As a basis for measuring performance for a particular accounting period, the cash basis of accounting has three weaknesses. Briefly describe the three weaknesses
As a basis for measuring performance for a particular accounting period, the cash basis of accounting has three weaknesses.
First, the cash basis does not adequately match the cost of the efforts required to generate inflows with the inflows themselves. Cash outflows of one period can relate to operating activities whose cash inflows occur in preceding or succeeding periods.
Second, the cash basis of accounting separates the recognition of revenue from the process of earning those revenues. A firm should recognize revenue when it has earned those revenues by delivering goods and services to customers, which often occurs before it collects cash from those customers. In these cases, recognizing revenues when the firm collects cash often results in reporting the effects of operating activities one or more periods after the critical revenue-generating activity—the customer's purchase of goods and service—has occurred.
Third, performance measured using the cash basis is sensitive to the timing of cash expenditures. A delay of even a few days in cash expenditures near the end of the accounting period will increase earnings for that period, while decreasing earnings in one or more subsequent periods.
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Peter was just hired as an accounting assistant and wants to make a good impression in his new position. What should he do when listening to his supervisor?
A) Don't ask questions because doing so may make him look ignorant. B) Show his interest by leaning forward and striving for good eye contact. C) Feel free to answer the phone if he receives a call to show how busy he is. D) Rely on his memory for the details rather than take notes to show how sharp he is.
An accountant-client privilege is statutorily recognized in all states, permitting the accountant to refuse to disclose confidential information gleaned from his client
a. True b. False Indicate whether the statement is true or false
Recovery of damages under Rule 10b-5 requires proof of:
A) a purchase and sale of the same securities within six months. B) scienter. C) negligence. D) immateriality of a statement.
Logistics cost as a percentage of GDP for the United States is approximately ________.
Fill in the blank(s) with the appropriate word(s).