...BACKGROUND Shortly after the Civil War Abraham Anderson and Joseph Campbell began manufacturing canned vegetables and fruit preserves. However, in 1876, Campbell bought out Anderson’s interest and renamed the firm the Joseph Campbell Preserving Company. Later, Arthur Dorrance became Campbell’s new partner. By the early 1920s, John Dorrance, Arthur Dorrance’s nephew, was the sole owner of the Campbell Soup Company, which was the largest producer of canned soup products. Unfortunately, with the twentieth century vastly approaching the nation’s appetite for condensed soup products deteriorated. This weakening demand caused the company’s executives to use an assortment of questionable business practices and accounting schemes to enhance the company’s reported earnings. The alleged scams included trade loading, improper accounting for loading discounts, shipping to the yard, and guaranteed sales. In this case, these four main scams represent how Campbell Soup used improper business practices to manipulate its periodic income statements. Pricewaterhouse Coopers (PWC) was the auditor’s for Campbell soup. Campbell offered sizable trade discounts near the end of accounting period to entice customers to make product purchases that they would otherwise defer. By doing so, Campbell Soup not only used price concessions to prop up its reported revenues and profits but they also manipulated the reports on their periodic income statement. During the audit PwC also learned that Campbell recorded...
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...responsibility is to conduct an audit of the financial statements in accordance with auditing standards. 3. An error is an unintentional misstatement of the financial statements, whereas fraud is intentional. Auditing standards make no distinction between the auditor's responsibilities for searching for errors and fraud. In either case, the auditor must obtain reasonable assurance about whether the statements are free of material mistatements. 10. Management assertions are implied or expressed representations by management about classes of transactions and the related accounts and disclosures in the financial statements. In most cases they are implied. Management assertions are directly related to GAAP, as they are part of the criteria that management uses to record and disclose accounting information in financial statements. Auditing standards classify assertions into three categories: assertions about classes of transactions and events, assertions about account balances, and assertions about presentation and disclosure. 13. The existence objective deals with whether the amounts included in the financial statements should actually be included. For example, inclusion of an account receivable from a customer in the accounts receivable trial balance when there is no receivable from that customer violates existence objective. This objective is the auditor's counterpart to the management assertion of existence for account balances. The completeness objective deals with whether...
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...Accounting Exercises Charles Peterson Grantham University Exercise 2-9A Prepaid items on financial statement Therapy Inc. experienced the following events in 2013, its first year of operation: 1. Performed counseling services for $18,000 cash. 2. On February 1, 2013, paid $12,000 cash to rent office space for the coming year. 3. Adjusted the accounts to reflect e amount of rent used during the year. Required Based on this information alone a. Record the events under an accounting equation b. Prepare an income statement, balance sheet, and statement of cash flows for the 2013 accounting period. c. Ignoring all other future events, what is the amount of rent expense that would be recognized in 2014? | Income Statement | Statement of Cash Flows | Balance Sheet | 1. Prepaid rent | | | $18,000 | 2. Cash paid for rent | | $(12,000) | | 3. Rent expense | $6,000 | | | Exercise 2-14A Supplies, Unearned revenue, and the financial statement model Ross, Attorney at Law, experienced the following transactions in 2013, the first year of operations: 1. Purchased $1,500 of office supplies on account. 2. Accepted $36,000 on February 1, 2013, as a retainer for services to be performed evenly over the next 12 months. 3. Performed legal services for cash of $84,000. 4. Paid cash for salaries expenses of $32,000. 5. Paid a cash dividend to the stockholders of $8,000. 6. Paid $1,200 of the amount...
