Financial Accounting Uses The Accrual Concept

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
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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

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

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

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 ...
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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

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.

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.

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 more content on Helpwriting.net ...
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,

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

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

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 missionstatements 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

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 ... Show more content on Helpwriting.net ...
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

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 netasset 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

вЂњCompare 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 andaccrual 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
ВЈ1.35 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
ВЈ1.6 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 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 content on Helpwriting.net ...
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

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 Helpwriting.net ...
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

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

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

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.,

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

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 thefinancial 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 more content on Helpwriting.net ...
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

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 Helpwriting.net ...
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

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 Helpwriting.net ...
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

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 whengenerally
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

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

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

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

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

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

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 content on Helpwriting.net ...
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,

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

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 в‰Ў 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 в‰Ў 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

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

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

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 content
on Helpwriting.net ...
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

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

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 more content on Helpwriting.net ...
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

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

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 Helpwriting.net ...
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

Financial Accounting Uses The Accrual Concept

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