal control activities
including adherence to standards of conduct and expected levels of competence. In

Cash Based Accounting & Accrual Based Accounting
Introduction
There are two based types of accounting measurement to determine the profit. They are cash basis
and accrual basis. Business can use either a cash basis or accrual basis to work there profit.
However, most of the company prefers to use accrual basis instead of others. In this essay, I will
compare the difference between cash basis and accrual basis on expense and revenue. In addition,
how can company choose their measurement of profit will also be discussed.
Cash basis & accrual basis
Cash basis accounting is focus on cash flow, the companies record the revenue and expense when
the cash flow really comes into their account. In other words, revenue is record when cash is
received and expense record when cash is paid. ... Show more content on Helpwriting.net ...
In accrual basis accounting, when an expense is record before cash flow really comes into the
account, it will be recorded in an accrued expense account. (Bushman 2007) As a result, there will
not have a delay in account.
How can company choose their accounting method
Most small businesses are free to choose either cash basis or accrual basis. (Fishman 2007) The cash
basis accounting will be the best choice because it can save lots of expense in record–keeping. If
you have a big company with lots of sales on credit. You need to use accrual basis accounting.
(Fishman 2007) Big companies always have lots of sales on credit and purchase on credit, so the
cash basis will have lots of delay caused by the time. In addition, big companies always have
expense machines. If you use cash basis, the expense of the machine will be record to only this
financial year. However, if you use accrual basis accounting, the expenses will be record into many
years and it is called depreciation. The record is more accurate. The revenue record principle
requires that revenue need to be record when earned, not when the cash is received and this principal
is very important for all companies.
Conclusion
I have identified the difference between cash basis accounting and accrual basis accounting. Both of
them have their own advantages and disadvantages. So, it is very important for your company to
choose which the most suitable one is.

Accounting and Finance: Essay on Accrual Basis
AC300:Financial Accounting I – Compulsory essay due 15th November
Discuss the advantages and disadvantages of financial statements prepared on an accrual basis
The financial statement is a financial document used to indicate the financial position of a business
at a particular moment in time. A business's financial position can be analysed into three main areas:
Profitability, liquidity and stewardships. The statement is prepared at the end of each financial year
using accounting basis. The Accrual accounting basis is one of them, it is perhaps the most
commonly used approach to keep up with revenues and expenses in the preparation of financial
statement . It is suitable to use by organisations that have business activities involving ... Show more
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This may be due a prepaid revenue at a specific timing when payment to creditors (Trade payables)
is made before purchased good arrived. The situation may also happen when the business has not yet
received receipts from debtors (Trade receivables), but the sales is actually recorded and included in
the income statement. Therefore the difference in timing may contribute to problems in the cash–
flow in the organisation.
In conclusion, the accrual accounting basis is widely used in the preparation of financial statement
because it is more objective and realistic to recognise revenue and expenses when they are incurred,
even though no cash has actually changed hand. Therefore the profitability of a business is outstood
very clearly in the financial statement. However, accrual basis is complex, and the cash at bank
balance does not reflect to net revenue. In credit sales transaction, the event of delivery of goods or
services, does not occur at the same time as the invoice receipt from debtors. Doubtlessly, it is a
good measure for the profitability, but for cash–flow and liquidity, it may not be reliably useful. An
alternative method of accounting basis, the cash basis, can be used in preparing the financial
statement. The cash basis recognises revenues and expenses according to the real–time cash flow.
This simply means that the transactions are recorded when cash

Difference Between Accrual And Cash Accounting Essay
Differentiate Between Accrual and Cash Accounting. There is a consensus within the team that
Accrual and Cash accounting is the least difficult objective to comprehend. The team believes that
the most important factor between the two principal accounting methods is the timing in recording
revenue and expenses. The team discussed the differences and unanimously agreed that accrual
accounting is the most practical to use for partnership and corporation accounting practices. The
team has decided that the cash basic accounting method would be better suited for a sole
proprietorship or a small business. Our reasoning is based off of the difficulties we believe that
comes from corporate operations which need to provide all means in recording financial gains and
losses during the time of each transaction, not when the cash physically transition from one hand to
the other. According to "Cash vs. Accrual Accounting" (2000), "As you can readily see, the results
produced by the cash and accrual accounting methods will only be different if you do some
transactions on credit. If all your transactions are paid in cash as soon as completed, including your
sales and your purchases, then your ledgers will look the same, regardless of what method you use"
(para. 4). Prepare Financial Statements The team believes that financial statements will be the most
difficult because of the multiple transaction and quantitative data needed to be gather in order to
create a financial statement.

Cash Vs Accrual-Basis
There are two kinds of accounting basis which can be adopted by the company to prepare its
financial position. One is accrual basis of accounting where revenue and expenses are recognized
when they are received and incurred and other is cash basis where all the revenue and expenses are
recognized when cash is received or paid (Cleverley, Cleverley, & Song, 2012). Generally, small
businesses, not–for–profit organizations, some Government agencies and community associations
use the cash–basis while larger for–profit businesses use the accrual–basis (Baskerville, 2014). This
is because the cash–basis is quite simple to understand and maintain while the more complicated
accrual–basis produces the more accurate assessment of the financial position and performance of
the business. Tax laws and accounting standards generally give small organizations a choice as to
which approach they will adopt. At the same time larger organizations and public companies are
required to record their financial transactions using ONLY the accrual method. ... Show more
First, accrual basis of accounting state that revenue are recognized only when they are incurred
whether the cash is received or not expenses are recognized when they are incurred whether the cash
is paid or not (Cleverley, Cleverley, & Song, 2012). Secondly, cash basis of accounting state that
revenue are recognized when cash is received and expenses are recognized when cash is paid. Cash
basis of accounting does not measure the economic activity it deals only with the receipt and
payment of cash. Another key difference between the accrual accounting method and the cash
accounting method is that the accrual accounting method properly applies the accounting concept of
the 'matching principle' while the cash accounting method does not (Baskerville,

Earning Management
Does the Commercial Banking Industry of UAE Practice Earnings Management Dr. Mohammed
Obeidat Introduction It is the right of external users of accounting information to be provided with
more adequate information to protect their interests. Many questionable issues concerning the term
of earnings management are still available. Auditors, accountants, financial analysts, and other
concerned parties may hold the responsibility of detecting external users from the practices of
earnings management. Many questionable issues are still available regarding the term of earnings
management. Some people may have no enough idea about what practices are classified under
earnings management, and what practices can not be classified under this ... Show more content on
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This study depends on cross sectional data because a time series data will misstate the data, so it is
unique in its inputs of data. This paper is organized as follows: The first section defines earnings
management, and describes the incentives of its practices by commercial banks, in addition to that, it
explores the methods of practice and how these practices can be defected. The second section
explores the most related prior researches. The third section presents the hypotheses of the current
research. The fourth section describes the followed methodology in the current study. The fifth
section presents the results, while the fifth explores the findings. Literature Review and Prior
Researches Many people believe that the term of earnings management is understandable in its
simple form, but most of those unable to determine whether a selected practice is an earnings
management or not. Understanding what earnings management constitutes and why it takes place is
important for all users of accounting information. This study highlights the different aspects of
earnings management, so it identifies clearly this term, and presents the incentives standing behind
its practice. Moreover, the current study determines the methods of earnings management used by
firms, and explores how these practices can be detected. Earnings management is defined as the
"intentional misstatement of earnings leading to bottom line numbers that would have been different
in the absence

