Essays on Accrual Basis

About the paper

The paper discusses the use of funds in government accounting and will delineate how the fund balance represents the available spending resources of the entity. In addition, we will also comment on the special purpose fund in government accounting.

Government Fund and Balance of Fund

With regards to government accounting, Funds refer to the independent accounting mechanism with a self balancing set of accounts. The equity account, that represent the difference between assets and liabilities, refers to the fund balance, which the government or the respective department can use for future investment or to meet working capital needs. In fact, the overall objective of fund ...

Accrual and Cash Accounting Concepts in a Hospital

Difference between Accrual and Cash Accounting Methods Accrual and cash accounting methods are two approaches used to recognize revenues and expenses. Under the accrual basis, the revenues are recognized when it is earned and realized or realizable. Thus, an enterprise can claim to have earned revenue from a certain transaction if it has delivered the products or provided the services. The term “realized” means that cash is received, and “realizable” signifies that there is a reasonable basis to anticipate that cash will be received in the future. On the other hand, expenses are recognized in the same period that ...

Comparison of CAFRs of Philadelphia and Austin Cities

Publication method The publication methods for the two comprehensive annual financial reports are similar in most respects. Both are addressed to the city mayor, city council members and the people of the city. Both are also prepared and published in accordance with GAAPs for local governments. However, there are a few differences in the two report. The CAFR for the City of Philadelphia is prepared by the Director of Finance while that of the City of Austin is prepared by the Financial and Administrative Services Department. Besides, the CAFR for Philadelphia is for the financial year ended June 30 ...

Individual Tax Case Study

Facts Age: 60 Marital status: Single Bob recently retired from IBM and has $690,000 available from his 401(k) fund. He plans on using the money to open a used car business. The business will be located at 210 Ocean View Drive in Pensacola, Florida. The estimated taxable income from the business might be $300,000. Bob’s individual wealth including investments in stocks, bonds, and land is approximately $14,000,000. Last year, Bob reported a dividend income of $6,000 and an interest income of $20,000. The $14,000,000 comprises of land worth $9, ...

Part A:

About the company and other related information Founded in the year 1924, PUMA is a Germany based multinational entity that designs, manufacture and sells athletic footwear, apparels and other related accessories. The company was formed by two brothers,Adolf Dassler and Rudolf Dassler but owing to family quarrels, Rudolf separated from his brother and took over the company, eventually naming it Puma. Over the time, the company has expanded its product offering and it now offers products in various categories of sports. In addition to its principle brand PUMA, the company also offers its products under the name of ...

Abstract

This paper presents the ideal purpose of adopting a unitary global set of accounting standards to be applied across the globe. It presents the major characteristics of both the dominant accounting standards used worldwide, the IFRS and the US GAAP. It examines whether the IFRS or US GAAP works best for the present and the future needs of a global finance system. The various differences of these two accounting standards were shown. The major applications of the IFRS as the leading accounting standards and principles were also highlighted in the paper. It also provided various guidelines in this seemingly ...

The reason for difference in Net Profit from Operations in the Income Statement and Cash Flow from Operations in Cash Flow Statement is because, both the financial statement follows different accounting principle. While the Net Income of the company is calculated by following accrual basis of accounting, the CFO is calculated by strictly following cash basis of accounting. In other words, if the revenue from a unit sold during December is expected to be received in January, the income statement will record revenue in December itself while no such entry would be posted in Cash flow from Operations. Hence, Income ...

(a)Discuss the need for a cash flow statement such as that given for JLJPlc; Cash flow statement analysis is helpful to management in the generation and utilization of cash in the most efficient way. Efficient utilization of cash helps management in its objective of wealth maximisation. The cash flow statement helps in identifying the strength of cash generation in the various activities such as operations, financing, and investing. It helps trace the source of cash received and how it is disbursed. For To be a healthy firm, cash should come from operations. The cash flow statement is also an indicator ...

Q1. How does the modified accrual basis of accounting differ from the accrual basis?

-The concept of Modified Accrual basis is more popular in the preparation of the financial statements of Government Agencies as those financial statements focus on the flow of current financial resources and if the available resources were allocated and used in conformity with the budgetary and other financial constraints. Under this accrual method, the government agencies use the combination of accrual accounting and cash basis accounting. Hence, under this accrual method of accounting, revenues that will not be collected in the time period so as to pay-off current period obligations, will not be included as part of revenue figures. ...

