Upfront Revenue Recognition.
Under this approach, all revenues related to warranty contract and equipment should be recognized immediately after the sale. Positive side of this method is that it increases profits more in the first year. Therefore, increased profits usually mean increased share price and as a result, welfare of shareholders increase. However, particularly in this case, there is mismatch between recognition of revenue and its occurrence. Rule of revenue 1 which stated at the end of the paper, dictates that revenue and costs should be matched in the period when they incurred or gained. Thus, this rule is violated under the given approach. Therefore, it is treated as an agressive approach. Additionally, while considering tax effect of the method, it is evident that under the all approaches received amount of money is
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Initially, only revenue from the sale of equipment is recognized and revenue from the warranty services is divided equally for 24 months. It is true that after using this method profits that shown on the financial statements of the company will be decreased, however, it will be fair representation of figures. Additionally, after converting last years’statements under current method, some of the warranty revenues will be recognized in this year which means that alteration will increase given year’s profit. This method follow the matching principle and most of the IASB joined companies follow this method as well. Therefore, it will be easier to compare figures of the companies. Additionally, company will gain from paying taxes later; $140 in the first year and $40 second year. Since under three methods received amount of money is not changed on cash basis, only under this method it is feasible to have more money and to invest in the first year. Therefore, considering all these arguments, I believe this is the best approach for revenue
ARB43, Ch.4, Par.9 ?Where evidence indicates that cost will be recovered with an approximately normal profit upon sale in the ordinary course of business, no loss should be recognized...?
In order for Jim Turin & Sons, Inc to have used this method of accounting it would have had to match the cost of the merchandise with the revenue earned from the sale. Using the matching of revenue and cost the company would have had to have kept an actual inventory and maintained records of the costs associated with said inventory. Since the costs are not immediately deducted under the accrual method they are deferred to the year when the merchandise is
...-based, charge-based, and contractual payment systems. (p. 7). CRC Press. Retrieved from http://books.google.com/books?id=sCzhN9HruM0C&dq=fee schedule based payment&source=gbs_navlinks_s
For over fifty years, companies have utilized subliminal messaging in print, television, and radio advertisements to manipulate consumers into purchasing certain products and services. This form of advertising infringes upon American citizens first amendment rights which, as defined by Wooley vs. Maynard, extend to protect a person's freedom of thought and speech. Such communication influences individual's behavior without his or her knowledge, and removes his or her ability to actively make certain decisions. The practice of subliminal messaging is defined by the Federal Communication Commission as" a technique of projecting information below the viewing audience's threshold of sensation or awareness." In visual advertising, specifically, a message lasting only a few milliseconds is flashed on the TV screen. Theoretically, such a message could be absorbed by the viewer without him or her realizing it ("Subliminal Messages"). This practice was first brought to the attention of the public in the late 1950s when James Vicary, a movie theatre owner and marketing researcher, announced that he had developed special equipment which would allow the advertising industry to utilize subliminal projection ("The Legal Status of Subliminal Communication in America"). He cited a success story at one of his privately owned movie theatres where he flashed phrases like "Eat Popcorn" and "Drink Coca-Cola" at 0.0005 seconds during movies. Using this method, he claimed to have raised his Coca cola sales by 18% and popcorn sales by 58% ("The Roots of Subliminal Perception"). Although Vicary attempted to pass off his discovery as harmless advertising technique, the general public became extremely offended and fearful of this attack on their subcons...
It was the year 1987 when the Gartner Group popularized the form of full cost accounting named Total Cost of Ownership (TCO)(author, Gartner Total Cost of Ownership). Originally TCO was mainly used in the IT business sector. This changed in the 1980’s when it became clear to many organizations that there is a distinct difference between purchase price and full costs of a products ownership. This brings us towards the main strength of conducting a TCO analysis, besides taking the purchase costs into account, which consist of the amount a money an organization pays for the required service, product or capital outlay. It also considers 1. Acquisition costs; these can consist of sourcing, administration, freight, and taxes. 2. Usage costs, which consists of the costs associated with converting the given product or service into a finished product. And finally 3. End of life cycle costs; the costs or profits incurred when disposing of a product. TCO can be seen as a form of full cost accounting; it systematically collects and presents all the data for each proposed alternative.