Essay about Acct-212 Midterm Study Guide
ACCT212 – Financial Accounting Midterm Exam Study Guide YOU MAY WANT TO PRINT
THIS GUIDE. 1. The Midterm Exam is "open book, open notes." The maximum time you can spend
in the exam is 3 hours, 30 minutes. If you have not clicked the Submit For Grade button by then,
you will be automatically exited from the exam. In the Midterm Exam environment, the Windows
clipboard is disabled, so you will not be able to copy exam questions or answers to or from other
applications. 2. You should click the Save Answers button in the exam frequently. This helps prevent
connection timeouts that might occur with certain Internet Service Providers, and also minimizes
lost answers in the event of connection problems. If your Internet connection does break, ... Show
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7. Exam Questions * There are 5 randomly selected short answer questions each worth 20 points for
a total of 100 points. * There are 2 randomly selected essay questions each worth 25 points for a
total of 50 points. * The Midterm Exam covers course TCOs 1,2,3 & 5 and Weeks 1–3. * The
Midterm Exam contains 2 pages, which can be completed in any order. You may go back and forth
between the pages. * The Midterm Exam questions are pooled. This means that not everyone will
have the same questions. Even if you do have some of the same questions, they may not be in the
same order. These questions are distributed amongst the TCOs. The entire exam is worth 150 points.
* On the essay questions, your answers should be succinct, should fully address each part of the
question, and should demonstrate your knowledge and understanding in a concise but complete
answer. Most essay questions require answers that are a couple of paragraphs (not a couple of
sentences) that directly speak to each part of the question. Some students opt to work on the essay
questions first, due to their higher point value and the length of time needed to adequately address
each question, but this is entirely your choice. * Remember to always use proper citation when
quoting other sources. This means that ANY borrowed material (even a short phrase) should be

The Differences and Similarties Between the Gasb and the Fasb
Government and Non–Profit
Today we will explore the exciting world of the GASB and the FASB. Two of the most exciting
boards in the accounting world today. We will compare and contrast each of the boards to get a more
in–depth look into how each of the boards operate. We will go thru their mission statements in order
to get a sense of how they operate and what are their overall goals. Let's get started!
The FASB mission statement states, "that it is to establish and improve standards of financial
accounting and reporting that foster financial reporting by nongovernmental entities and provides
decision–useful information to investors and other users of financial reports. That mission is
accomplished through a comprehensive ... Show more content on Helpwriting.net ...
A major comparison is that both the FASB and the GASB both report to the Financial Accounting
Foundation's Board of Trustees "(gasb.com).
The FASB works by their Rules of Procedure which describe the operating procedures. The Rules of
procedure incorporate the FASB mission, and how the mission is accomplished, how they will hold
their meetings and the overall workings of the FASB. The GASB also have their own Rules of
Procedure which are set forth procedures in which they use to improve the standards of the financial
accounting and reporting. The Rules of Procedure are another way in which the GASB and the
FASB are very similar. They both use their mission statements as the basis for their Rules of
Procedure. With their Rules of Procedure they implement how the mission statement tasks will be
accomplished with the help of chairman and the officers. In both the FASB and the GASB they state
in the Rules of Procedure they state the protocol for meetings and the voting requirements. The rules
of procedure also state" Rules governing public announcements and the kinds of information made
broadly available to the public " (fasb.org).
Both the FASB and the GASB have a lot of similarities and a few contrasts. One similarity being to
establish standards in accounting and financial reporting. One of the big contrast is that the FASB is
non–governmental entities and the GASB is

Accounting for a Loss Contingency Verdict Overturned on...
Re: Accounting for a Loss Contingency Verdict Overturned on Appeal
Date:
Relevant Facts:
W Inc and your company have been engaged in litigation over a specific patent infringement matter.
In May 2007, W filed a claim.
On December 31 2007, your company determined that a loss in connection to the claim was
probable.
The company estimated a loss between 15 and $20 million USD.
$17 million USD was named as the most likely amount of loss.
A jury trial took place on September 2009.
On September 24 2009 the jury found in favor of W.
The judgment required your company to pay W $18.5 million USD.
In November 2009, your company filed an appeal.
In December 2010, the court of appeals overturned the jury ... Show more content on
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Options:
a. Prior period adjustment.
b. Change in estimate (2009 event).
A prior period adjustment is a correction, for an accounting error, on the financial statements of a
prior year. ASC 250–10–50–7 states that "when financial statements are restated to correct an error,
the entity shall disclose that its previously issued financial statements have been restated, along with
a description of the nature of the error. The entity also shall disclose ...the cumulative effect of the
change on retained earnings or other appropriate components of equity or net assets in the statement
of financial position." The adjustment to the estimate is not a correction due to an error. Therefore, it
should not affect or restate retained earnings or liabilities recorded in prior periods
The company should report the change in the contingency accrual as a 2009 event due change in
estimate. ASC 250–10–45–17 specifies that "a change in accounting estimate shall not be accounted
for by restating or retrospectively adjusting amounts reported in financial statements of prior
periods." Additionally, ASC 450–20–25–7 indicates that "all estimated losses for loss contingencies
shall be charged to income rather than charging some to income and others to retained earnings as
prior period adjustments".

