Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 6, Problem 1BIC
90907-6-1BIC
To determine
Advice Company S to get better of accounting quality.
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How can the qualitative relevance characteristic be improved in high-quality accounting information? Do not simply repeat what it is, provide suggestions as to how a particular part of the qualitative characteristics could be improved.
Please provide different answers and explanations than copy and pasting:
“Accounting information is relevant if it can provide helpful information about past events and help in predicting future events or in taking action to deal with possible future events. For example, a company experiencing a strong quarter and presenting these improved results to creditors is relevant to the creditors' decision-making process to extend or enlarge credit available to the company.”
How can the enhancing characteristic timeliness be improved in high-quality accounting information? Do not simply repeat what it is, provide suggestions as to how a particular part of the enhancing characteristic could be improved.
Please provide different answers and explanations than copy and pasting:
“Timeliness matters for accounting information because it competes with other information. For example, if a company issues its financial statements a year after its accounting period, users of financial statements would find it difficult to determine how well the company is doing in the present.”
You are required to prepare a reflection paper that incorporates your answers to the following questions:
1. Besides earning a profit, what other objectives might a business have? How can Accounting play an important role in these objectives?
2. A new manager of a retail company suggests that the company should prepare its Statement of Profit or Loss on the basis of cash receipts and cash expenditures (except for the acquisition of fixed assets, such as plant and equipment). He argues that managers, investors, creditors, and others are more interested in cash receipts and disbursements than in accrual-based accounting. Do you think he is correct? Explain.
3. The manager of your company told you to go out to the warehouse and count merchandise inventory. He said that owner is coming for a meeting next week and the manager wanted to put on a good show. He asked you to make the inventory higher by counting the first and last row twice. The higher ending inventory will result in higher…
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Financial Reporting, Financial Statement Analysis and Valuation
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