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 Accounting’s 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? It’s all about Managers report profits through interpretations of Accounting Principles the earnings process Accounting choices can’t change ca $ h Cash is defined exogenously. You either have it, or you don’t. 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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This note was uploaded on 03/20/2012 for the course ECON 4 taught by Professor Willoughby during the Spring '08 term at UCSD.

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

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