Sample Journal Entry:
Loss (Expense)........................................ 1,500,000
Contingent Liability–Litigation.....................1,500,000
Specific Issue 3:
When should

The Accounting Manager For The Houston Division
Early in my career, I learned sometimes one must get uncomfortable to get comfortable and
sometimes very uncomfortable to get a little comfortable. Ironically, this is one of those times. I was
newly appointed to be the accounting manager for the Houston division in late 2009. Furthermore, I
was responsible for maintaining accurate accounting records as well as developing financial
indicators for the region. Although the previous accounting manager had left the organization a
couple of years back, the position was never filled. Instead, the branch manager held the position as
the interim while still performing his other duties. Also, there was a managing director who held
double duties as the branch manager and managing director too. My ... Show more content on
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His response didn't sit well with me, so I decided to investigate further to make sure I was not
overlooking anything. Unfortunately, I was right, the more I started asking my staff about those
practices, the less confident I became of the financials. It was evident there was no paper trail from
the branch manager ever asking the accounting department to accrue the expenses. He did the
opposite, he asked them personally, and in returned they were given overtime. Nevertheless, I
wanted to change that culture right away. I started by explaining to the team how accounting rules
work. Also, the importance of proper record retention. But I had to be careful not raise concerns
with the branch manager, as I found out he was kept abreast of everything that I did. From now on I
instructed the team that they would need in writing all requests to accrued or re–accrued the
expenses, and based on the dollar amount, an explanation when those accruals will be released. I
wanted to be in the front–end of the situation, as the new process that I put in place will raise
questions about the P&L once those expenses realized. Without delay, I went to the office of the
managing director to let him know what I had instructed the team. And to be aware that the P&L
will be affected because of old accruals without resolutions would reduce the margins for the month.
The meeting didn 't go well for me. He told me that I should have advised him of my

Yorba Linda Essay
Question 1 (a): Does the city of Yorba Linda's current budgeting process meet the goals set of it?
No, the city of Yorba Linda's current budgeting process does not meet the goals set of it. As
mentioned, Mr. Simonian had three basic goals for the city's budgeting process which are intended
to provide a forum for discussion that lead to the establishment of good city policies and priorities.
First, he wanted the budget to be easy for City Council members to understand. As stated in the
case, Yorba Linda council members had little or no formal training in public administration or
policy. This shows that they do not have proper background to do administration as well as basic
accounting understanding to perform finance related matter. ... Show more content on
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If there is any objection, this is when discussion is opened for anyone to express opinions as to why
he or she does not agree or agrees with the decision. During this session, all the strengths and
weaknesses of an idea can be argued by the members in order to assist in making good decision.
In referring to the case, Mr. Simonian budget was initially approved with four favorable votes and
only one objection by John Gullixson. Mr. Gullixson disagreed on the increment of the cost of
police services. Out of concern, he voiced out that Brea police personnel were overpaid through the
contract. However, Mr. Simonian countered that Yorba Linda's police costs were low in comparison
with most other cities in Orange Country since it does not have to employ full–time detectives as
well as to cover all the overhead costs associated if Yorba Linda is to own a police force.
Consequently, the budget was approved and adopted with four favorable votes and with Mr.
Gullixson abstaining.
This clearly shows that, even though the budget was not unanimously approved by all the council
members, it does not give bad reputation to the city manager and the staff as well as to the budgeting
process. Somehow, it provides a platform to discuss on which decision is much better.
Question 2 (a): What is fund accounting.
Fund accounting is an accounting system emphasizing on accountability rather than profitability. It
is normally used by

Delta Airlines Accrual Accounting
In this case study Pete refers to what the Delta Airlines accountant told him in response to his
inquiry as to why his bonus did not include the $5,000,000 sale placed on December 30th,
"something about matching revenues and expenses." (Warren, Reeve, Duchac, 2016) Pete and Sonia
are questioning when exactly sales transactions are recorded, what defines the period in which a sale
is recognized. Delta Airlines is operating under the matching concept of accounting. This concept
requires all revenues and their related expenses to be recorded during the same accounting period.
The matching concept is used while working under the accrual basis of accounting. When using
accrual accounting one must record all revenue as it is earned and expenses when

An Accounting Method For A Transparent Government
An Accounting Method for a Transparent Government *I got some bad news about my health. I
should be okay, but I 'm worried all the work I 've done will go unknown if I don 't publish now.
This was finished in haste. Please forgive errors, typos, glitches, and bad programming techniques.*
I 've designed an accounting method to be used to for a transparent government that is easily
understood by even a layperson. Thus, every citizen of age can understand the financial position of
their city. I call this system: [Simpel Accounting]
(https://github.com/CTNFuture/CTNFuture.github.io/tree/master/simpel–accounting). Yes, I
intentionally misspelled the word "simple" to a more phonetically correct version to help avoid
conflict with anyone ... Show more content on Helpwriting.net ...
From here, the citizen can quickly see if the city is on an upward or downward trend. Click the ≡
icon –> *PRIOR YEARS* –> *Prior 4 years* This will populate the screen with profits and the net
worth of the prior 4 years in addition to the current. A graph will appear showing the data. Now that
the citizen sees the city being on a downward trend, let 's look what is causing a lost in income. (I 'll
be adding more functionality to this area later. For now we 'll return to the original settings.) Click
the ≡ icon –> *PRIOR YEARS* –> *Current year* Let 's dig into the financials. Click *Profit
(Cash, Operating)* –> click *Revenue* and click *Expenses* Now we have two pie charts.
Revenue has a very strong reliance on sales tax and a low percentage of property tax compared to
the national average. Unusual, but this city might have a preference for sales tax revenue. Look at
expenses. Police are taking a large percentage (50%) of the expenses. Of that percentage half of it is
going to retirement. Let 's take a closer look: On the left side click *Police* –> *Retirement* From
here, we can see almost all of the expense is coming from paying pensions. While the lay person
may not know this, this situation might have resulted from a shrinking city. Pensions, at least for
most governments, are a guaranteed payment after retirement. If their the city population and, thus,
funds are decreasing, but the number of government retirees

Case Study Of News Australia Holdings Pty Ltd V FCA
News Australia Holdings Pty Ltd v FCA
Case details:
Between– NEWS AUSTRALIA HOLDINGS PTY LTD (APPLICANT) and COMMISSIONER OF
TAXATION (RESPONDENT)
Judge– PAGONE J
Date of order– 8 JUNE 2017
Conclusion– The application be dismissed.
Case background & Reasoning behind Judgement:
The appeal is whether SRC Holdings Limited derived interest income due to it from News Limited
during the year of income ended 30 June 2010. This is in the context of controlled foreign
corporation provisions– Income Tax Assessment Act 1936.
The applicant, News Australia Holdings Pty Lt, was the provisional head company of a multiple
entry consolidated group which included News Limited and SRC; Thus, the interest income will be
assessable to the applicant in this proceeding.
... Show more content on Helpwriting.net ...
News Australia Holdings Pty Ltd) was to be evaluated on SRC's interest income which accrued in
2010.
Interest income of US$66,023,141 (~A$75,028,696) accrued to SRC as a debt in 2010 of income
under the terms of a loan agreement on 28th April 2006 between News Limited and SRC (i.e. the
News loan agreement); This interest was not paid until 2011 year of income on 2nd July 2010, and
on 8th July 2010; SRC compensated Australian withholding tax of A$7,502,870 in respect of this

