Ugly Puppy 1

Ugly Puppy 1 - Accounting Choices Reader Chapter 6 Appendix...

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Unformatted text preview: Accounting Choices Reader Chapter 6 Appendix F for Solutions Ugly Puppy Period #1 Econ/Mgmt 4 May 4, 2011 Next? Exploring some of Accountings subtleties Applying a principles-based approach accrual . How management can influence perceived performance. Learning the details and the consequences of accounting choices. Accounting Standards include both rules and guidelines for making accounting choices in different industries and for changing situations. Manager make these choices. This provides managers with opportunities. They can take an accounting posture that can be either: 1. Conservative choices that understate earnings . 2. Aggressive choices that overstate earnings . Management can make choices about how activities are measured and classified . Management can frame the interpretation of business activities What counts gets recorded and reported At what amount? How is the amount measured? As what? Revenue or Gain? Asset or Expense? When? This period? Next period? Its all about Managers report profits through interpretations of Accounting Principles the earnings process Accounting choices cant change ca $ h Cash is defined exogenously. You either have it, or you dont. Cash collections are a back-office event: Acquiring resources incurring costs & expenses can be done without the use of cash, i.e. on credit; sales can be made without customers paying, i.e. on credit, or barter. Conservative Choices CONS Recognizing revenue when (a) the service is provided (not before) (b) customers know the price, and (c) when cash is collected or its collection is reasonabl y certain ....
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Ugly Puppy 1 - Accounting Choices Reader Chapter 6 Appendix...

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