Accounting Cycle

Name

ACC/421

Date

Instructor Name

Accounting Cycle

Most organizations have an accounting cycle process with the aim of processing/organizing

information and statements regarding their financial position at the end of each accounting period. This

enables the stakeholder to estimate whether the organization is running at a loss or making a profit.

Accounting process is an ongoing activity in a company, and it is done repeatedly at the end of each

accounting period. The accounting process varies significantly depending on various aspects such as the

size of the organization in terms of operations and the number of accountants.

Week 1 DQ 1

What are the major objectives of financial reporting?

Response #1 The objectives of financial reporting are to give the user information that is useful in investment and credit decisions, assessing cash flow prospects and supply information about company resources, claims on those resources and changes in them.

Week 1 – DQ 2

What is the purpose of GAAP and the accounting cycle?

Response #1 Generally accepted accounting principles (GAAP) are accounting rules, procedures, and standards that assist investors, creditors, and auditors to make financial decisions that help the economy run efficiently. The purpose of GAAP and the accounting cycle is to ensure organizations are reporting financial information correctly. GAAP and the accounting cycle also provide consistency with accounting practices within a company. When a business prepares the financial information according to GAAP management, creditors, potential investors, and investors can depend on the records provided to make the best decisions for the company. Stockholders are able to receive an accurate image of the financial health of the organization as well.

Week 1 – DQ 3

What organizations are responsible for governing financial reporting and what are their roles?

Response #1 Organizations that are responsible for governing financial reporting include the Securities and Exchange Commission (SEC), American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), and Government

Accounting Standards Board (GASB). The role of the Securities and Exchange Commission is to protect investors by maintaining a fair market. The role of American Institute of Certified Public Accountants is to maintain and improve the tax system for the public and CPA’s. The role of the Financial Accounting Standards Board is to make sure organizations

Week 2 – DQ 1

What are the different criteria for recognizing revenue?

Response #1 According to SAB 101--GENERAL REVENUE RECOGNITION RULES organizations “should not recognize revenue until is realized or realizable and earned.” Before revenue is recognized, transactions must meet the following criteria:

- There is a persuasive evidence of an arrangement.

- The seller’s price to the buyer is fixed or determinable.

- Delivery has occurred or services have been rendered.

- Collectability is reasonably assured.

Week 2 – DQ 2

What are the differences between regular and irregular items on an income statement?

Response #1 Some differences between regular and irregular items on an income statement is regular income is paid on a schedule such as weekly or monthly whereas irregular items are not paid on a schedule. Irregular items include discontinued operations, changes in accounting principles, or extraordinary items for example, due to an earthquake. Irregular items are reported separately because this helps creditors and investors predict the future cash flows.

Week 2 – DQ 3

What is included in other comprehensive income?

Response #1 Other comprehensive income is gains and losses that have not been realized by a business yet. Gains and losses that have not been realized could include foreign currency translation gains or losses, foreign investments gains or losses, and unrealized

pension costs. Other comprehensive income is the difference between net income and comprehensive income.

ACC421 – Intermediate Accounting IIIndividual Assignments – Week 2

This assignment is worth a total of 75 points distributed evenly among the four problems. It will be graded based upon both the accuracy of your solutions (2/3) and effort (1/3). Points for effort will be impacted by poor formatting, poor organization, clear lack of effort, and careless errors. Any simple arithmetic errors, unbalanced journal entries, or unbalanced schedules will result in a significant point reduction for that problem. Show your work and double check your math and entries!

Problem 1:

Grading: This problem is worth a total of 18.75 points. There are 10 grading elements each worth 18.75 x 2/3 / 10 = 1.25 points. There are 18.75 x 1/3 = 6.25 points available for effort.

Consider each one of the following in light of the characteristics of accounting:

A: The economic consequences of a standard or rule are not considered.

This assignment is worth a total of 75 points distributed evenly among the four problems. It will be graded based upon both the accuracy of your solutions (2/3) and effort (1/3). Points for effort will be impacted by poor formatting, poor organization, clear lack of effort, and careless errors. Any simple arithmetic errors, unbalanced journal entries, or unbalanced schedules will result in zero effort points for that problem. Show your work and double check your math and entries!

PROBLEM 3-5

Grading: This problem is worth a total of 37.5 points. There are 18 grading elements each worth 37.5 x 2/3 / 18 = 1.3889 points. There are 37.5 x 1/3 = 12.5 points available for effort.

Week 3 – DQ 1

What are the limitations of using ratios for financial statement analysis? What are the benefits?

Response #1 Limitations of Ratios Analysis:

1. Limitations of financial statement analysis are based only on the information which has been recorded in the financial statements.

2. Comparative study required are useful in judging the efficiency of the business only when they are compared with the past results of the business.

Week 3 – DQ 2

What does full disclosure mean? How does full disclosure affect financial reporting?

Response #1 The full disclosure principle means that all financial facts that are significant in influencing the judgment of the anticipated reader of the document to be documented in the financial reports. This includes any information that will make an impact on the financial statements as well. Full disclosure affects financial reporting in that all information is provided whether or not the benefits or the costs are presented or known. This can be difficult to understand or make a viable decision if you are an investor wishing to invest in the company or organization.

Week 3 – DQ 3

What information is provided in the auditors’ report?

Response #1 The auditors’ report usually consists of three paragraphs. The first paragraph includes information of the responsibilities of the directors and auditors. The second paragraph is called the scope which describes the purpose of the audit and states that GAAP have been used. The three paragraph provides information of the auditor’s opinion as to if they feel the statements provided are accurate. Auditor’s have ethical guidelines that must be followed however there are no guarantees with their reports.

Week 3 – DQ 4

What information is contained in the balance sheet?

Response #1 The balance sheet gives detailed information about organization assets, liabilities, and shareholders’ equity. Assets are property or money that an organization possesses such as plants, trucks, or cash. Liabilities are amounts of money that an

organization owes to others. For example, loans or rent for use of an office. Shareholders’ equity is capital or net worth. It is the leftover money after an organization sold all of its assets and paid off all of its liabilities. The balance sheet reports the financial position of an organization.

ACC421 – Intermediate Accounting IIIndividual Assignments – Week 3

This assignment is worth a total of 75 points distributed evenly among the four problems. It will be graded based upon both the accuracy of your solutions (2/3) and effort (1/3). Points for effort will be impacted by poor formatting, poor organization, clear lack of effort, and careless errors. Any simple arithmetic errors, unbalanced journal entries, or unbalanced schedules will result in a significant point reduction for that problem. Show your work and double check your math and entries!

Problem 1:

Grading: This problem is worth a total of 18.75 points. There are 23 grading elements each worth 18.75 x 2/3 / 23 = 0.5435 points. There are 18.75 x 1/3 = 6.25 points available for effort.

Week 4 – DQ 1

What does the statement of cash flows tell you about a company?

Response #1 The statement of cash flows is used to provide companies with information about its incoming cash (cash receipts) and outgoing cash (cash disbursements). This information is also used for a company's operating, investing, and financing activities. Operating activities are transactions that determine net income by revenues, expenses, gains, and losses. Investing activities are transactions that involve lending money, collecting money on those loans, and buying and disposing of assets. Financing activities are transactions that involve repaying loans, obtaining cash from lenders, and paying dividends

Week 4 – DQ 2

What is included in each section of the statement of cash flows?

Response #1 The statement of cash flows has three sections: operating activities, financing activities, and investing activities.

The operating activities section includes anything that affects the cash account that also is included in determining net income on the Income Statement. Basically, this section of the statement of cash flows takes the income statement and, either directly or indirectly, turns it from accrual-based accounting to cash-based.

Week 4 – DQ 3

What are the differences between the direct and indirect method of presenting a statement of cash flows?

Response #1 Both direct method and indirect method report in the same manner when it comes to cash flows from investing activities and cash flows from financing activities. The two methods differ on the cash flows from operating activities. The direct method reports the sources of the operating cash and its uses. Reporting the sources and uses of cash in the statement of cash flow is the advantage of this method.

ACC421 – Intermediate Accounting IIIndividual Assignments – Week 4

This assignment is worth a total of 75 points distributed evenly among the four problems. It will be graded based upon both the accuracy of your solutions (2/3) and effort (1/3). Points for effort will be impacted by poor formatting, poor organization, clear lack of effort, and careless errors. Any simple arithmetic errors, unbalanced journal entries, or unbalanced schedules will result in a significant point reduction for that problem. Show your work and double check your math and entries!