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... Ownership The Job Title [list@YourCompany.com?Subject=EDUxxxxx] is responsible for ensuring that this document is necessary and that it reflects actual practice. Accounting Methods Builder (AMB) [pic] Schedule: Timing Topic minutes Lecture minutes Practice minutes Total Objectives [pic] Accounting Methods Builder (AMB) Overview [pic] Accounting Methods Builder (AMB) Overview [pic] Accounting Methods Builder (AMB) Overview This diagram shows a hierarchy of the AMB, indicating how the components fit together. The transaction objects and the sources carry transaction information into the rules defined for each component of an entry. These components, i.e. journal line type, account derivation rule, and journal entry descriptions are grouped together as a journal line definition (JLD) for a particular event. For example, you can set up a JLD for an invoice validation event, another for payment creation, and another for payment clearing. The set of rules for a particular subledger application is called the application accounting definition (AAD). The set of AADs for multiple applications is called the subledger accounting method. You can maintain multiple accounting methods. You can set up as many components as you like and use them for different accounting methods. You can set up an accounting method that creates entries in compliance with US GAAP, and another one that complies with IFRS. These two methods could share components...
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...ACC30010 Auditing Unit Revision 1 S1, 2015 Exam Preparation: In presenting for the final exam it is expected you have: Read the set chapters in the textbook Read the lecture slides Done all of the set tutorial work Minimise what you are memorising – far better to understand: There will be some things you will need to commit to memory. There needs to be structure to your exam preparation: Topic summaries – not past exams! Read 2 as many auditing questions as you can. S1, 2015 Exam Information: Minimum Requirements to pass this Unit of Study: You must obtain a mark of at least 45% on the final examination to be eligible for a pass in this unit. This is non-negotiable!!!! 3 S1, 2015 Exam Information: Exam comprises 2 Parts: Part A is MCQ = 50 marks Part B are Short Answer Questions = 50 marks Total 100 marks All topics are examinable except: Introduction to Auditing (lecture 1) Ethics, Independence and Corporate Governance (lecture 4a) Sampling (lecture 10) NOTE: This information does not apply to any subsequent exams, such as the ‘special’ exams (SPX) or the ‘Last to Complete’ exams (LTC) 4 Statistical Overview of Unit - Averages: Mid-Semester Test: 8.9 / 15 Presentations: 7.7 / 10 (77%) Essay: 8.9 / 15 (SFS now accessible through your My.Swinburne account) 5 (59%) (59%) Nature and Objectives of Auditing 6 Elements of an...
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...Accounting is the process of identifying the transactions and events, measuring the transactions and events in terms of money, recording them in a systematic manner in the books of accounts, classifying or grouping them and finally summarizing the transactions in a manner useful to the users of accounting information . Let’s now discuss these accounting processes one by one: 1. Identifying the transactions and events: This is the first step of accounting process. It identifies the transactions of financial character that is required to be recorded In the books of accounts. Transactions is transfer of money or goods or services from one person or account to another person or account. 2. Measuring: This denotes expressing the values of business transactions and events in terms of money 3. Recording: It deals with recording of identifiable and measurable transaction and events in a systematic manner in the books of original entry that are in accordance with principles of accountancy. 4. Classifying: It deals with periodic grouping of transactions of similar nature that appear in the books of original entry into appropriate heads by posting or transfer entries 5. Summarizing: It deals with summarizing or condensing transactions in a manner useful to the users. This function involves the preparation of financial statements such as income statement, balance sheet, statement of changes in financial position and cash flow statement 6. Analyzing: It deals with the...
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...ACC 557 WK 2 Chapter 1 Quiz - All Possible Questions To Purchase Click Link Below: http://strtutorials.com/ACC-557-WK-2-Chapter-1-Quiz-All-Possible-Questions-ACC5574.htm ACC 557 WK 2 Chapter 1 Quiz - All Possible Questions TRUE-FALSE STATEMENTS 1. Owners of business firms are the only people who need accounting information. 2. Transactions that can be measured in dollars and cents are recorded in the financial information system. 3. The hiring of a new company president is an economic event recorded by the financial information system. 4. Management of a business enterprise is the major external user of information. 5. Accounting communicates financial information about a business enterprise to both internal and external users. 6. Accounting information is used only by external users with a financial interest in a business enterprise. 7. Financial statements are the major means of communicating accounting information to interested parties. 8. Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process. 9. The origins of accounting are attributed to Luca Pacioli, a famous mathematician. 10. The study of accounting will be useful only if a student is interested in working for a profit-oriented business firm. 11. Private accountants are accountants who are not employees of business enterprises...
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...Assertions may be classified into the following types: Assertions relating to classes of transactions | Assertions | Explanation | Examples: Salaries & Wages Cost | Occurrence | Transactions recognized in the financial statements have occurred and relate to the entity. | Salaries & wages expense has been incurred during the period in respect of the personnel employed by the entity. Salaries and wages expense does not include the payroll cost of any unauthorized personnel. | Completeness | All transactions that were supposed to be recorded have been recognized in the financial statements. | Salaries and wages cost in respect of all personnel have been fully accounted for. | Accuracy | Transactions have been recorded accurately at their appropriate amounts. | Salaries and wages cost has been calculated accurately. Any adjustments such as tax deduction at source have been correctly reconciled and accounted for. | Cut-off | Transactions have been recognized in the correct accounting periods. | Salaries and wages cost recognized during the period relates to the current accounting period. Any accrued and prepaid expenses have been accounted for correctly in the financial statements. | Classification | Transactions have been classified and presented fairly in the financial statements. | Salaries and wages cost has been fairly allocated between: -Operating expenses incurred in production activities; -General and administrative expenses; and -Cost of personnel...
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...of transactions and events: 1. Occurrence: transactions and events so recorded in the financial statements actually occurred and relates to the same period. 2. Completeness: all such transactions and events that required recording have been recorded 3. Accuracy: transactions and ancillary information have been recorded with accurate amounts 4. Cutoff: only those transactions and events have been recorded that pertains to the accounting period under consideration 5. Classification: transactions and events have been recorded in the related accounts properly 2. Assertions about account balances at the period end: 1. Existence: all the assets, liabilities and other interests that appear in the financial statements actually exist. 2. Rights and obligations: the assets presented in the financial statements are actually assets for which entity holds the ownership right or has all the necessary controls the right to use the asset. Similarly, the liabilities recorded are actually the obligations of the entity. 3. Completeness: all the assets, interests and obligations of the entity that required recording have been recorded in the financial statements 4. Valuation and allocation: all the assets, obligations and equity interests have been valued appropriately and if any allocation was need than it has been done already. 3. Assertions about presentation and disclosure: 1. Occurrence and rights and obligations: transactions, events...
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...defined as a sequence or process that is involved in completing the accounting process. Accounting cycle also refers to traditional procedures that performed by the company in order to record all the business transactions during the accounting periods. There are several sequences includes in the accounting cycle such as identifying, collecting and analyzing documents and business transactions, records the process in journals, posting the journalized amounts to ledger, preparing the trial balances and financial statements. Usually, an accounting cycle of the company begins when a business transaction take place and finishes the accounting cycle when the financial statements are prepared. The period of the accounting...
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...The Accounting Cycle The Accounting cycle of a business require a set of steps to that keep a record of events and transactions that happens during an appointed time span. The time span typically last a month. The accounting clerk usually performs a multitude of task within an accounting cycle. Such as, general clerical duties, accounting and bookkeeping functions, and process account payables and receivables as needed. (Winthrop). The accounting departments create a chart with accounts and determine how to record the financial information. Businesses form a method to secure the certainty of recording financial information that generates a change in their financial standing. Every month, companies execute tasks to allow the recording of their financial events and also their transactions. These tasks incorporate procedures to arrange financial statements to contribute useful information for the private and foreign users. If for some reason an issue is not calculable then it is not reported. Tax experts and governing agencies provide codes and policies to assure the confidence of a full exposure and compatibility of all financial information. The FASB issued the following guideline for recognizing revenue: "Revenue is recognized when it is realized or realizable and it is earned" (Siegel, Levine, Qureshi, & Shim, 2001). Analysis and Journalizing Many businesses use a double-entry system that is a method that records every action with a debit and a credit. In...