The Advantages Of The Accrual Concept In Accounting
The accrual concept in accounting represents the expenses and incomes that are made in the period
they take place, involving cash payments at the same time. The advantage side of the accrual
approach is that financial statements include all the expenditures of the reported revenues for an
accounting period. For instance when business has cash flows, it checks the accrual accounting
entries and writes the cash transactions. Admittedly, the accrual principle is a basic requirement of
all accounting spheres, such as Generally Accepted Accounting Principles and International
Financial Standards. The concept usually use transactions recorded under its principle which
demands the use of an accrual journey entry making two sides namely debit and credit. As charges
are not always made in cash and the left amount is more ... Show more content on Helpwriting.net ...
Case in point.
The organization has merchandise which were obtained at the prize of $ 800. Amidst the year,
organization has again purchased the same merchandise yet with a bit higher prize, $ 850. Toward
the end of the year, the advantage is recorded to be decided sheet at expense of $ 800 and $ 850.
Every one of them are not recorded at new prize; generally, the normal benefit could be less in the
last counts.
10
Duality guideline in bookkeeping is focused around the record for all parts of a transaction. Under
the framework, parts of transactions are arranged under two principle sorts: charge and credit.
Charge represents the increment in holdings and costs, and the abatement in liabilities, value and
salary while credit represents the increment in wage, obligation, and value and the diminishing in
possessions and stakes. Subsequently, the double perspective idea is usually communicated in the
recipe of central bookkeeping mathematical statement: Assets = Liabilities and

Employer 401 Case Study
We often ask the question, "How does our 401(k) plan stack up?" When you are an employee, you
will consider items such as the investment choices, administration fees, or loan terms. However, if
you are an owner, the most important thing to think about may be how to contribute the highest
amount you can under Section 415. For 2016, the defined contribution plan annual addition limit
without catch–up is $53,000, and will rise to $54,000 next year.
The Internal Revenue Code (IRC) subjects qualified employer plans to compliance testing.
Employer 401(k) plans must pass the "actual deferral percentage" (ADP) test, and if there are
employer match contributions, the "actual contribution percentage" (ACP) test. However, safe
harbor plans are not subject to discrimination testing if the plan sponsor contributes a pre–approved
safe harbor employer contribution.
Safe harbor plans guarantee that the Highly Compensated Employees (HCEs) will be able to
contribute the maximum deferral amount of $18,000, but not necessarily the maximum annual
addition under Code Section 415. In those cases, the triple stack match formula may be the solution,
as follows:
Stack One: 100% of the first 3% of deferrals, plus 50% on the next 2% of deferrals. That means that
if an employee defers 5%, they will receive the maximum 4% of compensation match on the first ...
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In addition to the requirements discussed above, it is important to remember that none of the stacked
matches can require a 1,000 hour of work or employment at year end. Stack One also cannot be
subject to vesting, as it must be fully vested to qualify as safe harbor. Provisions for the triple stack
match must be in place before the start of the plan year in which they are

Financial Accounting Uses The Accrual Concept
Revenue received in advance
Financial accounting uses the accrual concept whereby the results of transactions are recorded when
or as they occur instead of only when cash is received or paid. On the other hand, the taxation
authorities taxes entities on the earliest of accrual or receipt. The difference in the accounting and
tax treatments of different transactions may therefore result in an entity's profit/loss before taxation
for a period (or year of assessment) being different from the entity's taxable income/loss for that
period (or year of assessment).
Transnet is a South African resident company as it was incorporated in the Republic of South Africa
(page 159 of the Transnet Annual Financial Statements 2015 Volume 2) and will therefore be taxed
on its world–wide income.
For an amount to constitute gross income it needs to meet the requirements or elements of the gross
income definition as defined in section 1 of the Income Tax Act 58 of 1962 (the Act). In the case of
any South African resident, gross income is the total amount in cash or otherwise received by or
accrued to or in favour of such resident during the year or period of assessment excluding receipts
and accruals of a capital nature (Stiglingh, M; et al. 2016).
The words 'received by' and accrued to' are not defined in the Act, reference to the relevant case law
is therefore necessary (Stiglingh, M; et al. 2016). For an amount to accrue to a taxpayer, the
taxpayer has to be entitled to receive payment of

History Of Accounting And Private Sector
Introduction
Since the early 1980s public sector accounting and private sector accounting have experienced
significant transformation such as decentralization, deregulation and the differences between thee
two sectors are highly topical and political in many countries (Blondal 2003). The key
transformation is the adoption of 'accrual basis' of accounting rather than 'cash basis' accounting by
increasing number of countries (Guthrie and Ryan 1998). Meanwhile, public sectors refer
specifically to organizations owned by government and private sectors refer to those organizations
which are not government, owned and run by individuals and companies for profit–oriented
(Investopedia 2014). In this essay, there are several accounting issues to be discussed, include the
development of sector neutrality, advantages and disadvantages of accrual basis accounting in public
sector and meaningfulness of sector neutrality.
Development of sector neutrality
'New Public Management' is used to describe the institutionalization of private sector corporate
models into the public sectors (Guthrie and Ryan 1998). In order to set a standards to private and
public sectors, the Public Sector Accounting Standards Board (PSASB) merged with the Australian
Accounting Standards Board (AASB) in 2000 (Ryan, Guthrie and Day 2007). After merging with
PSASB, the new AASB made a decision regarding International Financial Reporting Standards
(IFRS) adoption in 2002 but effective in 2005 (Ryan, Guthrie and Day

Accounting : Cash And Accrual Accounting
Cash and Accrual Accounting
Organizations have two types of accounting that is processed: cash and accrual. Accountant's use
both of these to track the income and expenses within the organization. The main difference between
these two is the timing in how payments are received. Cash accounting is not documented until
payment has officially been received. For example, cash in hand for a service or when a check has
cleared can this be accounted as cash accrual. On the contrary, accrual accounting is accounted for
when the actual sale occurs. In this case, this can be seen in a hospital setting where the organization
knows it will be reimbursed in time by an insurance company, so it is immediately recorded as
income received. Accrual ... Show more content on Helpwriting.net ...
Yes however they had more liabilities in the 2014 year; it counteracted the net asset variance of
432,202. So which the company had to spend 48,291 to profit the 432,202 that was made in 2014.
The operating statement is used to asses' performance and financial stability. It records the
organization's revenues and how it pays expenses, debts, and taxes. It is the statement that provides
net profit/income for the company. The Stanford document presents the beginning and ending year
of revenue and in–between it shows us the expense paid out. In 2014 the total expense were more
than 2013, however the company made more in operational revenue which turned a profit.
The cash flow statement is very similar to an everyday checkbook. This represents money in and
money out. This shows deposits and liabilities in streamline of investments made, accounts
payables, and equities that transpired over the year. The year 2014 after had a more profitable year
than 2013.
Asset Valuation Asset valuation consists of six ways to determine if something is an asset. Of those
six is price level adjusted historical cost, net realizable value, future profits, and replacement cost.
Price level adjusted historical cost is described using inflation. In general overtime, assets can
usually increase in value with inflation. The advantage of using is that it can inflation for assets can
look

