• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
Page
  1. 1
    1
  2. 2
    2
  3. 3
    3
  4. 4
    4
  5. 5
    5
  6. 6
    6
  7. 7
    7
  8. 8
    8
  9. 9
    9
  10. 10
    10
  11. 11
    11
  12. 12
    12
  13. 13
    13
  14. 14
    14
  15. 15
    15

Accounting for Managerial Decision Making

Extracts from this document...

Introduction

Recognition Position Paper University of Phoenix Accounting for Managerial Decision Making ACC 539 August 21, 2004 Memorandum To: Chief Executive Officer, Ace Manufacturing From: Team A -Team M1, Big Picture Consulting Subject: RECOGNITION POSITION PAPER Date: August 21, 2004 This memorandum is reflective of Team A's, Big Picture Consulting, recommendations to Ace manufacturing for the recognition of revenues and expenses. Revenue and expense recognition is the process of identifying and recognizing the sources of revenues or expenses and is crucial to reporting corporate performance. We have entered into a new era in corporate responsibility and are now holding top-level executives accountable for their organizations fiduciary responsibilities as changes in reporting requirements and methods evolve. The Financial Accounting Standards Board (FASB) with pressure from the Securities and Exchange Commission (SEC) is moving forward to standardize the revenue and expense recognition requirements and methods in place to regain private and public trust of corporations after many large-scale public corporation scandals. The recognition process includes: * Definition - Is the item an asset, liability, equity, revenue, expense, gain or loss? * Measurability - Does it possess the characteristics that permit reliable measurement? * Relevance - Will it make a difference to the decision maker? * Reliability - Is it a faithful representation? These questions and thoughts, in the recognition processes should be followed when determining revenue and expense recognition. ...read more.

Middle

80). Expense Recognition Methods Expense recognition is best recognized, and the majority of expense recognition is accomplished, using the matching principle method. Expenses are recognized in relation to the revenues. The expenses are incurred to support the generation of the revenue. Several expenses are recognized in the current period calculations and are clear-cut. Cost of goods sold, deprecation and long term assets are examples of clear-cut expenses. Some are more complex, such as income tax expense and pension expense, and require a significant amount of recognition and measurement to be properly calculated. For expense recognition it is recommended that Ace Manufacturing use Cost of Good of Goods and Straight Line Depreciation methods. Cost of Goods Sold Method Cost of goods sold is usually the largest expense a company will have. The cost flow methods of FIFO, LIFO and average cost involved have a significant role in this calculation. "Cost of goods sold is sometimes phrased as COST OF SALES. The cost of goods sold is the costs actually incurred in producing the product or service. It is the direct costs of production. It does not include the indirect costs, which may be things like administration and marketing costs. These cannot be directly attributed to producing the product and so are not included. The cost of goods sold for a production company will include things like raw materials, energy and labor used to produce the product. ...read more.

Conclusion

The expensing of stock options could be a better reflection of the company's overall economic reality. Commitment to the best practices in the financial reporting world will take the company far into the future. The expensing of stock options will put the various forms of present day employee options on an equal playing field. It is recommended that Ace Manufacturing expense stock options. Managers are against expensing because it may curtail the large stock options they have received in the past, and make their job more difficult. They are using any scenario they can to stop expensing. There are a hundred companies that have seen the light, and realize that expensing is going to happen and have already started expensing stock options. This gives a more up front picture of the company and will only change the way things are documented. (Signed copy on file) Team A - Team M1 Big Picture Consultants Conclusion This memorandum has provided Team A's, Big Picture Consulting, recommendations to Ace Manufacturing, for the recognition of revenues and expenses. The recognition of revenue and expense is crucial to reporting corporate performance as changes in reporting requirements and methods evolve. In order to met the challenges Ace Manufacture is moving forward to standardize the revenue and expense recognition requirements and methods in place to regain private and public trust across corporate America. With this knowledge and recommendations if followed Ace Manufacturing will be the premier organization of the future. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. P1- The role of internet marketing

    Internet marketing opportunities are there for different uses such as: * Relationship Marketing and mass customisation: this outlines the aim of the business and that is based on building a strong relationship with the customers by making them get

  2. A2 Business CourseWork

    At the moment interest rates, as well as mortgage repayments are very low. This means in effect that it is better to be a net borrower (someone who is currently repaying a mortgage) than a net saver (someone who has lots of money in the bank in savings)

  1. The purpose of accounting is to keep track of transactions and recording revenue and ...

    The property was leased out, using the owners savings and dividends from other private ltd companies. A long term loan was also taken out from the bank, to cover the costs until the company breaks even. Capital Expenditure: Using the money under capital income, the whole building was renovated.

  2. The purpose of this paper is to analyze the decision of pursuing an MBA ...

    * Will MBA will help me to earn more than my existing salary. What will be the return with MBA and without MBA?

  1. Introducing Accounting - Purpose, Information, Statements and Ledgers

    1500 1.6 Communicating Financial Information to Users By Means Of Financial Statement Financial statement is the formal record of the relevant financial information of a business or an entity. The purpose of the statements is to communicate the financial performance and position with the users by providing accurate information in monetary terms.

  2. Explain the difference between capital income, revenue income, capital expenditure and revenue expenditure.

    Administrative costs include things such as postage, printing and stationary; this may include items such as Future fashion business cards, headed paper and order books. For example Future Fashion will have a lot of paperwork regarding business details about their employees about their business and also about their regular customers

  1. I am going to produce a report which assesses the working capital management of ...

    From the creditors payment period ratio figure we could tell that M&S takes longer time to repay their creditors, and the reason behind this is that the business has got more than 2000 direct suppliers of finished products.

  2. Estimate the cost of equity appropriate for the evaluation of the incremental cash flow ...

    Buying plant, company will not incur potential marketing costs in initial selling of new products. The company is better off buying the plant than building from the scratch a new one. Usually, plants are costly to build. Also, the company can reduce competition in the market.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work