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Paper Instructions:

Select a publicly-traded company (small company) and access the company's most recent annual report (select the Investors menu item). Locate the notes to the financial statements and identify the information topics disclosed in these footnotes and explain the reasons for disclosure.

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Winning Her Business: How to Transform the Customer Experience for the World's Most Powerful Consumers By Bridget Brennan

29 Words  1 Pages

Questions and Topics We Can Help You To Answer:
Paper Instructions:

The balance sheet shows the financial picture of a business at a given point in time. It is what the organization owns versus what they owe.

The income statement shows the profit (or revenue-positive position) versus the loss of an organization over time.

For this phase, utilize Merrill Lynch’s handout on reading financial statements. Refer to the following link:


Using one year of the balance sheet, determine the organization’s liquidity through the current ratio and debt-to-equity ratio. Use the table below and answer the questions.
Left Side

Right Side

Current Assets ________

Current Liabilities _________

Fixed Assets _________

Long-Term Liabilities______

Other Assets __________

Shareholder Equity ________

What is the current ratio? Do you have enough current assets to meet your current liabilities? Explain. (Refer to page 23. of the Merrill Lynch handout/link)
What is their debt-to-equity ratio?
Total liabilities/total shareholder equity =

Using one year of the income statement, determine the organization’s profitability or fund balance perspective through operating margin and net profit ratio. Use the table below and analyze the both the operating margin and net profit ratio. Refer to page 31. Of the Merrill Lynch handout/link.
Operating Margin =

Operating Income/net sales

Net Profit Margin =

Net Income/Net sales

216 Words  1 Pages

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Paper Instructions:
Why are accounting standards necessary and what determines a high quality accounting standards?

24 Words  1 Pages


The Provision of Bookkeeping Services to Small and Medium-sized Local Businesses by the Books Now, LLC Company


 Problem of background

Bookkeeping refers to the process of tracking the financial transactions made by a business organization within a stipulated period.  Contingent with the type of accounting system that the firm uses, each financial transaction is usually recorded based on the existing supporting documentation. Typically, these documentations might be a purchase order, an invoice, receipt, or other similar types of financial recording validating that the business transaction took place (Oosthuizen, Van Vuuren & Botha, 2020). According to modern financial accounting research, a large percentage of the small and medium-sized business organizations, in their early stages, are mainly concerned with compliance-recording transactions, paying bills, ensuring payroll accuracy, getting paid, as well as following federal and state regulations

 Nonetheless, small and medium-sized business enterprises' costs for bookkeeping will ultimately depend on different variables. The size of the company, number of workers, number of monthly transactions, how payrolls are processed, bills to settle, invoices sent out, and number of expense accounts and balance sheets to reconcile are examples of these variables (Ganesan et al., 2018). Furthermore, the company's costs will be impacted by how the accounting department of the business administers policies and procedures, accounting systems, and reporting.

Recommendations and steps to Achieve Goals


One of the primary decisions that should be taken into consideration by Books Now, LLC when setting up the SMSs bookkeeping systems entails determining whether to use an accrual or cash accounting system or not. In case the company is managing the financial records of SMSs from their premises, it will be vital to stick with the cash accounting (Garbowski et al., 2019). Likewise, if the company decides to use cash accounting to record the daily financial transactions of SMS businesses, it will be essential to consider recording transactions whenever cash changes hands.

On the other hand, in the process of using an accrual accounting method, the company should have the potential of recording sales or purchases instantly, even though cash may not exchange hands until later dates. At times, the underlying reason for that is that a business organization may decide to use the cash accounting method before switching to an accrual accounting system as it diversifies its business activities (Adeniji, 2021). Conversely, in case the company acknowledges that the business is offering credit to their potential customers or it is obtaining credit from its suppliers, then it will be logical to utilize the accrual accounting method.

Nonetheless, it will be vital for the management authority of Books Now, LLC to decide whether they will use a double-entry or single-entry bookkeeping system to record the business transactions that hired them. Using the single-entry bookkeeping method for small and medium-sized businesses means that this system will typically follow the same technique as keeping the check register of the organization (Lestari & Maimunah, 2019). The company will be recording financial transactions of the businesses as it settles its bills and makes deposits into their accounts. This method ultimately works for small and medium-sized businesses because of their low volume of transactions.

The company should also have the potential to set up their electronic accounting system in setting up the bookkeeping system of the business. The primary reason for that is that nowadays, financial accounting consulting companies use computerized software to keep track of the businesses’ accounting journals with their bookkeeping entries (Musah, 2017). Although firms, especially small and medium-sized businesses, use basic spreadsheets like Microsoft Excel, it will be imperative to consider setting up charts of accounts. These charts might change with time as the business organization changes and grows.

Steps to achieve the goals

  1. Selecting the most suitable accounting method

Different accounting methods are used, including cash-basis, accrual, and modified cash-basis accounting methods. Since the primary goal of Books Now, LLC entails offering bookkeeping services to small and medium-sized businesses, it will be imperative to either use the cash-basis accounting method or the accrual accounting method. The reason why the cash-basis accounting system is preferred is that it does not require extensive accounting knowledge. Basically, this method uses cash accounts, for instance, income, expenses, and so on (Oosthuizen, Van Vuuren, & Botha, 2020). The Accrual accounting method requires extensive accounting knowledge, and it is also time-consuming. In utilizing this method, income and expenses, for instance, should be recorded as the transaction takes place even if money changes hands.

  1. Determining how the business transaction should be recorded

The company can decide whether to use accounting software, hire an accountant, or record the business transactions by hand (for instance, using spreadsheets). For instance, manual recording of transactions by hand is considered to be time-consuming. However, it one of the cheapest options for small and medium-sized business owners. When using this method, it will be vital to consider accounting for each transaction before calculating totals. Alternatively, hiring consultants frees the management authority of a business from managing their accounting books or making unnecessary accounting mistakes (Kaili, 2019). Although this option is the least time-consuming and most expensive, it enables the company to ensure that its financial statements have been compiled and totals computed chronologically.

  1. Setting up a chart of accounts

The chart of accounts is vital since it will assist in listing the accounts of a business in its financial statements before breaking down money into specific categories. Furthermore, these charts are vital since they will assist in showing the inflow and the outflow of cash. It mainly comprises expenses, revenues, equity, liabilities, and assets of the business. To further break down each account, the company can use sub-accounts, such as product sales, to systematically organize transactions. 

  1. Opening business bank account

Since the primary goal of the Books Now, LLC entails offering bookkeeping services to small and medium-sized businesses, it will be imperative to ensure that it has encouraged the management authority of such businesses to open bank accounts if they are not operating them.  Mixing up business and personal funds are not preferred in a business. Thus, having separate bank accounts is vital since they assist in clearing accounting errors, overspreading, inaccurate tax filling, and so on (Kaili, 2019). In return, this strategy will ensure that the accounts of the small and medium-sized businesses are structured and create clear audit trails.

  1. Determining how the business will be paid

A business cannot grow if its potential customers do not settle their debts. Therefore, Books Now, LLC should ensure that it has encouraged the businesses that hire it to establish clear client payment policies. In return, it will be easier for such organizations to have the potential of determining the type of payments to be accepted by their customers. It includes things like credit cards, checks, cash, and other associated forms of payments. For example, if the business decides to sell to clients on credit, it will be vital to ensure that they have sent out invoices at later dates after providing products or services (Musah, 2017). Furthermore, it will be vital to take into account determining invoice payment terms, for example, when payments will be due, forms of acceptable payment, where to dispatch the payments, and so on.

  1. Keeping record of expenses

Keeping track of expenses is one of the crucial parts of accounting. It assists in ensuring that the accounting books are kept in order as expenses are tracked. It includes bills, invoices, receipts, previous tax returns, and proof of payments, credit cards, and bank statements. The more documentation kept in the records, the better off the business organization and accounting books will be.

  1. Making a schedule and setting reminders

Letting financial transactions pile up results in disorganized records, errors, and unnecessary stress. Creating and sticking to the accounting cycle will assist in simplifying bookkeeping responsibilities. The schedule should begin with the opening accounting balances and end with the closing account balances (Musah, 2017). Using reminders can also assist in updating the business’s accounting books.

Types of market research/what it will accomplish

Small and medium-sized businesses always require systematic bookkeeping methods as they grow. These businesses are ultimately concerned with losing financial control. Therefore, the company’s primary goal will entail convincing such businesses to outsource bookkeeping and accounting consultants like them for cost or expense analysis.  With the stakes relatively higher, it implies that the company should have the potential of enabling such business organizations to make extensive utilization of management accounting services. Ideally, this is because a large percentage of these businesses cannot have the potential of affording the use of a dedicated chief financial officer (CFO) (Lestari & Maimunah, 2019). Furthermore, although such businesses do not require full-time bookkeeper/s, they can depend on part-time accounting help to limit their hiring options.

Nonetheless, some of these business organizations can rely on in-house financial accounting and bookkeeping assistance. Despite that, the goal of Books Now, LLC will enable small and medium-sized businesses to save money by outsourcing their accounting services. This is because bookkeeping will not be the only key business activities to be financed (Adeniji, 2021). In return, the businesses will have to be comfortable with their accounting situation as the cash producer for their owner or committed to growing.

Small and medium-sized businesses usually purchase bookkeeping and other accounting services for the purpose of tracking their transactions. Therefore, another goal Books Now, LLC entails ensuring that they will be contacting their business partners or meet in person so as to discuss the prospects of working together. Considering the bookkeeping services to be offered, the company will be ensuring that it has competed indirectly against the prospects of being hired as part-time or full-time bookkeepers. As a result, this will enable such businesses to have greater control of their financial accounts and for the sake of future development. Another advantage of moving the bookkeeping of a business to outsource is that it will assist in changing the role of the existing workers (Garbowski et al., 2019). Therefore, the company will be tackled with the task of ensuring that part-time bookkeepers of the businesses have been efficiently trained to handle their accounting records as required.

