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ACC 561 Wk 2 Individual Accounting Methods
Purpose of Assignment
This week’s activity illustrates the role a company’s accounting
method plays in financial statement reporting. In this assignment, students
evaluate the events occuring in a business setting and determine how to
properly analyze those events to identify the impact on both cash and accrual
accounting methods.
Resources: Generally Accepted Accounting
Principles (GAAP), U.S. Securities and Exchange Commission (SEC)
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Student Materials
Scenario: BizCon, a consulting firm, has just
completed its first year of operations. The company’s sales growth was
explosive. To encourage clients to hire its services, BizCon offered 180-day
financing – meaning its largest customers do not pay for nearly 6 months.
Because BizCon is a new company, its equipment suppliers insist on being paid
cash on delivery. Also, it had to pay up front for 2 years of insurance. At the
end of the year, BizCon owed employees for one full month of salaries, but due
to a cash shortfall, it promised to pay them the first week of next year.
As the senior accountant, the Chief Financial Officer has asked
you to prepare a memo to be sent to management notifying them of the delayed
wage payments.
Prepare the memo in a maximum 700 words including
the following information to better outline the situation:
·
Explain how cash and accrual accounting differs for each of the
events listed in the above scenario and describe the proper accrual accounting.
·
Assess how at the end of the year, BizCon reported a favorable
net income, yet the company’s management is concerned because the company is very
short of cash. Explain to management how BizCon could have positive net income
and yet run out of cash.
Format your assignment consistent with APA
guidelines.
Submit your assignment.
Resources: