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Scenario: BizCon, a consulting firm, has just completed its first year of
operations. The company's sales growth was explosive. To encourage
clients to hire its services, BizCon offered 180-day financing - meaning
its largest customers do not pay for nearly 6 months. Because BizCon is
a new company, its equipment suppliers insist on being paid cash on
delivery. Also, it had to pay up front for 2 years of insurance. At the end
of the year, BizCon owed employees for one full month of salaries, but
due to a cash shortfall, it promised to pay them the first week of next
year.
As the senior accountant, the Chief Financial Officer has asked you to
prepare a memo to be sent to management notifying them of the delayed
wage payments.
Prepare the memo in a maximum 700 words including the following
information to better outline the situation:
· Explain how cash and accrual accounting differs for each of
the events listed in the above scenario and describe the proper
accrual accounting.
· Assess how at the end of the year, BizCon reported a favorable
net income, yet the company's management is concerned because
the company is very short of cash. Explain to management how
BizCon could have positive net income and yet run out of cash.
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ACC 561 Week 2 Individual Assignment Accounting and The
Regulatory Environment Presentation
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