Case Study Of Accrual Accounting
Case 1:
1–
By using these accounting tricks and changing the debits from "rent expenses" to "prepaid rent".
Ahmed affected the net income of the company. Income means an increasing in the economic
benefits during the accounting period in the form of increasing of assets or decreasing of liabilities
that results in increasing the equity.So, when Ahmed changed the entries, he decreased the
expesnses and increased the assets as "prepaid rent" is considered an asset. As the relationship
between expenses and Net income is expressed by a mathematical rule which is net income=
revenues–expenses , when the expenses decreased the net inome increased as net income means that
the total revenues are greater than the total expenses. Then the change would affect the income
statement and the balance sheet.
2–
In my opinion, As a result of these actions, Ahmed did not gain or lose anything . Adel gained as he
received his bonus by showing that the net income of the company has increased. But, the ones who
lost are the creditors and the investors that are deceived by the unreal ... Show more content on
Helpwriting.net ...
Cash basis accounting is a major accounting method that recognizes revenues and expenses at the
time physical cash is actually received or paid out. When cash is received, revenues are recorded.
When cash is paid, expenses are recorded. It is not allowed under Generally Accepted Accounting
Principles. Small business will sometimes use this method. While accrual basis accounting is the
opposite, it requires income to be recognized in a company's books at the time the revenue is earned
(but not necessarily received) and records expenses when liabilities are incurred (but not necessarily
paid for).Most businesses use accrual basis accounting . So, I would use the accrual basis accounting
as it is more accurate. It provides a better picture of business's revenues and

Accrual Basis Accounting Essay example
Accrual Basis Accounting
Accrual accounting is a system of accounting that is based on the accrual principal accounting. This
principal requires revenue to be recognized and recorded when earned. Expenses are to be recorded
when they occur. The accrual basis of accounting is used by most companies. Very small businesses
and individuals use cash basis accounting.
The major distinction between the accrual and the cash basis of accounting is when revenue and
expenses are recognized. When the cash method is used, revenue is recorded when money is
received. Expenses are recorded only when money is paid. The Accrual method accounts for
revenue when it is earned. Expenses for goods and services are recorded when they are incurred.
The ... Show more content on Helpwriting.net ...
Some payroll policies allow for the carry over or roll over some or all unused time that has been
accrued into the next year. If the accrual policy does not have any type of rollover, any accrued time
that has been taken is usually lost at the end of the employer's calendar year.
The accrual basis of accounting conforms to the GAAP financial statements preparation provisions
for external users. The US GAAP website describes financial guidelines, provides an understanding
of the financial guidelines, and describes management's general flexibility. You must understand the
flexibility in the GAAP standards and relate it to the individual company and its industry. Regulators
view earnings quality as high when generally accepted accounting principles are adhered to.
Management typically describes the accounting choices and estimates that are embedded in the
company's key critical accounting policies in the "Management Discussion and Analysis" (MD&A)
section of the Form 10–K.
Accrual accounting enables management to exercise its unique understanding of their business to
convey important information about its economic welfare (relevance) and allows management some
discretion to manipulate important information about the company's economic welfare (reliability).
Accounting analysis evaluates management's judgment on how it chooses to use accruals.
The company's current accounting policies should be creating accurate accounting estimates.
Extreme accruals that

Paid Time Off ( Pto )
Introduction Paid time off (PTO) is the system accumulate all kinds of identified leaves and specify
as a bulk number for everyone, as sick leaves, vacation leaves, and personal leaves, this policy
prevails in the USA as such no legal obligation for a minimum number of paid vacation days. The
PTO works best in the culture and accountable employee's environment existing. US companies
commonly regulate the amount the pay day off that will be allocated to each employee. in addition,
The PTO approach govern, the whole lot from planned leaves to sick leaves. without differentiate
any type of leaves, all treats as sum lump. research show that maximum the businesses begin using
the PTO approach before the year 2000. The PTO system allowed employees to take time off
without any restriction imposed through traditional time off policies. the tactic provides employees
with countable days that assign individually in the system, upon usage of the leaves, the system
automatically reduces the remaining balance day. employees can employ their allocated days in their
own personal, using the leave paid off leave system, without having to specify any reasons.
employers can advantage from PTO asking the employees to determine their leaves in advance and
employer can plan for lost workdays and creating a family environment through the organization.
Corporations usually provide variety of leaves (personal, sick, maternity, veteran) as privilege that
employees respect, although it's not

The Two Principles Of Accrual Accounting
In order to fully understand the accounting cycle and complete all eight steps, an accountant must
understand the adjusting and closing process and be able to prepare trial balances. The unadjusted,
adjusted, and post–closing trial balances are all prepared during the eight step accounting cycle. In
order to maintain the most accurate financial statements, accrual accounting should be used. Accrual
accounting is an "accounting method that records revenues when earned and expenses when
incurred without regard to when cash is exchanged" (Kemp & Waybright, 2013, p. 126). In order to
master the eight step process of the accounting cycle, an accountant should use accrual accounting,
understand the adjusting and closing process, and be able to ... Show more content on
Helpwriting.net ...
Adjusting entries are journal entries that adjust accounts to the correct balances. Accrual accounting
records revenues and expenses when they are earned or incurred. Sometimes adjusting entries need
to be made to adjust for unearned service revenue or depreciation expenses. The adjusting entries
will correctly balance accounts and correct any understatement or overstatement in the revenue or
expense accounts. If the adjusting entries are not made it can overstate or understate net income and
completely misrepresent the financial statements. The fifth step in the accounting cycle is preparing
an adjusted trial balance. Once all of the accounts have been adjusted, the balanced totals can be
transferred over to the adjusted trial balance. The adjusted trial balance should give an accurate
balance on all accounts. After completing the adjusted trial balance, the next step in the accounting
cycle is preparing the financial statements. The totals from the adjusted trial balance will be used to
prepare each financial statement. The seventh step is posting closing entries. Closing entries are
journal entries that close revenues, expenses, and dividends. In order to close these accounts, the
total balance needs to be entered into the opposite column of the accounts to zero them out. For
instance, service revenue would be debited and retained earnings would be credited. All expense
accounts and dividends would

Accrual Basis Of Accounting Over Cash Basis
Introduction There has been a significant debate focusing on costs and benefits of adopting accrual
basis of accounting over cash basis of accounting. This paper illustrates the concepts of accrual basis
of accounting, highlights the benefits of accrual basis of accounting posed by its advocates and also
briefly discusses the disadvantages of adopting accrual basis accounting. The paper also briefly
discusses the recent accounting scandal of Tesco Plc. which showed that profits of the company
were overestimated by approximately 250 million and resulted in suspension of eight employees as
well as an initiation of investigation by Serious Fraud Office (SFO) UK. The paper finally concludes
that the substantial risks and costs associated with accrual basis are yet to be justified to encourage
its adoption. Discussion Numerous business transactions have effects on different time periods. For
instance, suppose Citigroup purchases a new building or Delta Air Lines purchases a new airplane;
these assets are going to be used for several years. It is argued that the full cost of such items should
not be expensed at the purchasing period as such items are going to be used for several subsequent
years. Thus it is important to determine the effects of such transaction on particular accounting
periods. However, determination of revenues amounts and expenses amounts and reporting them in
any given accounting period is rather difficult (Bamber and Parry, 2014). Reporting properly
demands

