Explain your rationale for applying accounting principle

Assignment Help Financial Accounting

Reference no: EM133855979

Competency

In this project, you will demonstrate your mastery of the following competency:

Demonstrate the foundational principles of financial accounting.

Scenario

You work as the accountant of a sole proprietorship, Jamie's Consulting. Jamie's Consulting has decided to expand and would like to obtain a line of credit with the bank. To apply for a line of credit, the bank requires the most recent set of financial statements. To help the owner, Jamie, accurately convey the business's performance and overall financial health to the bank, she has asked you to review the business's recent transactions and write a brief that will prepare her for her meeting with the bank.

Accountant working on a laptop to input financial accounting information.

Directions

Financial Review: Jamie emails you the quarterly business transactions Word document to review. Jamie is currently traveling for business and would like the information from the review in a clear and concise manner. Use the Financial Review Template Word Document to review the transactions and provide sufficient reasoning for Jamie to understand your rationale for deciding to share the financial information with the bank. To ensure the financial information is accurate, reliable, and relevant, include the following in your review:

A. Apply the most relevant accounting principle from GAAP to each business transaction.

B. Explain your rationale for applying each accounting principle.

C. Use the accounting principles to decide to include or omit each business transaction.

D. Determine the appropriate account types for each business transaction. Note that each transaction will correspond to more than one type of account.

E. Refer to the accounting equation to determine whether each account type results in an increase or decrease of the account.

F. Brief to the Owner: After you send the financial review information, Jamie follows up with you via email. She is unfamiliar with financial accounting practices and asks you to write a brief that will prepare her for communicating the reliability of the financial information to the bank. As an accountant, you are responsible for effectively conveying the importance of accurate financial information. Specifically, Jamie asks you to address the following in your brief:

G. Explain the importance of applying GAAP to justify the accuracy, reliability, and relevance of financial information.

H. Describe the limitations or risks of applying GAAP. Address Jamie's concerns by discussing the following:

I. What are the methods used to identify, record, and communicate financial information?

J. What are the implications for omitting one or more of the generally accepted accounting principles?

K. What uncertainties and risk factors are associated with reporting financial information?

Reference no: EM133855979

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