How BizCon could have positive net income

Reference no: EM131823920

Question: BizCon, a consulting firm, has just completed its first year of operations. The company's sales growth was explosive. To encourage clients to hire its services, BizCon offered 180-day financing-meaning its largest customers do not pay for nearly 6 months. Because BizCon is a new company, its equipment suppliers insist on being paid cash on delivery. Also, it had to pay up front for 2 years of insurance. At the end of the year, BizCon owed employees for one full month of salaries, but due to a cash shortfall, it promised to pay them the first week of next year.

Instructions: (a) Explain how cash and accrual accounting would differ for each of the events listed above and describe the proper accrual accounting.

(b) Assume that at the end of the year, BizCon reported a favorable net income, yet the company's management is concerned because the company is very short of cash. Explain how BizCon could have positive net income and yet run out of cash.

Reference no: EM131823920

Questions Cloud

Prepare an accrual-basis income statement : The repair shop equipment was purchased on November 1 and has an estimated useful life of 4 years. Lease payments to the landlord are made at the beginning.

Describe what is meant by constructive conflict : Identify and describe an example from your personal or professional experience where you were part of constructive conflict.

Human health and the environment : From what you know about growth hormones, list three potential effects on cattle health, human health and the environment from use of bovine growth hormone.

Explain why the interaction between estrogen : Explain why the interaction between estrogen, GnRH and LH prior to ovulation is consideredd to be a positive feedback loop (effect)?

How BizCon could have positive net income : BizCon, a consulting firm, has just completed its first year of operations. The company's sales growth was explosive. To encourage clients to hire its services.

Relationships with other living organisms : As a living organism, all aspects of biology directly relate to humans and their relationships with other living organisms as well as non-living organisms.

Understanding of structure and electrical activity : To strengthen your understanding of structure and electrical activity (movement of ions) of the neuron, please create a FUNCTIONING model of the neuron.

Define the status of the accounts before adjustment : For each item, indicate the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).

Knowledge of homeostasis and the control systems : Using your knowledge of homeostasis and the control systems, as a class discuss if the thirst sensation is a negative or positive control system.

User Account

All Pages