Auditing Chap. 5
5–52
Trend analysis, common–size financial statements, and ratios are presented for the Brody
Corporation in Figure 5.4. Assume that you are auditing Brody 's financial statements for the year
ended 12/31/X8. You have performed tests of controls over the recording of gross sales and believe
that the system is operating effectively and that 7 percent represents an accurate estimate of the
increase in gross sales for 20X8 over the amount for 20X7. You should also assume that the
financial statements for 20X6 and 20X7 are not misstated.
Required
a. | | Analyze Figure 5.4 and identify any accounts that appear to represent significant variations
from what one might expect. For each of the accounts, identify another account that might ... Show
John Ross, who had been a manager with a large CPA firm, was quickly hired to replace Wagner.
Although the change in Datasave 's chief financial officer caused some disruption, the audit was
completed on a timely basis. As the last step in the audit process, you have prepared the
representation letter for signing. You wanted the letter to be signed by William Cox, the president;
Robert Star, the controller; and Wagner, who occasionally came to the company 's offices to resolve
matters regarding his past compensation. The signatures of Cox and Star were obtained, and you
approached Wagner for his signature. In response to your request, Wagner replied, "I no longer am
employed with this crazy company. Why should I take any responsibility for the financial
statements?" Despite your attempts to persuade him, Wagner refused to sign the letter. Wagner also
refused to discuss the reasons for his resignation, other than to say the reasons were personal. When
you discussed the problem of Wagner 's refusal to sign with Cox, he indicated that there was no
problem because Ross would sign the letter. You see this as a possible solution, but you are aware
that Ross knows very little about the financial statements for the year under audit. Also, you are still
somewhat concerned about the reasons for Wagner 's resignation.Required: a. Describe fully the
alternatives that are available to you in this situation.Making

“Compare the Relative Advantages and Limitations of...
"Compare the relative advantages and limitations of financial statements prepared on a cash basis
with those prepared on an accrual basis"
To compare the advantages and limitations of different financial statements begins with first
understanding what financial statements are and what different purposes they can be used for, as
well as the differentiation between cash and accrual accounting. The cash and accrual methods of
accounting are the two principle ways of keeping track of businesses takings and expenses and in
the majority of cases it is possible to decide which method is best for a business on an individual
basis, although in all cases cash based accounting can only apply to small businesses earning less
than £1.35 million, so ... Show more content on Helpwriting.net ...
If the customer never pays then you will never have to pay the VAT. This can only apply to small
businesses because once a business' income exceeds £1.6 million pounds then it must use the normal
VAT system. A benefit of using cash based accounting for VAT is that it could help your cash flow,
especially if an entity's customers are slow payers. But the entity can also be disadvantaged because;
if you buy most of your stock or services on credit you can't reclaim the VAT until you have paid
your suppliers.
In conclusion, financial accounting in general has many advantages and limitations, it can present
shareholders and members of the business how it has been doing and is sometimes the most
available picture for people with limited access to a company's information. But on the other hand it
also mainly based on the past and cannot necessarily reflect what is too happen in the future. Cash
based financial statements as we have seen can be beneficial for small businesses to use because of
tax reasons; it means that VAT only has to be paid when a customer has paid the business. But cash
accounting also has its limitations; in the long run it can distort the real impact that transactions are
having on a business. To prepare financial statements with the accrual method seems to be the most
desirable method for a business, as you can use the matching method

Accrual Accounting
Good afternoon, Mr. Jones. It has been a pleasure working with you. Below I have provided
information with regards to revenue recognition for your business as well as my recommendation
for the accounting method to be used by your new company.
Differentiate between accrual accounting and cash basis. Based on the type of business and the
client's accounting system, what is the impact when revenue is recognized? The difference between
the accrual and cash basis accounting is when expenses and revenue are recognized. According to
the IRS Publication 538 "You must use the same accounting method from year to year. An
accounting method clearly reflects income only if all items and gross income and expenses are
treated the same from year to ... Show more content on Helpwriting.net ...
Consider how the accounting system impacts revenue recognition, consistent with Internal Revenue
Code and Treasury regulations. A case can be made for both the cash basis and accrual method of
accounting. The cash basis method is generally used for small businesses and using that method
would allow you to pay taxes only on the money you receive from the sales not the sale itself. It
would also allow you to only account for the expenses when they are paid. This could cause
confusion with regards to matching. It would also only provide a very narrow view of the business
as a whole with the balance sheet only showing cash and owners equity.
One reason for the accrual method recommendation is your inventory of vehicles. If you are
maintaining an inventory to sell then you should use the accrual method. Also on your balance sheet
you will see your accounts receivables and payables as well as any prepaid accounts noted. This
accounting method provides a better view overall for your

Accrual Accounting : An Accounting Method
a. Accrual accounting is an accounting method that is utilized to size the performance and of a
company by recognizing circumstances regardless of when cash transactions occur. They are
documented by matching revenues to expenses at the time in which the transaction occurs rather
than when a payment is processed. This method allows the current cash credits and debits to be
combined with future expected cash flows to give a more accurate picture of a company 's current
financial state. It is ideal to use this method of accounting if an organization has a revenue of more
than five million per year. While the accrual method shows the flow of business income and debts
more accurately, the downside to this method of accounting is that financial advisers may be
blindsided as to what cash reserves are available, which could ultimately result in some serious cash
flow obstacles. A common example that I have seen used which helps me understand is when your
income ledger may show thousands of dollars in sales, while in reality your bank account is empty
because your customers haven 't paid you yet. Cash Basis accounting is when revenues are
documented when cash is received and expenses are recognized when paid. The cash basis of
accounting is usually utilized by small companies with a revenue of less than one million annually.
The cash method provides a more accurate picture of how much actual cash your business has. Cash
basis accounting is allowed for tax purposes only for smaller