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... 3. About enterpnse resources. claims to resources, and changes in them Qualitative Characteristics: 1. Primary qualities A. Relevance 1) Predictive value 2) Feedback value 3) Timeliness B..Reliability: 1.Verifiability 2.Representational faithfulness 3..Neutrality Secondary qualities: 1.. Comparability: information that has been measured and reported in a similar manner for different enterprise is considered comparable 2. consistency : same accounting treatments to similar events by an entity from period to period is considered consistent ELEMENTS OF FINANCIAL STATEMENTS ASSETS: Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. LIABILITIES: Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. EQUITY: Residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise, the equity is the ownership interest. INVESTMENTS BY OWNERS: Increases in net assets of a particular enterprise resulting from transfers to it from other entities of something of value to obtain or increase ownership interests (or equity) in it. Assets are most commonly received as investments by owners, but that which is received may also include services or satisfaction or conversion...
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...believed that the transfer was a nontaxable event. However, the Commissioner claimed that Mr. Davis should be taxed on the gain realized in the transfer. They brought the disagreement to the United States Court of Claims first, and the Court of Claims ruled in Mr. Davis’ favor. Then, the Commissioner appealed this case to the Court of Appeals which ruled in the Commissioner’s favor. Finally, the case reached the United States Supreme Court. ISSUE: Whether the transaction to fulfill the marital settlement is a taxable event, and if it is a taxable event, how to determine the taxable gain realized of the transaction. HOLDING: Yes, the transfer of the property to release the husband’s marital obligation is a taxable event. The amount realized in the transaction should be equal to the market value of the property at the time of transfer. LEGAL ANALYSIS: Both the Tax Court and the Court of Appeals for the Sixth Circuit stated that the appreciated property transferred to fulfill the divorce settlement had no tax effect on the transferor because the market value of marital rights which were the amount realized by husband is indeterminable. However, the Courts of Appeals of the Second and Third Circuits argued that by assuming that the value of marital rights had the same value as the transferred property, the amount realized is determinable. SUMMARIZE THE TAXPAYER’S AND THE GOVERNMENT’S ARGUMENT: The taxpayer argued that the property transaction in this situation...
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...distribution channels. For the pricing of a policy the actuarial information provides the basic premium to that the organizational overheads are added ad-hoc. This is done primarily due to the unavailability of the relevant information. With the use of a relevant Activity Based Management (ABM) model the same organization can get information on acquiring a customer, serving the requests, claims and closure of policy due to surrender or maturity payment etc. Let us see how an ABM model can provide sufficiently detail information of the overheads. The model calculates the cost of various transactions (aka processes) in the organization. These transactions are grouped across various dimensions as follows: Customer lifecycle event – Acquire, Serve, Retain and Close are the four events in the lifecycle of a customer with the organization. Various transactions are grouped as per these events, so that the organization can understand their ‘cost focus’ on acquisition, retention etc. The total cost to acquire in any period could vary between 35-45% of the total overhead. Retention costs take next place which include the renewals and revivals and can go up to 6-10% of the overhead. Cost to serve is around 2% and the...
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...whether transactions and events have been recorded in the correct accounting period. Audit procedures must ensure that transactions occurring near year-end are recorded in the financial statements in the proper period. For example, the auditor may want to test proper cutoff of revenue transactions at December 31. This can be done by examining a sample of shipping documents and sales invoices for a few days before and after year-end. Audit evidence: Audit Evidence is evidence obtained during a financial audit and recorded in the audit working papers. In the audit engagement acceptance or reappointment stage, audit evidence is the information that the auditor is to consider for the appointment. For examples, change in the entity control environment, inherent risk and nature of the entity business, and scope of audit work. Subsequent Event: Subsequent event is the accounting term for a financial transaction that occurs after completion of the balance sheet for a specified period but before the company’s full set of financial statements is prepared. Subsequent events clarify information about a business’ financial picture as reflected by the balance sheet, a financial report that includes all transactions through the report date. The Financial Accounting Standards Board, the authority entrusted with establishing generally accepted accounting principles, publishes detailed requirements for defining and recording subsequent events in financial records. Adjusting Event or Post...
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