What accounting method (cash or accrual) would you recommend, Financial Accounting

Assignment Help:

What Accounting method (cash or accrual) would you recommend for the following businesses?
a. A gift shop with average annual gross receipts of $900,000
b. an accounting partnership with annual gross receipts of $12 million.
c. A drywall subcontractor who works on residences and has annual gross receipts of $3 million.
d. An incorporated insurance agency with annual gross receipts of $6 million.

Ross company is a computer consulting firm. the company also sells equipment to its clients. the sales of equipment account for approximately %40 of the company's gross receipts. the company has consistently used the cash method to report its income from services and the accrural method to report its income for the sale of inventory. In June of the current year, Ross's accountant discovered that as a small business, the company qualifies to use the cash method for all of its activities. The company is a calendar year taxpayer. As of the begininngin of the current year, the company had $120,000 of inventory on hand and $90,000 aof accounts receivable from the sales of equipment and $30,000 of receivables from the counseling services.
a. Compute the adjustment due to the change in accounting method.
b. Is the adjustment postive or negative? explain.
c. when can the adjustment be taken into account in computing taxable income?

 


Related Discussions:- What accounting method (cash or accrual) would you recommend

As an expense and an asset-survivorship policy, As an expense and an asset ...

As an expense and an asset This approach tries to resolve the differences between the two methods by ensuring that we show an asset that may materialize or crystallize and at t

Show advantages of financial intermediation, Q. Show Advantages of financia...

Q. Show Advantages of financial intermediation? The advantages of financial intermediation are as follows Investors are able to pool their funds in a bank deposit account to

Preparation of cashflow statements, Preparation of cashflow statements ...

Preparation of cashflow statements IAS 7 recommends that the cashflow statement can be prepared using two methods:- I) Direct method Whereby, cash from operations is deter

Bond that matures in 12 years, You just purchased a bond that matures in 12...

You just purchased a bond that matures in 12 years. The bond has a face value of $1,000 and has an 7% yearly coupon. The bond has a present yield of 5.74%. What is the bond's yield

Explain the rules of debits and credits, A classmate is considering droppin...

A classmate is considering dropping his or her accounting class because he or she cannot understand the rules of debits and credits. Explain the rules of debits and credits in a wa

Amount of depreciation expense , In January 2011, Rogers Co. purchased a ma...

In January 2011, Rogers Co. purchased a machine that cost $85,000. The equipment is estimated to have a 5-year life and a salvage value of $15,000. a) Compute the amount of depr

Determine the evidence on the usefulness of accounting, Evidence on the use...

Evidence on the usefulness of accounting There are convincing evidence and arguments that accounting information is at least perceived as being useful to users. Various researc

Members voluntary winding up-liquidation of companies, Members Voluntary Wi...

Members Voluntary Winding Up The company may be wound up by the members themselves without reference to the creditors, if the company is solvent. 1) Declaration of solvency

Premium coupons , premium coupons that already have been expired should be ...

premium coupons that already have been expired should be or shouldn''t be estimated as liability?

Content of accounts-trusts accounts, Content of accounts Periodical acc...

Content of accounts Periodical accounts should normally consist of:         1.    Balance sheet of the whole trust;         2.    Capital account;         3.    Income account

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd