BizCon a Consulting Firm

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Business Finance

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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 address management ‘s concerns related to these issues and offer solutions. 

Answer the questions listed in the worksheet provided. Keep your answers short, but provide enough insightful relevant detail on the specific topic being addressed.

Issues to be addressed:

  • 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.

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Student Name: Assignment: Accounting Methods Date: 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 address management ‘s concerns related to these issues and offer solutions. Answer the questions listed in the worksheet provided. Keep your answers short, but provide enough insightful relevant detail on the specific topic being addressed. Issues to be addressed: • • 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. Explain how cash and accrual accounting differs for each of the events listed in the scenario and describe the proper accrual accounting. 180-day financing for customers. Payment to equipment suppliers upon delivery of goods. Prepayment for 2 years of insurance coverage. Cash Accounting Reporting Accrual Accounting Reporting Instructor’s Comments: Explain how cash and accrual accounting differs for each of the events listed in the scenario and describe the proper accrual accounting. Cash Accounting Reporting Accrual Accounting Reporting Total Available Total Earned 60 #/60 One month’s salaries owed at year-end. 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. Then explain how BizCon could have positive net income and yet run out of cash. Instructor’s Comments:
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Explanation & Answer

Attached.

Running Head: BIZCON, A CONSULTING FIRM

BizCon, a Consulting Firm
Student’s Name
Professor’s Name
Course Name
Date

1

BIZCON, A CONSULTING FIRM

2

Explain how cash and accrual accounting differs for each of the events listed in the above
scenario and describe the proper accrual accounting.
Two methods of accounting shall be used BizCon. The methods include; cash and accrual
terms. Payment on cash terms is employed by small businesses and for personal expenses. The
cash terms are used in profits when the finances are gained in cash and for expenses when the
suppliers receive their payment in cash. Alternatively, the cash is used for making small fiscal
transactions and for accounting operations on a day to day basis. When expenditures on services
and goods are incurred the Accrual terms are employed. Based on the information in the scenario
the Bizcon suppliers have a preference of getting ...


Anonymous
Excellent resource! Really helped me get the gist of things.

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