ACC561 Phoenix Week 2 BizCon Accounting Methods Clarification Memo

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Writing

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ACC561

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University of Phoenix

Description

Purpose of Assignment **NO PLAGIARISM**

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.

Assignment Steps

Resources: 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.

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.

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Accounting Methods Grading Guide ACC/561 Version 7 Accounting Copyright Copyright © 2017 by University of Phoenix. All rights reserved. University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries. Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation. Edited in accordance with University of Phoenix® editorial standards and practices. Accounting Methods Grading Guide ACC/561 Version 7 Individual Assignment: 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 that occur in a business setting and determine how to properly analyze those events to identify the impact on both cash and accrual accounting methods. Resources Required 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. Grading Guide Content Met Partially Met Not Met Total Available Total Earned 4 #/4 Partially Met Not Met Comments: Explained how cash and accrual accounting differs for each of the events listed in the scenario and describe the proper accrual accounting. Assessed 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. Explained to management how BizCon could have positive net income and yet run out of cash. The memo is a maximum 700 words in length. Writing Guidelines The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Met Comments: 2 Accounting Methods Grading Guide ACC/561 Version 7 Writing Guidelines Met Partially Met Not Met Total Available Total Earned 2 #/2 6 #/6 Intellectual property is recognized with in-text citations and a reference page. Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation. Assignment Total Additional comments: # Comments: 3
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Tags: APA GAAP Accounting Methods Clarification BizCon Accounting Methods accrual accounting methods

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Explanation & Answer

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Accounting Methods Memo
Accrual accounting is a business approach that measures the performance of a company
as at the point at which an economic activity happens regardless of when the cash transactions
take place. This means that money received in advance, and that in arrears is accounted for
during the current financial period. Prepayments are recorded as an asset on the balance sheet
while they are credited in the profit, and loss statement. Accruals, on the other hand, are credited
in the balance sheet, and debited to the profit, and loss statement. Therefore, as per the accrual
accounting methodology, the business position would be given by the expenses, and incomes of
the financial period, along with those of other periods which are either due, or have been
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