Income Statement:

The income statement reports the revenue and expenses of the firm over a period of time. The income statement is sometimes refered to as the statement of operations or Profit and Loss Statement. The income statement relies on the equation:

In other words, Income Statement serves the purpose of providing the investors and other users of financial statements with most appropriate profitability of the entity net of expenses incurred by the company. In an elaborated manner, income statement helps an investor to assess as how the business has performed by giving a summary of how the business incurs its revenue and ...

The cash flow statement provides information beyond what is shown in the income statement. Since the income statement is made on the accrual basis of accounting rather than cash basis, it will always differ from the cash flow statement. The cash flow statement provides the following information: - Information about the company’s cash cash receipts and cash payments during an accounting period - Information about the company’s operating, investing and financing cash flow activities - A transparent view of company’s performance as it provides an understanding of the impact’s of accrual accounting ...

Adjustments to the accounts

In the computation of the income tax of the client, depreciation is allowed as an expense in the income statement. Instead, capital allowances on the capital investments are allowed. The taxpayer computes the capital allowances as per the prescribed rates by the commissioner of income tax. These include investment deduction, wear and tear allowance as well as the industrial building deduction. In the case of Andrew, the capital allowances can be computed as below:

Computation of the writing down allowance on general pool for the year 2012/2013 was at 18%.

Balance brought forward on General pool = £2500 Add: New equipment purchased = £5000 Less: Old Machine sold = (£600) Net value of general pool ...

Briefly explain accrual basis of account. Also what is the reason why accrual basis of accounting is not desirable for most organizations? An accounting system that recognizes the revenues as they are earned and records the expenses as they are incurred, is known as the accrual accounting system. Totals of expenses and revenues are included in the financial statements, whether or not the cash against these transactions is paid or received in that period. The date of receipt or payment of cash does not have any effect on the books except to record the payment or receipt of ...

The cash method of accounting is one where revenues are only recorded once cash has been received and similarly expenses are only recorded when cash is paid. When work is done or goods sold an invoice sent to the customer; no revenue would be recorded until the money has been received. Likewise, when the business owes debts to suppliers among other businesses, expenses are not recorded until the amount is paid. In the accrual basis of accounting, on the other hand, income is recognized and recorded immediately it is earned and expenses recorded immediately they are incurred whether the ...

Introduction: Accrual and Cash basis of accounting are the two methods of making a record of the business transactions in the organization’s records. According to Rich, Jones, Mowen & Hansen (2012) “Under Cash basis accounting, revenues and expenses are recorded when cash is received or paid regardless of when the revenues are earned or the expenses are incurred. Accrual basis accounting; links income measurement, to the selling activities of a company by recognizing revenues and expenses when they occur” (p. 135). The accrual basis of accounting adheres to the revenue recognition and expense recognition principle as laid down by the ...

Accrual and cash basis differs in regard to recognition of revenue as well as expenses of a business. Cash basis recognizes income when cash is received. For example, when goods are sold at a profit the profit will be recognized when the buyer pays for the goods. Therefore, if a company uses cash basis of recording trasactions, when credit sales are made it is impossible to recognize any profit to be obtained from such sales till the time customer pays. In addition, cash basis requires expenses to be first paid then recorded. This means that any expense incurred and not immediately paid ...

Financial appraisal

Query 1 Risk refers to the likelihood of incurring losses. Financial risk results from several events such markets prices fluctuations, foreign exchange fluctuations, interest rate fluctuation among others. There are several ways in which RTE can reduce or extinguish financial risk on the investment of 100,000 pounds in fitting and furniture for the new building. This section discusses some of the ways of mitigating the financial risk they are exposed to. RTE should first conduct an internal as well as an external analysis to identify the risks facing it. RTE trustees should then understand its relevance ...

Introduction

Charities and companies have different reporting requirements. The reporting requirements for charities depend on whether they are registered as companies or not and the annual earnings of the organisation. Companies have more legal requirements on the preparation of the financial statements especially the companies that are trading in the stock exchange. There are guidelines and principles that have to be adhered to in the preparation of the financial statements. There are differences between the reporting requirements of companies and charities when it comes to the format of the income statements and the auditing requirements.

Mitigating Risk in Advance Payments

The charity organization is concerned ...