Recommended Implementation /Process Design

The accounting books of a business enable its management authority to review their organization's expenses and income and see where they stand financially. By ensuring that the accounting books are organized systematically and up-to-date, the management authority of any business can have complete control of their finances and make SMART (systematic, measurable, achievable, realistic, and timely) business decisions (Ganesan et al., 2018). Different steps can be utilized by Books Now, LLC to achieve the bookkeeping goals of small and medium-sized businesses.

Despite that, the organization will cross a threshold at some point, and it will be imperative to place more emphasis on the need for accurate and timely financial reporting and intelligence. Because of that, the business will be forced to have managerial or management accounting, or accrued-based accounting, or advanced bookkeeping to assist in making data-driven financial decisions (Oosthuizen, Van Vuuren & Botha, 2020). Ideally, these are the main guidelines that will assist the business to improve cash flow, increase profits, and enjoy economies of scale. On the other hand, in case bookkeepers can be hired by the businesses based on these guidelines, it means that the company's aim will entail ensuring that bookkeeping training is systematically done.













Adeniji, Y. A. (2021). Internal Audit Outsourcing Practices among Micro, Small and Medium Sized Enterprises (MSMEs) in Lagos State. European Journal of Business and Innovation Research9(1), 53-67.

Ganesan, Y., Haron, H., Amran, A., & Pitchay, A. A. (2018). It is the External Accountant Matter in Business Performance of Small and Medium Enterprises? The Role of Non-Audit Services. International Academic Journal of Accounting and Financial Management5(4), 36-48.

Garbowski, M., Drobyazko, S., Matveeva, V., Kyiashko, O., & Dmytrovska, V. (2019). Financial accounting of E-business enterprises. Academy of Accounting and Financial Studies Journal23, 1-5.

In Kaili, E. (2019). New models of financing and financial reporting for European SMEs: A practitioner's view. Cham, Switzerland: Palgrave Macmillan


Musah, A. (2017). Benefits and challenges of bookkeeping and accounting practices of SMEs and its effect on Growth and Performance in Ghana. Journal of Accounting, Business and Management (JABM)24(2), 16-36.

Oosthuizen, A., Van Vuuren, J., & Botha, M. (2020). Compliance or management: The benefits that small business owners gain from frequently sourcing accounting services. The Southern African Journal of Entrepreneurship and Small Business Management12(1).














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Article review

The article by Rundio (2016) outlines the six steps that an organization can follow when developing a budget and they are as follows

  • Collecting relevant data

Discusses the activities engaged in by the finance department and the nurse manager to collect relevant data and create a functional budget.

  • Planning services

Involves processes engaged in by the nurse manager to ensure that the finace department is kept informed of all associated costs and projected revenues so as to ensure they are included in the budget.

  • Planning activities

Involves activities engaged in by the nurse manager to ensure that finance is informed of particular treatments that are new to the department so as to ensure they are planned for in the budget.

  • Implementing the plan

This stage discusses the processes engaged in by the nurse manager after a project has been approved by the board and upper-level administration to put the plan into action and provide the services in question.

  • Monitoring the budget

This section focuses on activities engaged in by the nurse manager and the finance department when monitoring the budget to give accurate financial reporting on a regular basis.

  • Taking corrective measures when necessary

Here, the author focuses on the need for flexibility to allow modification of the initial goals whenever necessary.


            From the article, the most important step is implementing the plan. This is the stage where the plan is implemented in an actual setting rather than discussing it in teams or as data and information (Rundio, 2016). Although the first three steps are important, the stage where the plan is implemented determines whether the budget will be successful or not. In the implementation stage, the nurse manager must ensure that all measures have been taken to ensure that the implementation occurs as planned. Its importance lies in the fact that failure to successfully implement the plan would render all the efforts engaged in the first three steps useless and wastage of the institution’s time and resources.

            The nurse manager can however engage employees in the implementation step to increase the chances for success. One approach would be involving members of staff in the entire process. Employees should be asked to give their opinion on what changes they believe should be introduced especially when collecting relevant data (Naranjee et al, 2019). Involving employees helps them to prepare for possible changes as they are aware of the processes being considered for improvement and what disruptions are likely to occur in the work flow.

Allowing employees access to information before any changes are introduced gives them time to prepare mentally for the changes and in so doing, increase the chances for the plan being successful. Another advantage of involving employees in the process is that it helps make them feel as part of the organization. Employees tend to commit more when they feel their interests are aligned with those of the organization (Golway, 2019). When involved in the decision making process, employees are likely to contribute more towards ensuring that the implementation step is successful. The nurse manager should therefore organize training and team building activities and establish proper lines of communication between the top management and other junior staff.  Improved communication and cooperation is likely to foster good relationships that will facilitate successful implementation of the plan and overall success when coming up with a budget.












Golway M, (2019) “Managing fiscal resources” Journal for Nurses in Professional           Development, retrieved from,       &Issue_ID=4882658

Naranjee, N., Ngxongo, T., & