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Instructions:
Accrual Basis Accounting Revenue Recognition Principal Discussion
Under the accrual basis accounting, revenues and expenses are recognized by the following principles:
Revenue recognition: Revenue is recognized when both of the following conditions are met: Revenue is earned and Revenue is realized or realizable.
Expense recognition: Expense is recognized in the period in which related revenue is recognized (this is also known as the Matching Principle).
Respond to the following in a minimum of 175 words:
Discuss when the requirements of the revenue recognition principle are usually met. Give an example.
Discuss when the requirements of the expense recognition principle are usually met. Give an example.
Financial Statements Discussion
This week’s activity illustrates the role a company’s accounting method plays in financial statement reporting. In this assignment, students evaluate the events occurring in a business setting and determine how to properly analyze those events to identify the impact on both cash and accrual accounting methods.
Resources
Accounting Methods Grading Guide
Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Commission (SEC)
Tutorial help on Excel and Word functions can be found on the Microsoft Office website. There are also additional tutorials via the web offering support for Office products.
Assignment Steps
Scenario: Bison, 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, Bison offered 180-day financing – meaning its largest customers do not pay for nearly 6 months. Because Bison 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, Bison 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, Bison reported a favorable net income, yet the company’s management is concerned because the company is very short of cash. Explain to management how Bison could have positive net income and yet run out of cash
Accrual Basis Accounting Revenue Recognition Principal Discussion
RUBRIC |
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Excellent Quality 95-100%
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Introduction
45-41 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned. |
Literature Support 91-84 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned. |
Methodology 58-53 points Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met. |
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Average Score 50-85% |
40-38 points More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided. |
83-76 points Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration. |
52-49 points Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met. |
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Poor Quality 0-45% |
37-1 points The background and/or significance are missing. No search history information is provided. |
75-1 points Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration. |
48-1 points There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met |
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Accrual Basis Accounting Revenue Recognition Principal Discussion |
Accrual Basis Accounting Revenue Recognition Principal Discussion