Accounting Methods

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Business Finance

Description

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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Explanation & Answer

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Running head: BIZCOM COMPANY

1

BizCom Company
Student name
Institution affiliated
Date

BIZCOM COMPANY

2

BizCom Company
Internal memo
To all employees
Subject: Delayed wage payment
I am writing to all our employees on behalf of the accounting department and the
BizCom Company as a whole. First, to update them about the delay in payment of their wages,
Secondly, to give a substantive explanation concerning the company’s financial status, that is, an
explanation on accrual accounting and report on the net income at the end of this year. And
lastly, apologies for any inconveniences that may be caused as a result of the delayed payment.
Cash and accrual accounting
Ac...


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