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.

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

How could the presentation of financial information pose an ethical dilemma to a business professional who is attempting to meet the demands of users who are interested in similar information?
Question: Which of the following is a fundamental accounting principle that states that businesses should only record transactions that can be expressed in monetary terms? A) Matching principle B) Materiality principle C) Monetary unit principle D) Conservatism principle
Identify which one of the following statement is not correct: a. Dividend decision is the primary function of the financial manager b. The financial manager need not concentrate on mobilization of finance c. Cash management plays a major role in the area of finance d. Management control is an emerging role of the financial manager
Accounting enables an entity or an individual to record their financial transactions for a given period. In understanding how accounting works, it is important to know the key phrases and terms applied such as the accounting equation. Through accounting, you can track the transactions and minimize fraud.
Financial statement users assess a business liquidity and solvency to see whether a business is generating enough cash to pay its debts True False
Here is question The purpose of this assignment is for you to demonstrate your ability to record business transactions and then prepare a properly formatted income statement and balance sheet. The one additional requirement is that you answer the questions that you find below. Questions to be answer 1. What is the company's ending Cash balance? What is the company's ending Equity? Why is cash not equal to equity? 2. What is the company's net income for the period? 3. If you had to repay your creditors today, could you? Explain. 4. The company made a small amount of net income over the month. Explain why the equity actually decreased over the period. 5. You have recorded journal entries for the period of a month. If you were told that the business license in T12 was a annual expense, would this impact the reported net income? Explain why or why not.
Consider the following statements. For each one of them state whether the statement is true or false and provide a brief explanation to support your answer. a) Financial accounting is targeted at external users while management accounting focuses on internal users. b) The trial balance is part of a company’s financial statements. c) Bank loans are always non-current liabilities. d) In accounting, revenues are recognised whenever there is a cash transfer. e) As understandability is one of the key characteristics of accounting according to the IASB conceptual framework, transactions that are too difficult should not be recognised in the accounts.
2. Multiple choices, please choose one of the correct choices 1) Which one of the following statements is not true? a) Financial accounting reports are used by investors to make investment decisions while cost and management accounting reports are used by managers to make business decisions. b) Financial accounting summarizes accounting transactions while cost and management accounting presents a detailed analysis of costs, selling prices and any other information required by an entity's management.< c) Financial accounting reports report on what has happened while management accounting reports focus on current activity and future projections. d) Financial accounting reports have an internal user focus while management accounting reports are focused on external users of accounting information.< 2) What kind of cost does the table represent? Output Cost 5,000.00 12,000.00 a) Semi-variable Cost b) Fixed Cost c) Variable Cost 30,000.00 55,000.00 90,000.00 ✔ e A 3) The form and content of…
A bank statement Select one: A. is a bill from the bank for services rendered B. shows a company the financial position of the bank as of a certain date C. shows the activity that increased or decreased the company's account balance D. is a credit reference letter written by the company's bank
A prepaid expense is one of the assets which are on a balance sheet that a company or rather a business is paying in advance for the services and goods that they are yet to receive in the future. Prepaid expenses’ value is made over time onto the income statement but is initially recorded as an asset. So as to ensure a record sense of accountability, a company must adjust these expenses so as to ensure that the expenses are recognized within the period that the expenses are incurred within the business period. This expense is placed in the debit column before it expired, however, it has to be moved to the credit column. There are a number of adjustments that most of the companies do make entries to before they prepare their ultimate report on the financial period. Some of these adjustments include; accrued expenses, accrued revenue, depreciation expenses and even deferred revenues. What is your opinion?
Could anyone explain this question? indicate the financial statement on which the account’s balance should be found. Also, if the account is shown on a company’s balance sheet, indicate if it should appear in the asset section, liability section, retained earnings section, income section, or stockholders’ equity section. Accounts Receivable Note Receivable Discount on Note Receivable Bank Service Charge Expense Bad Debts Expense Sales Return Liability Interest Revenue Allowance for Doubtful Accounts Cash Over/ Short Interest Receivable Sales Returns and Allowances
Accounting concepts form the fundamental principles upon which financial accounting is based. These concepts provide a framework for recording, reporting, and interpreting financial transactions in a consistent and meaningful manner. One of the key accounting concepts is the principle of conservatism, which dictates that when faced with uncertainty, accountants should err on the side of caution by recognizing potential losses immediately while delaying the recognition of potential gains until they are realized. This concept ensures that financial statements provide users with a reliable representation of an entity's financial position and performance, even in the face of uncertainty Question: How does the principle of conservatism contribute to the reliability of financial statements?