Abstract This paper defines and compares two concepts in accounting - the cash basis and the accrualbasis. It shows that the cash basis of accounting is more likely to be used by service businesses than by retail or manufacturing businesses. The paper also provides an example in table form to show the differences between the two systems.
From the Paper "In short, under the cash method, a business reports income when it is received and reports expenses when cash is disbursed. Under the accrual method, a business reports income when the business has the right to receive the income and reports expenses when all events, which create the liability, have occurred and the amount of the expense is reasonably determinable."
Abstract This paper explains that, in cash basis or cash accounting, businesses record transactions only if they involve the payment or receipt of cash, which does a poor job of matching revenues earned with money laid out for expenses. The author points out that, in accrual accounting, the economic impact of a transaction is recorded whether or not the transaction involves cash, which does a better job of matching revenues with expenses and of handling items such as property and equipment. The paper relates that the four statements used in the accrual method accounting are the balance sheet, the income statement, the statement of cash flows and the statement of stockholders' equity.
From the Paper "An example would be a purchase of supplies in July but the supplies are not sold until August. You receive the cash in August. However, when the books are closed all you have to show for July is an expense for supplies but no revenue to offset it, meaning there is a loss for that month. This can make it difficult for a business to determine whether or not it is earning a profit because all its business activity does not always fall on the same month. It also has trouble tracking anything other than cash. For example if you purchased equipment or property the cash method of accounting would show the purchase and disbursement in the month of purchase. These items, however, will be used over a period of time."
An analysis of the strengths and weaknesses of the research paper, "The Market Pricing of Accruals Quality", by Jennifer Francis, Ryan LaFond, Per Olsson, Katherine Schipper.
Abstract This paper analyzes the theoretical and methodological strengths and weaknesses of the research paper, "The Market Pricing Of Accruals Quality" by Jennifer Francis, Ryan LaFond, Per Olsson, Katherine Schipper. The paper summarizes the strengths of the research and underlines the weaknesses of the empirical method. Finally, this paper discusses the limitations of the theoretical approach.
Table of Contents:
Synthesis Of Strengths
Accruals Quality Has An Impact On The Information Risk And The Cost Of Capital
Innate Accruals Quality Has A Larger Impact Than Discretionary Accruals Quality Has
Methodological Weaknesses
The Specific Sample Cannot Be Applied Generally
Hypotheses And Methods Are Questionable
There Are Variances Between Empirical Findings And Other Results
Theoretical Limitations
Only The Systematic Component Of Earning Quality Risk Contributes To The Equity Risk Premium
The Relation Between Accruals Quality And Cost Of Capital Depends On The Fundamental Risk
Accruals Quality Is Neither A Priced Risk Factor Nor A Determinant Of The Cost Of Capital
From the Paper "In the paper Earnings quality and the equity risk premium: a benchmark model, Yee makes a distinction between the fundamental earnings and the reported earnings: the fundamental earnings are the accounting profits generating future dividend cash flows, while the reported earnings are the imperfect signal of fundamental earnings. He also makes the difference between the two sources of associated earnings risk: the fundamental risk and the earnings quality risk. The fundamental risk is the uncertainty of future dividends payments, whereas the earnings quality risk or information risk is the uncertainty that the reported earnings may not be announced quickly and precisely. Only the systematic components of earnings risk contribute to the equity risk premium, while all the components, either systematic or diversifiable, affect the earnings capitalization factors."
Abstract This paper presents the basic forms and methods of accounting for cash accounting and accrual-based accounting and compares the two. It examines which form of accounting is more beneficial to specific sectors of the economy and looks at the advantages and disadvantages of each.
From the Paper "In the cash basis of accounting, the business records are "cash in" (deposits to the bank account) called cash receipts, and "cash out" (checks) called cash disbursements. Cash receipts - Cash disbursement = Cash flow. Each month's cash flow is added to the preceding month's cash balance yielding the current month's cash balance.
The cash basis of accounting is more likely to be used by service businesses than by retail or manufacturing businesses. Service businesses usually do not need equipment and can sell a service they perform with nothing more than their own hands and minds. Think of people who are lawyers, writers, public relations and advertising personnel, and accountants."
Abstract This paper describes deferrals as prepaid expenses and accruals as accrued liability. It explains what these terms mean and how they are found on balance sheets. The paper gives examples of the terms that are described above.
Table of Contents:
Deferrals: Prepaid Expenses
1. Prepaid Expenses Recorded Initially as Assets
2. Prepaid Expenses Recorded Initially as Expenses
Deferrals: Unearned Revenues
1. Unearned Revenue Recorded Initially as Liabilities
2. Unearned Revenues Recorded Initially as Revenues
Accrued Liabilities
Accrued Assets
From the Paper "Tracy (1997) stated that accrued liabilities is a short-term liabilities that arise from the gradual buildup of unpaid expenses, such as vacation pay earned by employees or profit-based bonus plans that are not paid until the following year. Example of an accrued liability is the salary of the employees. The amounts of such accrued but unpaid terms at the end of the fiscal period are both an expense and a liability (Fess and Niswonger, 1986)."