While analyzing the data for The Body Shop International case, I noticed some trends and have compiled my assumptions for the next three years. I have compiled pro-forma statements for the fiscal years 2002, 2003 & 2004. These figures are based on the percentage of sales method for pro-forma financial modeling. Simply put, I used the sales figures from the past three years 1999, 2000 & 2001 and applied a growth rate of 13% increase to sales. Below are some additional assumptions that I have created to illustrate how the firm can become profitable while increasing market share and maintaining stockholder interest within the firm over the next three years.
Term “marginal” is extensively used and known with reference to the economics which means “extra”, whereas with economic view point the marginal cost is the cost of producing every extra unit; however the accounting terminology of “marginal” defines the cost incurred on production other than its fixed cost is the marginal cost. Simply, none of the technique is applied unless it serves the benefits and the marginal costing is used by the firms for its registered benefits. Among all its benefits the primary advantage it serves is its attempt to distinguish the fixed and variable costs, and the method only considers the related variable costs to be included in production cost and the fixed costs are thus later deducted out for ascertaining net profit. The inventory at the year-end is also valued on the bases of variable cost. With all these beneficial characteristics of the said system firms using marginal costing are clearly aware of its ...
The overall purpose of cost accounting is to advise top administration and the management team on the most suitable and cost effective methods and actions to employ based on cost, capability and efficiencies of a given product or service. It can be defined as the method where all the expenditures used during execution of business activities are gathered, categorized, examined and noted down (Horngren & Srikant, 2000). Once these numbers are gathered and recorded the information is used to determine a selling price and/or to identify possible investment opportunities. Although the principal aim or function of cost accounting is to help the business administration with their decision making and business planning process, the cost accounting data
The four techniques used for analyzing the costs and benefits of a proposed system is break-even analysis, payback analysis, cash-flow analysis, and present value analysis. Break-even analysis is a supply-side analysis. Only the costs of the sales is analyze with break-even. It does not analyze how demand may be affected at different price levels. A strength of break-even analysis it’s relatively simple concept and the formula can be easily understood and used by most people. Another strength is that it provides vital information when making a decision. Weaknesses of break-even analysis is it assumes that all output will be sold. It is difficult to apply break-even analysis when a company sells more than one product. Break-even cannot show what will definitely happen. The payback analysis method is the simplest analysis method to use when looking at one or more major project options. It tells you how long it will takes to earn back the money you will spend on the project. Payback analysis helps you decide you whether or not you should undertake the project. The biggest strength of the payback method is that it is simple. The payback analysis method is used to make quick evaluations of projects. Weaknesses of the payback method is that the method ignores the time value of money. The payback analysis method does not consider cash inflows from a project that may occur after the initial investment has been recovered. A cash flow analysis is a listing of the flows of cash into and out of the project. This is like your checking account at your bank. Deposits are the cash inflows and withdrawals are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time...
Advertisement has become fundamental in today’s economy. It is a medium that companies utilize to promote their services. It has become a big business. Many companies spend millions upon millions in their efforts to promote their products and services. The market is highly competitive and companies are constantly making use of the techniques used to communicate with consumers. These techniques can be seen almost everywhere. Adverts appear on television, magazines, billboards and are even heard on radio stations. There are countless means that advertisers use to lure the customer(s) in the hope that they will be loyal to the brand. Some of these techniques have been quite controversial. Subliminal advertisement or messaging is a prime example. Their subtle manipulations have instilled some fear and uneasiness on many consumers. These manipulations are deceptive, behavior altering and cause paranoia. Due to these negative aspects of subliminal messaging, it should not be an acceptable form of advertisement.
Crowdfunding permits originators of revenue driven, imaginative, and social dares to store their endeavors by drawing on moderately little commitments from a generally expansive number of people utilizing the web, without standard fiscal mediators. It proposes that individual systems and underlying task quality are connected with the accomplishment of Crowdfunding deliberations, and that topography is identified with both the kind of activities proposed and effective raising money. Crowdfunding tasks can extend incredibly in both objective and extent, from little masterful activities to business people looking for countless dollars in seed capital as an elective to customary funding financing.
Again, both methods clear out the accounts payable. Also the employee is receiving the cash or common shares in the right amount.
2. Should the component costs be figured on a before tax or an after tax basis?
Crowdfunding is an intermediate platform which uses social media, bigdata and cloud technologies to significantly fund small and medium scale industries to start up the industries.
The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them.