Accounting Methods

timer Asked: Feb 25th, 2019
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Question Description

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 occurring in a business setting and determine how to properly analyze those events to identify the impact on both cash and accrual accounting methods.

Assignment Steps

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.

Tutor Answer

School: Purdue University

Please consider this file.



Accounting Methods

Accounting Methods


Accounting Methods
BizCon is a brand new consulting firm closing its first year of business. To attract
customers to purchase their services, BizCon offered 180 days deferred payment plans. BizCon
is a new company who has not yet made a name for itself and cannot procure financing from its
equipment suppliers. Therefore, BizCon has had to pay cash upon delivery for all of its
equipment this year. In addition to the payments made for equipment, BizCon needed to
purchase two years of insurance, payable up front. Due to the cash shortfall from the upfront
payments and deferred financing for its largest customers, the last month’s payroll for BizCon
employees, unfortunately, is delayed until the first week of the next year.

Date: February 26, 2018

Management Staff


Your Name, Senior Accountan...

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