FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
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Chapter 13, Problem 13.8EYCT
To determine
To draft: Memo to LD providing explanation for analysis of financial statements.
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Ethics and income Reporting
You have been hired as an “accounting consultant” by Watson Company to evaluate its financial reporting policies. Watson is a small corporation with a few shareholders owning stock that is not publicly traded. In a discussion with you, Chris Watson, the company president, say, “ For Watson Company’s annual income statement, it is our policy to always record and report revenues when we collect the cash and to record and report expenses when we pay the cash. I like this approach, and I think our shareholders and creditors do too. This policy results in income that is reliable and conservative, which is the way accounting should be. Besides, it is easy to keep track of our income. All I need are the receipts and payments recorded in the company’s checkbook.”
Required:
From financial reporting and ethical perspectives, how would you reply to Chris?
Question:Prepare a reflection paper that incorporates your answers to the following independent questions:
1. What problems can you foresee if a business manager does not have a basic knowledge of accounting?
2. The owner of a company asks you if he can charge all his personal expenses to his business. He said that he owns the company anyway. Explain to the business owner the business entity assumption and the ethical considerations of his idea.
3. After examining the financial statements, the owner of a small business expressed surprise that the firm's cash balance had decreased during the month even though there was substantial net income. Do you think this owner is right to expect the cash to increase because of a substantial net income? Why or why not?
4. Jiffy Trading runs 10 branches and pays for a variety of expenses. Anna, the Accounts Payable Clerk of Jiffy Trading writes the checks for each supplier and the Accounting Manager signs the checks. Anna decided she…
Describe the responsibilities of a financial analyst.
Write five to seven bullet points outlining the responsibilities of a financial analyst. Write in complete sentences.
Use an example to discuss the importance of analyzing and managing finances to help make business decisions.
How do these responsibilities help inform management decisions?
What would happen if management didn’t have this information?
Consider the bullet points you outlined in the previous section. Then write a brief paragraph that answers the following questions. Use examples to support your claims.
Explain how to use accounting principles to analyze a business’s financial health. Give examples to support your claims.
What accounting information do financial analysts use?
What would happen if that information was not available or was not accurate?
Write a brief paragraph that explains how financial analysts use accounting principles to analyze a business’s financial health. In your paragraph, also answer…
Chapter 13 Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
Ch. 13 - Prob. 1QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - (a) Distinguish among the following bases of...Ch. 13 - Prob. 11Q
Ch. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 20QCh. 13 - Prob. 21QCh. 13 - Prob. 22QCh. 13 - Prob. 13.1BECh. 13 - Prob. 13.2BECh. 13 - Prob. 13.14BECh. 13 - Prob. 13.15BECh. 13 - Prob. 13.4EYCTCh. 13 - Prob. 13.8EYCT
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- 1-Accounting software is related to which system of accounting? a. Manual Individual customer records b. Manual system of accounting c. Computerized accounting d. Any system of accounting 2-A Creditor of the business uses the financial statement for a. Day to day decision making related to the business b. Making the decisions to buy or sell the shares c. Evaluating the risks of granting credit or lending money d. Verifying whether the company complies with tax laws 3-For every debit there will be an equal credit according to a. Dual aspect concept b. Matching concept c. Money measurement concept d. Cost concept 4-Mr. Asif is an accountant. Purchase of Merchandise on credit for OMR 75000 was entered in Furniture Account for OMR 75000 but he posted Accounts payable entry is correct. Which of the following rectification entry is correct? a. Debit Accounts payable RO 75000 Credit Furniture RO 75000 b. Debit Purchase RO 75000 Credit Accounts payable account RO…arrow_forwardYou are the senior accountant in a company and in charge of the accounts department. One of your junior staff is very good at book-keeping and you have identified her as a person with potential for promotion. You have therefore agreed to pay for her tuition on a financial accounting course. She has asked you what she will learn apart from book-keeping. Required: State briefly the purpose and contents of EITHER the International Accounting Standards Board’s “Framework for the Preparation and Presentation of Financial Statements” OR the Accounting Standards Board’s “Statement of Principles for Financial Reporting”. Thank youarrow_forwardSuppose that a company called Futuristics, Inc hires you to work in Supply Cha Management. Your new manager sets up a meeting to discuss the Surfers, Inc. account. The meeting opens with the manager stating, "I just reviewed the financial report on Surfers, Inc. It really doesn't cost much to serve them, does i Which of the following would be an appropriate response to the manager's statement? Traditional accounting methods are perfect to help us make decisions about serving the Surfers, Inc. account Activity-based costing would be better to report the Surfers, Inc. results to the financial community Traditional cost accounting gives us a good measure for comparing by customer Activity-based costing could better show us how much it really costs to serve Surfers, Inc. Activity-based costing takes depreciation into account to enable us to know when to replace machineryarrow_forward
- prepare a 2 full pages reflection paper that incorporates your answers to the following independent questions: 1. What problems can you foresee if a business manager does not have a basic knowledge of accounting? 2. The owner of a company asks you if he can charge all his personal expenses to his business. He said that he owns the company anyway. Explain to the business owner the business entity assumption and the ethical considerations of his idea. 3. After examining the financial statements, the owner of a small business expressed surprise that the firm's cash balance had decreased during the month even though there was substantial net income. Do you think this owner is right to expect cash to increase because of a substantial net income? Why or why not? 4. Jiffy Trading runs 10 branches and pays for a variety of expenses. Anna, the Accounts Payable Clerk of Jiffy Trading writes the checks for each supplier and the Accounting Manager signs the checks. Anna decided she needs a raise…arrow_forwardMaria comes to you for investment advice. She asks, “Which company’s stock should I buy? There are so many companies to choose from and I don’t know anything about any of them.”Required:Respond to Maria by explaining the two functions of financial accounting. Specifically address the four financial statements reported by companies and the information contained in each. Also explain the role of the auditor in the preparation of financial statements.arrow_forwarda) ‘Assessing the financial reporting quality is an important aspect of financial analysis’Required:Critically discuss this statement. (Discuss the concept of accounting quality, permanent and transitory earnings as part of your answer). b) Discuss five incentives that might cause management to manipulate reported earnings numbers.arrow_forward
- You are employed as an accountant for Innovative Computing. Your company is in the process of signing a large contract with an electronics components supplier. You have a friend who works for the electronics components supplier, and you were told the company having trouble paying bills. You ask to review the financial statements of the supplier. 1. Which financial statements would you find most helpful to determine the creditworthiness of the supplier? What information from the financial statements would you use to either support or disprove your friend’s claims? 2. What are the four basic financial statements? What is their purpose and what does each one tell you about a company? 3. How are the four financial statements interrelated? Which line items are used to prepare other statements? 4. In your opinion, explain which financial statement you think is the most important?arrow_forwardWhat are some specific activities that a financial manager does? For example: Review balance of company accounts. I want to know more about the exact day-to-day activities of a financial manager, such as the example I just gave.arrow_forwardDetermining organizations that govern accounting Suppose you are starting a business, Wholly Shirts, to imprint logos on T-shirts. In organizing the business and setting up its accounting records, you take your information to a CPA to prepare financial statements for the bank. Name the organization that governs the majority of the guidelines that the CPA will use to prepare financial statements for Wholly Shirts. What are those guidelines called?arrow_forward
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