Business Finance
UP BizCon Consulting Firm Delayed Payment of Employee Wages Memorandum

University of Phoenix

Question Description

I’m trying to study for my Accounting course and I need some help to understand this question.

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.

Student has agreed that all tutoring, explanations, and answers provided by the tutor will be used to help in the learning process and in accordance with Studypool's honor code & terms of service.

Final Answer

Attached.

Running header: MEMO

Memo
Student’s Name
Institutional Affiliation
Course

MEMO

2
Memo

To: MANAGEMENT
From: CHIEF FINANCIAL OFFICER
Date: March 23, 2020
Subject: Delayed payment of wages
Dear members, I would like to take this opportunity to explain and put to rest some of the
recent issues facing BizCon, among them being the delayed payment of employee wages. To be
more specific, BizCon employees have not received one month's wages as a result of cash
shortfalls within the company. The objective of this memo is to explain in detail why the
company has cash shortfalls.
To begin with, it is important to point out that there are apparent differences between the
accrual and cash methods of accounting. These two methods of accounting have an impact on the
business in terms of paying suppliers, settling employee wages, and the policy of 180-day
financing. The primary focus is based on wages paid to workers at different times of the financial
year and the revenues the company expects to receive using the two basic accounting methods.
The company suppliers have implored to be paid their dues on a cash bas...

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University of Virginia

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