Individual Week 5 Essay

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Words: 836
Pages: 4

Individual Week 5
Luis D. Maymí Romero
University of Phoenix
ACC/280
Prof. Manfredo H. Rodríguez abril 27, 2015
1. What are generally accepted accounting principles (GAAP)?
The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.

What bodies provide authoritative support for GAAP?

In the United States, the authoritative body that promulgates accounting principles and GAAP alike is the financial accounting standards board (FASB). FASB is a private, non-profit organization whose primary purpose is to develop GAAP in the United States. It issues memorandums and statements that are used as guide in the preparation, interpretation and analysis of the financial statements of various business entities.

2. What elements comprise the FASB’s conceptual framework?

The Conceptual Framework project aims to update and refine the existing concepts to reflect the changes in markets, business practices and the economic environment that have occurred in the two or more decades since the concepts were first developed.

Phases
Topics
A
Objectives and qualitative characteristics
B
Definitions of elements, recognition and derecognition
C
Measurement
D
Reporting entity concept
E
Boundaries of financial reporting, and Presentation and Disclosure
F
Purpose and status of the framework
G
Application of the framework to not-for-profit entities
H
Remaining Issues, if any

E8-5
Listed below are five procedures followed by The Beat Company.

1. Several individuals operate the cash register using the same register drawer.
2. A monthly bank reconciliation is prepared by someone who has no other cash responsibilities.
3. Ellen May writes checks and also records cash payment journal entries.
4. One individual orders inventory, while a different individual authorizes payments.
5. Unnumbered sales invoices from credit sales are forwarded to the accounting department every four weeks for recording.

Instructions
Indicate whether each procedure is an example of good internal control or of weak internal control.
If it is an example of good internal control, indicate which internal control principle is being followed. If it is an example of weak internal control, indicate which internal control principle is violated. Use the table below.

Procedure
1.
2.
3.
4.
5.

IC Good or Weak?
Weak
Good
Weak
Good
Good

Related Internal Control Principle
Establishment of responsibility
Independent internal verification
Segregation of duties
Segregation of duties
Documentation procedure

E15-1 Financial information for Blevins Inc. is presented below.

December 31, 2009
December 31, 2008
Current assets
Plant assets (net)
Current liabilities
Long-term liabilities
Common stock, $1 par
Retained earnings

$125,000 396,000 91,000 133,000 161,000 136,000

$100,000 330,000 70,000 95,000 115,000 150,000
Instructions
Prepare a schedule showing a horizontal analysis for 2009 using 2008 as the base year.
BLEVINS INC.
Condensed Balance Sheets
December 31

Increase or (Decrease)

2009

2008

Amount

Percentage

Assets

Current assets
Plant assets (net) Total assets

$125,000 396,000
$521,000

$100,000 330,000
$430,000

($25,000
( 66,000 91,000

(25.0%)
(20.0%)
(21.2%)

Liabilities

Current liabilities
Long-term liabilities Total liabilities

$ 91,000 133,000 224,000

$ 70,000 95,000 165,000

($21,000)
( 38,000)
( 59,000)

(30.0%)
(40.0%)
(35.8%)

Stockholders’ Equity

Common stock, $1 par
Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity

161,000 136,000

297,000

$521,000

115,000 150,000

265,000

$430,000

( 46,000 (15,000 )
(14,000)

( 32,000)

($91,000)…