The Strengths And Weaknesses Of Different Discretionary...
Abstract
This paper shows the analysis of the strengths and weaknesses of different discretionary accruals
models in identifying earnings manipulation. The first paragraph defines earnings management and
discretionary accruals as well as non–discretionary accruals. The following paragraphs after that will
explain the different models that exist and how they work as well as their strengths and weaknesses.
And the final paragraph will show a summary of the key findings and possible recommendations.
Definition and related Aspects
Earnings management " occurs when managers use judgment in financial reporting and in
structuring transactions to alter financial reports to either mislead some stakeholders about
underlying economic performance of the company or to influence contractual outcomes that depend
on reported accounting numbers" (Healy and Wahlen).
In order to do manipulate those earnings they use different techniques e.g. "cookie jar reserve
technique" or "big bath technique". Accruals accounts are also being used to manipulate those
earnings and they are usually found on the balance sheet and embody the non–cash based assets and
liabilities. Those accruals are sometimes used as a proxy for earnings management in order to
evaluate the quality of the firms' earnings. By attempting to split the accruals into discretionary and
non–discretionary ones one can get a more complex proxy for possible earnings management. Non–
discretionary accruals reflect the conditions of a

A Comparison Between Cash Accounting and Accrual Accounting
A COMPARISON BETWEEN CASH ACCOUNTING AND ACCRUAL ACCOUNTING 1.
Introduction Accounting principle and theory are generally referred to two main accounting methods
which include cash accounting and accrual accounting. Cash basis accounting on income and cost is
determined by the amount of actual payment for reference and accounting recording mode is simple,
easy to master. The use of the accrual basis of accounting is more complicated than it with a main
difference of recording timing. This essay will firstly separately discuss related conception and
theory of cash and accrual accounting. Following this, it will explain the advantages and
disadvantages of those two dealing method. Finally, it will offer two examples to describe ... Show
The business is continuous, accrual accounting can more accurately reflect actual financial situation
and management performance during the specific business accounting period. Two parts shown as
follows to describe the weakness of accrual accounting: Firstly, profitability aspect–the accrual basis
gives a confirmation to some uncollected income. Such income is an imaginary number with some
risks; Secondly, a portion of sales income in the currency can not be received and a confirmation is
authorized in this situation, it will be having impact on taxation, distribution and many other aspects
to result in bad chain reaction, thereby causing the financial deficiency and income distribution in
advance; Furthermore, the accounting period calculation of profit does not have uniform standard
for different accounting methods to select and the subjectivity is too strong, easily manipulated by
the management authorities; Secondly, liquidity aspect–accrual accounting considers payment,
deferred expenses, accounts receivable and inventory as current assets. Obviously, liquidity of those
assets is poor, and this makes current assets liquidity enterprise off its real values. In the end,

Cola Wars HBR Essay example
Five–Step Approach to Unstructured Problems
1. Succinct Statement of the Financial Reporting Issue(s)
When has a company completed its side of an arrangement, allowing it to record a sale and related
loss contingencies (recall product costs), while still conforming to GAAP?
2. Brief Summary of the Economic Purpose of the Transaction
To better match revenues and expenses, Frequent Fixer has proposed recognizing all of its recall
product costs at the time of sale to match its competitors. Currently, Frequent Fixer only recognizes
"small campaigns" (projected product recall costs of less than $100,000) at the time of sale and
delays recognizing "major campaigns" until occurrence.
3. List of Alternative Ways to Report ... Show more content on Helpwriting.net ...
All campaigns are based on future product recall costs, which are the result of sales "incurred at the
date of the financial statements". Due to the historical evidence and the industry norm of product
recall losses, it appears that it is "probable that one or more future events will occur confirming the
fact of the loss".
For ASC 450–20–25–2 Condition B, it appears that the amount of loss is "reasonably estimable" for
small campaigns due to the industry practice of recognizing product recall losses at the time of sale
but the reasonableness of these estimates cannot be determined based on the information provided in
the case. For the major campaigns, however, it appears the estimation is not met. From 2001–2004,
it appeared that recall losses were increasing at a predictable rate of $500,000/year plus the increase
of the prior year. However, during 2005 and 2006, the costs increased at unpredictably high rates.
This shows unpredictability in recall costs. Therefore, Condition B cannot be met.
For ASC 980–405–25–1, the recall losses resulting from regulator–imposed liabilities can only be
recognized and taken to income "when the associated costs are incurred". Alternative A does not
meet this criterion.
Alternative B
For ASC 450–20–25–2 Condition A is met because all recall product

Real and Accrual Based Earnings Management
Advanced Accounting Theory Final Paper
April 28, 2014
Real and Accrual Based Earnings Management
1.1 Introduction The most important item in the financial statements of a company is earnings.
Earnings indicate the amount of value–added activities a company has engaged in over a period of
time, as well as assist in the direction of resource allocation in capital markets. Just as the eyes are
the window to the soul, earnings are the window to a company's value. Increasing earnings represent
an increasing company value, while the opposite can be said about decreasing earnings. Seeing how
important earnings are to a company's value, it comes to no surprise that management has a strong
incentive to report earnings in their maximum ... Show more content on Helpwriting.net ...
These techniques are defined briefly as follows:
Big Bath: a technique where a one–time charge is taken against income to reduce assets, resulting in
lower future expenses. The write off allows the asset to be reduced or removed from the financial
statements, ultimately resulting in a lower net income in that year. The idea is to take a "big bath" to
wash the books, resulting in an increased net income for future years. An example would be if a
manager shifted profits forward by prepaying expenses, or delaying the realization of revenues.
Creative Acquisition Accounting: when a company allocates a large portion of an acquisition price
as being "in process". An example would be using R&D as a large one–time write off charge.
Cookie Jar Reserves: a technique where a company portray unlikely assumptions when they are
calculating estimates for loan losses, warranty costs, or sales returns for example. Accruals are
hidden away in the 'cookie jar' during good times and the jar is empty during bad times.
Immaterial Mis–sapplications of Accounting Principles: when a company records errors within a
defined percentage ceiling and rationalizes the implied 'errors' on the profits being too small to be
material to increase earnings.
Premature Recognition of Revenue: when companies

Accrual Accounting And Cash-Flow Accounting Principles
The fundamental accounting principle that firms are compelled to follow when presenting their
performances of a certain period is based on earnings, not realised cash flows. That is, recording a
transaction as it happens regardless of the collection of cash which involved in it (Marshall,
McManus & Viele, 2014, p.18). The notions that the use of accrual accounting in measuring a firm's
performance would provide higher quality and accuracy than cash–flow accounting is addressed by
Financial Accounting Standards Board (FASB) in a statement in 1978. They affirmed the concept in
Statement of Financial Accounting Concepts No. 1: "Information about enterprise earnings and its
components measured by accrual accounting generally provides a better indication ... Show more
The Financial Accounting Standards Board (FASB) suggested that firm performance is measured
more accurately by using accrual accounting instead of cash–flow accounting. The main reason to
adopt accrual accounting as a standard when reporting earnings is that it measures short–term firm
performance better, as it efficiently mitigates timing and matching problem in cash–flow accounting.
Another fact that supports accrual accounting is that earnings has proven to be a better indication of
future share returns and share prices. However, the costs of adopting accrual accounting are firm
make assumptions and estimations when recorded the information. There are intentional errors, such
as managements manipulate the classifications of the data in their preferences. Also, the
unintentional errors will arise especially in the firm which have long operating cycle and/or the
firms that have huge fluctuations in working capital requirements. The disadvantages will thus
reduce the beneficial role of accrual accounting. The importance of cash–flow accounting is that it
helps the public inspect the firm's short–term solvency. Also, cash flows accounting prevent the
errors caused by firm management deliberately manipulate over recording accounting data.
Therefore, the information that accrual accounting and cash–flow accounting provided are
incremental to each other in explaining firm