Abstract The paper discusses the lower back as an area of the body for which people seek pain treatment far more frequently than almost any other. The paper notes that chronic low back pain is a primary reason for individuals to seek and potentially become addicted to narcotic pain medication. Additionally, many individuals overuse over the counter analgesics and or nonsteroidal anti-inflammatory drugs (often a cause of stomach problems or even vascular and cardiac damage). The paper discusses the use of BASI Pilates as a core muscle training program that can, when applied correctly, alleviate and even eliminate chronic lower back pain through training. This includes balance and the strengthening of abdominal and back muscles.
Outline:
Anatomical Description of Lower Back
Introduction
Body
BASI Pilates Regiment (Abdomen and Lower Back)
Case Study
Conclusion
From the Paper "The lower back is the lay term usually given to the lumbar and sacrum portions of the spinal column and all the muscles and connective tissues that surround them. The spinal column is composed of 33 interlocking vertebrae and the sacrum, the lowers five vertebrates plus the scrum make up what is known as the lower back. This are of the back is frequently a source of pain as there are many stressors and or injuries/diseases that can effect it as well as the stressful posture of continual sitting or standing or lifting using back instead of leg muscles can create superficial strain or deep muscle strain on the area."
Abstract This paper discusses the basis of basic human morality in the world today. It looks at religious moral traditions and briefly discusses the basis of Christian, Jewish and Muslim moral teachings. The paper then discusses secular moral concepts and compares these with religious moral teachings. The paper finally discusses the fundamental problems associated with religious values.
Table of Contents:
Introduction - Morality in Human Life
Religious Moral Traditions
Secular Moral Concepts
Fundamental Problems Associated with Religious Values
Conclusion - Resolving Contradictory Moral Philosophies
From the Paper "The most encouraging view of different religious moral teachings and secular laws that still prevail in modern societies is that the role of religious dogma and superstition has been decreasing steadily for several generations (Einstein, 1930), due, in large part to the perspective provided by scientific understanding. Likewise, modern human societies seem to be decreasing their reliance on ancient beliefs and scripture to derive practical moral values more consistent with human happiness and mutual tolerance of religious, cultural, and racial differences. Secular law is increasingly meeting the needs of establishing moral standards of conduct that protect everyone in society equally, while also protecting the right of free religious worship in private."
Abstract This paper discusses the concepts of inheritance on issues of intelligence and personality, or any issue that seems to indicate a biological basis for human behavior. The paper concludes that while it can make its case for the inheritance of sexual preference, it needs larger study populations to be more definitive and that there appears to be no one theory that at this time can lead to a definitive answer.
Table of Contents:
Introduction To The Topic
Theories on Homosexuality - Socio-biological Perspectives
Theories of Inheritance - The Brain Studies Model
Theories of Inheritance - The Twin Study
Summary
From the Paper "The authors did note that there appeared to be one significantly inconsistent result in their study. In respect to the non-twin brothers, and not reported in the data above, the rate of homosexuality was 9.2%, which was significantly lower than the expected rate. (It should be explained that the rate of homosexuality in this group should be approximately the same for non-twin brothers as it would be for dizygotic twins)"
Abstract This paper discusses the biological bases of human romantic interest, mate selection, the prevailing patterns of promiscuity, infidelity in marriage and gender-based biological responses to marital infidelity, both real and imaginary. The paper discusses the research for each of these areas and examines how the concluded facts affect human mate selection. An annotated bibliography is included with the paper.
Table of Contents:
Introduction
The Biological Basis of Human Sexual Attraction
The Significance of Symmetry, Hormonal Variation, and Fertility Indicators
The Role of Scent and Genetically-based Histocompatibility
Universal Gender-based Differences in the Response to Jealousy and Infidelity
From the Paper "Even the human response to jealousy is largely dictated by evolutionary responses (DeSteno, et al 2002) rather than concepts of higher moral principle. According to Margulis & Sagan, (1999), human males who suspected (rightly or wrongly) that their partners had been unfaithful produced dramatically higher concentrations of sperm in their ejaculate upon their first sexual contact after either reunion or reconciliation. Likewise, a study by Pietrzak, et al (2002) demonstrated the degree to which hormonal responses to infidelity differ between human males and females differed in terms of whether the threats involved emotional intimacy or sexual intimacy."
Abstract This paper discusses each of the following terms, expands on the definition, and explains why the concept is important to financial statements. The terms include Generally Accepted Accounting Principles (GAAP), Historical Cost, AccrualBasis vs. Cash Basis Accounting, and Current Assets and Liabilities vs. Non-Current Items. The paper locates the balance sheet, income statement, and statement of cash flows for Ford, Exxon-Mobil, and Microsoft. The paper examines whether net income or cash from operating activities is more useful for each of these companies.
