If there has been anyone that has taken this class could get a little help. I am not looking for the answers just some more info. I am not understanding it.
Instructions
For each of the three situations, say if the accounting method used is correct or incorrect. If
correct, identify which principle or assumption supports the method used. If incorrect, identify
which principle or assumption has been violated.
E1-5 Meredith Cleaners has the following balance sheet items.
Accounts payable Accounts receivable
Cash Notes payable
Cleaning equipment Salaries payable
Cleaning supplies Common stock
To determine if the accounting method used is correct or incorrect for each situation, we need to consider the principles and assumptions of accounting. Here is a breakdown of each scenario:
Situation 1:
E1-5 Meredith Cleaners has the following balance sheet items.
Accounts payable
Accounts receivable
Cash
Notes payable
Cleaning equipment
Salaries payable
Cleaning supplies
Common stock
To determine if the accounting method used is correct or incorrect, we'll need more specific information about how these items are being accounted for. However, I can provide some general guidance:
1. Accounts payable: This is a liability account that represents the company's obligations to pay for goods or services. If the company is recording accounts payable correctly by recognizing its outstanding obligations, then the accounting method is correct.
2. Accounts receivable: This is an asset account that represents the money owed to the company by its customers. If the company is correctly recording and tracking its accounts receivable, then the accounting method is correct.
3. Cash: Cash is an asset account that represents the company's available cash or cash equivalents. If the company is correctly recording and tracking its cash transactions, then the accounting method is correct.
4. Notes payable: This is a liability account that represents the company's obligations to repay borrowed funds. If the company is correctly recording its notes payable and recognizing the related interest expenses, then the accounting method is correct.
5. Cleaning equipment: This is a long-term asset that represents the equipment used in the cleaning business. If the company is correctly accounting for the cleaning equipment, including its initial cost, depreciation, and any impairment, then the accounting method is correct.
6. Salaries payable: This is a liability account that represents the company's obligations to pay employee salaries. If the company is correctly recognizing and recording its unpaid salaries, then the accounting method is correct.
7. Cleaning supplies: This is a current asset that represents the cleaning materials used in the business. If the company is correctly accounting for its cleaning supplies, including tracking and replenishing the inventory, then the accounting method is correct.
8. Common stock: This is an equity account that represents the ownership interest in the company held by its shareholders. If the company is correctly accounting for its common stock, including issuing and recording shares, then the accounting method is correct.
To determine if any principles or assumptions have been violated, we would need more specific information about how these items are being accounted for. Generally, accounting principles (e.g., matching principle, revenue recognition principle) and assumptions (e.g., going concern assumption, monetary unit assumption) could be violated if the accounting method applied does not align with them. Please provide more context or specific examples for further assistance.
To determine if the accounting method used is correct or incorrect for each situation, we need to understand and apply the principles and assumptions of accounting. Here are the steps you can follow to analyze each situation:
1. Read the situation carefully, paying attention to the balance sheet items given.
2. Identify the accounting method used in the situation and compare it to the generally accepted accounting principles (GAAP).
3. If the accounting method used follows GAAP, then it is correct. Identify the principle or assumption that supports the method used.
4. If the accounting method used does not follow GAAP, then it is incorrect. Identify the principle or assumption that has been violated.
Now, let's apply these steps to the given situation:
Situation E1-5:
Meredith Cleaners has the following balance sheet items:
- Accounts payable
- Accounts receivable
- Cash
- Notes payable
- Cleaning equipment
- Salaries payable
- Cleaning supplies
- Common stock
In this situation, we need to analyze each balance sheet item and assess if the accounting method used is correct or incorrect, while identifying the supporting principle or assumption or the violated principle or assumption.
To give you more specific guidance, it would be helpful if you provided the accounting methods used for each balance sheet item.