Accrual Balance And Cash Flow Statement
Question 1
I would explain these methods (accrual balance and cash flow statement), to Irene in this way:
The most of the time the business bookkeeping system use two methods: the accrual basis or the
cash basis (Gibson 2008).
On one hand, "Accrual accounting " is any record of revenues or expenditures when there is not a
cash transaction. The principle to apply this method is the "matching principle"( Berman& Knight,
2013), basically is the report of an expense or income statement in the equivalent period that is by
matching revenues to expenses. It measures the performance when cash transactions occur.
This method provides a precise picture of the company statement, but by his complexity is more
expensive to apply. In addition, the Enterprise using inventory, as well as, sales or credit must to use
this method. Furthermore, the financial condition is affected by transaction as credits or projects
and, these statements have to be reflected in the accounting balance.
Moreover, Accrual accounting in opposite to the cash flow (that will be explained on the next item)
reflects facts not probabilities, as an instance is the sales of a product, when a customer receive a
product by the credit system accrual accounting reflects the transaction as a fact in the account "
accounts receivable" , making an increase on the seller's revenue.
As said above, accrual accounting is the most precise representation of the financial results and the
enterprise financial position, being

Accounting And Accrual Basis Of Accounting Essay
1) Business owners are given a choice between using the cash basis of accounting and the accrual
basis of accounting. a) Which of the two methods do you believe a business would choose? Depends
on what kind of benefit the business owners are looking for. b) Why? If owners are looking for more
accurate revenue and expense, accrual basis should be applied. However, if the owner is looking for
less work by cutting down the time to make adjusting entries and want to know more accurate view
of cash flows, the business owners will likely to choose cash basis. c) What type of business is likely
to use a cash basis or modified cash basis and why? Small businesses will likely to use a cash basis
or modified cash basis because the accrual basis of accounting is not required by the reporting
purpose and cash basis require less accounting knowledge. For example, when I go to QQ bakery or
Liang Chinese BBQ place on 13miles and Dequindre, they only take cash. Though it is not limited
to cash–only businesses, if the businesses only accept cash, I think this type of businesses are highly
likely to use cash basis or modified cash basis. 2) Based on the method selected in #1a, a) Will the
financial statements presented show a true representation of the company 's performance? Accrual
basis shows a true representation of the company's performance. Please see the further explanation
on 2) c) for detailed amounts. b) On which financial statement did you focus to

Discretionary Accruals Model
Literature Review of Discretionary Accrual Models Chenxi Lin 01/03/2015 Literature Review of
Discretionary Accruals Models Audit quality is crucial for financial statements users and efficient
capital markets. However, how to measure audit quality properly has been a controversial issue,
because quality is not observable. With no uniform definition of audit quality, prior researchers
developed various audit quality proxies. Earning quality is one of the most commonly used measure
for audit quality. Client discretionary accruals, meet or beat earnings target, and likelihood of
restatement are all under this category. Among those, discretionary accruals are the most widely
used, because it is positively related to earnings management, which reflects audit quality. The
purpose of this review is to summarize the most commonly used models to measure discretionary
accruals by previous literature, and to help future studies to choose from these models when they are
used as audit quality proxies. Among all the research papers, there are two main methods to
calculate discretionary accruals: change dependent variables to accruals model (e.g., Jones Model,
Modified Jones Model, and McNichols Model) and performance adjustment measure (Kothari,
Leone, and Wasley, 2005). The most frequently cited model of discretionary accruals model is Jones
(1991) Model. The estimation of the discretionary accruals was used as the measure of earnings
management. Jones (1991) measured the total

Peyton Approved Case Study
Peyton Approved is a family owned business that has experienced significant growth in bakery and
merchandise sales. As a result, Peyton Approved recently expanded into a new manufacturing
facility to increase overall production. The new facility has been in operation for three months with
the move out of a home–based into a factory based operational mode, and it is essential to review
the operational budget. A quarterly review will ensure that appropriate planning, coordination,
communication, and benchmarking is performed so that the business is making the proper spending
decisions, and that a unified plan is created to meet overall business goals (Miller–Nobles, Mattison,
& Matsumura, 2016). As such, the operating budget and variances along ... Show more content on
Helpwriting.net ...
First, the materials efficiency variance was noted as unfavorable because 1,000 more units were
used than budgeted. Since materials efficiency variances result from a variety of causes, including
materials quality, spoilage, training, and equipment (Benge, n.d.). The next area to investigate are
the labor variances which showed the cost, while favorable, was a difference of $1.00 per hour.
Further, the efficiency was unfavorable, indicating that production required an additional 3,000
hours over budget, which could be the result of staff training, faulty equipment, or low–quality
materials (Direct labor efficiency variance – explanation, formula, example, reasons. 2016). Since
there appears to be a lower cost of labor than anticipated, but higher materials and hourly utilization
rate, it is possible that new lower cost staff were hired resulting in slower production rates and
elevated materials utilization. As such, the production manager should be consulted to investigate
the cause of these variances and to put proper corrective actions into place (Miller–Nobles et al.,

Asc 22-1 Contingencies Case Study
Case 1: Contingencies
1. For the year–end December 31, 2007, financial statements, what amount should M record as a
liability?
ASC 450–20–25–2 states that:
An estimated loss from a loss contingency shall be accrued by a charge to income if both of the
following conditions are met:
a. Information available before the financial statements are issued or are available to be issued
indicates that it is probable that an asset had been impaired or a liability had been incurred at the
date of the financial statements. Date of the financial statements means the end of the most recent
accounting period for which financial statements are being presented. It is implicit in this condition
that it must be probable that one or more future events ... Show more content on Helpwriting.net ...
The reduction of a liability.
While ASC 450–30–25–1 says:
A contingency that might result in a gain usually should not be reflected in the financial statements
because to do so might be to recognize revenue before its realization.
The overturning of the verdict means that M International will have to reduce the liability they
accrued in 2009, but must wait until it is realized in 2011 because the reduction is treated like a gain
contingency. Once the appellate judges declined W's petition for a re–hearing, M can realize that
they need to reduce the liability because they no longer have to pay the

Advantages Of Accrual Accounting In Malaysia Government

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