LabCo has entered into a contract with a customer, Halibut, to build a six-axis laser cutting machine that will be used by Halibut to cut airplane wings for a new fighter jet that will be sold by Halibut to a large government buyer. The contract entered into was for a fixed price and requires detailed and involved performance specifications. Upon entering into the contract, LabCo realized that this was a unique arrangement
Purpose of this RFP The purpose of this RFP is to detail the work that is to be done, from the beginning to end stages in order for various contractors to bid on this project. Any contractors bidding on this project must give technical and commercial proposals in accordance with the terms and conditions mentioned in this document. Cables, network equipment, and other infrastructure components that meet customer requirements will be purchased through outside vendors by the contractors. The source company reserves the right to negotiate the prices for the hardware and/or any software needed to complete this project. The bidder will furnish all labor, tools, and any other equipment needed to successfully complete this contract.
Wareham SC Systems, Inc.’s revenue recognition policy states that revenue for products will be recognized upon shipment. Since most products come with a warranty, the warranty is realized at the time revenue is recognized. Revenue recognition for service occurs at the time of the service or over the length of the service contract.
Solvency ratios this is one of many ratios used to measure a company’s ability to meet long-term obligations. The solvency ratio measures the size of a company’s after-tax income, excluding non-cash depreciation expenses, as compared to the company’s total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations. Users who may be interested in each type of ratio? Liquidity ratios are used by suppliers and other trade creditors.
By following the matching principle all of the costs associated with a particular product, not just its wholesale price, is expensed when the item is sold. Requirement 2 - A Generally, the lower of cost or market method is used to value inventory in order to “avoid reporting inventory at an amount greater than the benefits it can provide” (Spiceland, Sepe, & Nelson, 2013, p. 476). According to Spiceland, Sepe, and Nelson (2013) the “change in replacement cost usually is a good indicator of the direction of change in selling price” (p. 477). When the change in replacement cost is negative the LCM method allows companies to apply the conservatism principle. The conservatism principle involves “recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received” (The conservatism principle).
Going concern principle: The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless the evidence shows that it will not continue. Objectivity principle: The accounting guideline that requires financial statement information to be supported by independent , unbiased evidence rather than someone’s opinion; objectivity adds to the reliability, verifiability, and usefulness of accounting information. Cost principle: The accounting principle that requires financial statement information to be based on actual costs incurred in business transactions; it requires assets and services to be recorded initially at the cash or cash equivalent amount given in exchange. Revenue recognition principle: Provides guidance on when revenue should be reflected on the income statement; the rule states that revenue is recorded at the same time it is earned regardless of whether cash or another asset has been exchanged. Business Organizations Single proprietorship: A business owned by one individual, which is not organized as a corporation; also called a sole
The common methods of a chart of accounts include Accounting types – assets, liabilities, equity, revenue, expenses and revenue, followed by order of liquidity, and the account numbers. How does the order of liquidity apply to the balance sheet? The order of liquidity exclusively applies to those accounts in the balance sheet that can be liquidly turned in cash, expenses and revenue accounts are exempt. a good example of liquidity are U.S. bonds and common stocks, some believe that real estate might be a good one , but it is not , property prices can be under valued forcing to sale under actual
In the purchase of the injection packers, all of these elements are present, and so this purchase agreement can be looked at as a contractual agreement. The seller made an offer to sell its products, and after learning that the products would satisfy his needs the buyer accepted this offer (constituting offer and acceptance). The two parties agreed that this purchase would take place (constituting mutual agreement). A price was agreed upon and the buyer paid the seller (constituting consideration). Both parties were of legal age to enter into a contract and were of sound mind (constituting competent parties).
The subsidiary ledger should be used for control accounts and cash accounts. The special journals should be used when regual general is of no use. The purpose of the subsidiary ledger is to condense the account journal entries in a moral detail personal way. Control accounts are into two parts the general ledger and subsidiary ledger. the general ledger include cash, account payable, accountant receivables and common stock.
Full costing is an account of the entire cost involved in production or rendering service. Atrill & McLaney (2009, pp.92) puts it as a process that accounts for all cost associated with producing a product or service. Full costing is an essential process to the prizing of any product or service because it aids with the classification of all expenses involved in production and manufacturing and aids in the final costing of the product or service. Full costing is used by managers as earlier mentioned to decide product pricing and output, it is used to exercise control in all work process, it is used by managers to assess relative efficiency which will aid in the comparism of cost related to type of product or area of production to determine cost efficiency, it is finally used by managers according to Atrill & McLaney (pp.93, 2009) to assess performance which has to do with measuring business performance like income or profits. Activity based costing (ABC) on the other hand does not just rely on cost of materials for production or service but rather, also, on issues like overhead costs caused by certain activities, charges on overhead to outputs due to driving rates and the established overhead cost pools (Atrill & McLaney, pp 136-140).