This method I believe is more accurate in maintaining financial records at the end of the year and providing a better financial look into how a company is managing. Cash accounting is when companies record revenue only when cash has been received. Cash accounting even if the service was rendered if no cash was received the company will not record the expense. By only recording expenses when bills are paid, the company may be able to shift expenses into other periods in order to make the company look more profitable simply by manipulating when payments are made. This can make the financial statements misleading.
Amounts invested in the new corporations flowed back to ALZA and were recorded as R&D revenue. Since ALZA was recording both the revenue received from TDC and Crescendo and its own expense, the company claimed that the impact on income was not significant. This case reviews the journal entries made to record the investments in TDC and Crescendo and leads students through an evaluation of ALZA's claim that the arrangements had an insignificant impact on its reported net income. This case illustrates that ALZA's assertion is not an accurate assessment of the impact of the arrangement. Without the R&D arrangements, ALZA would simply be recording R&D expense as it was incurred, thereby reducing net income by the amount of R&D expense.
But empirical literature ( See Feige and Cebula, 2011) shows that there is a positive relationship between tax rate and tax fraud. In the model of Allingham and Sandmo 1972, as well as for others models developed thereafter, it is supposed that after tax audit, tax administration has a comprehensive knowledge on the real value of the chosen taxpayer’s income. But in the reality, tax administration can't detect all the mistakes or the omissions and
Under the Securities Act of 1933, the MIFT does not automatically fall into the category of exempt securities, so the company must still file a offering statement with the SEC to avoid penalties. Next, we developed an analytical Matrix that assisted us in deciphering between security law exemptions the company could leverage, and how they would realistically apply to Viscotech’s situation (see Exhibit 2). After analyzing the security laws pertaining to the issuance of securities, we decided their best option was the Regulation A offering to exempt the transaction from registration. It would have allowed the company to “test the waters” through a provision of Regulation A offering which allows companies to publish or deliver a written offering circular, radio broadcast, or television broadcast to prospective investors to gauge their interest before filing an offering statement with the SEC and taking on the fees necessary to do so. However, an offering statement would have needed to be submitted to the SEC and cleared before actually raising money through the Regulation A offering.
Accrual basis accounting records the transaction immediately in a type of account, such as accounts payable, money owed to other companies for services; or accounts receivable “money owed by its debtors” ("Google.com", 2012). Later when the business pays out or is paid; they perform a balance by debiting one account and balancing by credit the corresponding and opposite account. Tracking the relationship between purchase and sale easier, something cash basis accounting fails at. In general, accrual basis accounting is preferred at tax time and for medium to large business. The classic example is expense.
Accrual basis on accounting is the method of accounting that most business and professionals are required to use by law because of its matching principles. It provides better picture of a company’s profits during an accounting period. Cash basis accounting is a very simple form of accounting. In cash basis accounting, revenues are recorded when cash is actually received from customers and expenses are recorded when they are actually paid, no matter when they were actually invoiced. According to "Accrual" (2012),” Cash-basis accounting does not recognize promise to pay or expectations to receive money or service in the future, such as payables, receivables, and prepaid expenses”.
While the traditional accounting methods are good to measure past performance and financial stature, it does not allow for managers to see the impact or value that marketing has on the bottom line. For a manager to evaluate the impact of marketing they will need view the current marketing expenditures, sales, and profits to make a conscious decision on what methods are working. While I think placing marketing as an investment is a good concept, determining the value is too biased without a common measurement between all companies in a similar industry. Without understanding the current value of marketing, the marketing budget will be one of the first items cut when the business is in a downturn. Technology in all industries has increased dramatically over the past 10 years so being able to understand the current value of marketing methods should not be as strenuous as it has been in the past.
Accounting fraud can be described as some sort of earnings management but not all earnings management can be considered fraudulent. The distinguishing criteria of ethical accounting practices from unethical ones are use of accounting standards, transparency, and intent. If the intention is to misrepresent and mislead users of financial reports, it is most likely that accounting practices employed do not conform to accounting standards and unfavorable information vital to investors are withheld. On the other hand, ethical earnings management is done in a transparent manner and vital information are disclosed accordingly. 3.
Donavan is sued for failing to file tax return and pay tax under Internal Revenue Code Section 7201. Disposition of Lower Courts: The District Court held that Donavan’s behavior were sufficient to raise to grade of felony alleged offense of file returns and pay tax under Internal Revenue Code Section 7201.
As a business owner I would use accrual method only because it recognizes Receivables and payable. When using the cash basis a company can appear that it is earning profit when in fact it is loosing funds. Cash basis does not acknowledge money that is owed which make is very difficult to keep accurate records. The IRS generally requires companies to use the cash accrual basis of accounting on their tax return. The Internal revenue service does allow the cash method of accounting if certain criteria are met because tax laws change frequently it is essential to contact a CPA if a business owner decides to use cash basis of accounting.