From the Paper "The GAAP are not rules set in stone; rather, they are guidelines, or you might call them a group of objectives and conventions "that have evolved over time to govern how financial statements are prepared and presented," according to www.allbusiness.com. Theses principles are set by the Financial Accounting Standards Board (FASB), and the Securities and Exchange Commission (SEC) also provides input and guidance regarding the amendments to acceptable accounting practices. The GAAP serves as a guiding light for every business: when an accountant from outside the company is looking into its financial data and record-keeping, the company expects that accountant to be using GAAP. "Compliance with GAAP helps maintain creditability with creditors and stockholders," AllBusiness.com explains, "because it reassures outsiders that a company's financial reports accurately portray its financial position.""
Abstract This paper discusses the two large categories of accounting methods that companies tend to use, cash and accrual. The paper presents a definition of both concepts, as well as a comparison between the two methods. The paper offers general recommendations about when it is advisable to use one or the other. The paper contends that, nowadays, most companies use the accrual method.
From the Paper "The accrual methodology, on the other hand, "records income when the sale occurs, whether it be the delivery of a product or the rendering of a service on your part, regardless of when you get paid" . The expenses are similarly recorded when the liability is contracted. For example, in December, we buy equipment worth $20,000, payable over a period of six months. With the accrual accounting method, the respective expense is recorded in the month it was produced and not in every six months to follow during which the payments are made. One of the problems that may arrive when using the accrual method refers to the fact that sometimes the exact moment when the transaction or the liability was contracted is not known."
This paper discusses revenue and expense recognition methods, both standard and percentage of completion criteria, and the pros and cons of expensing stock options.
930 words (approx. 3.7 pages), 4 sources, APA, $ 33.95
Abstract This paper explains that expenses are recognized in the same period in which the benefits derived from those costs are recognized (the matching principle) and, thus, recognition of expenses is dictated by revenue recognition; therefore, associations between revenues and costs must be established. The author points out the pros of expensing options include providing a level playing field so that companies, which use cash bonuses, and companies, which use stock options, each have an expense on the income statement; however, there are many significant challenges for a company that expenses options. The paper recommends that manufacturing companies use accrualbasis accounting and follow GAAP guidelines for revenue and expense recognition and, with regards to expensing stock options, the company might explore the use of stock awards instead of stock options.
Table of Contents
Introduction
Revenue and Expense Recognition Methods
Expensing of Stock Options
Recommendations
From the Paper "The revenue recognition and matching principles mentioned above are used under the accrual basis of accounting. Under cash-basis accounting, revenue is recorded only when cash is received, and expenses are recorded only when paid. However, GAAP requires accrual basis accounting because the cash basis often causes misleading financial statements. With accrual basis, revenue must be recognized in the accounting period in which it is earned, not just when money is exchanged."
Abstract This paper explains that the American International Group--AIG, the world's largest insurer--was reported to have arranged deals to manipulate financial figure in its own records and those of General Re, a reinsurance company, resulting in financial fraud during the autumn of 2000. The author points out that AIG also was involved in another accounting fraud with Brightpoint Inc., which was reported by the Securities and Exchange Commission in 2003; AIG worked closely with the Brightpoint people to tailor an alleged insurance policy that let Brightpoint overstate its earnings by an amazing 61% in a cash circulation deal from Brightpoint to AIG and again back to Brightpoint. The paper defines receivables are monies due from the customers, which are tallied by invoices and happen due to operating cycle's process of selling inventory or services on terms that permit delivery before cash is collected.
Table of Contents
The General Re Fraud
The Brightpoint Fraud
Cash & AccrualBasis of Accounting
Receivables and Inventory
Fixed and Intangible Assets
Liability & Stockholders Equity
From the Paper "Under the cash method of accounting, the books are maintained on the actual cash flow. Income is recorded on its receipt and expenses enter the books on their actual payment. Whereas majority of the businesses use the accrual basis, the most correct method for the company depends on the sales volume, credit policy of the company and business structure. In case of the accrual method, income & expenses are recorded while they occur, notwithstanding whether there has been exchange of cash and an example of this is sale on credit. Accrual method is appropriate when the annual sales are more than $5 million and the business is a corporate organization. Besides, it is suggested that while selling on credit, matching of income and expenses during a given period must be done."
Abstract This paper explains to a manufacturing company how each of the following recommendations for recognizing revenue and expenses will assist the organization in meeting its goals. The paper also explains why alternative revenue recognition methods were not chosen.
1) Revenue Recognition Methods
2) Expensing Recognition Methods
3) Expensing of Stock Options
From the Paper "There are two different ways to recognize revenues. One way is the accrual accounting method. The other way to recognize revenues involves cash basis accounting. Al Rosen writes, in "Canadian Business", that under the accrual basis for accounting, revenue is recognized when either or both of the following conditions are met: the revenue is substantially earned or the revenue is realized or realizable. In other words, revenue is earned when products are delivered or services are provided. Under the accrual basis for accounting expenses must be..."
Abstract This paper examines how Class Act's revenue from an agreement with Broadway Venues could be realized. It explores the background of the situation and alternatives. It also recommends an accrual method of recognizing the revenue.
From the Paper "Companies regularly enter into business agreements where payments are made over a period of time. Such agreements can take the form of leases where the payments are regular and made over a long-period of time or ..."
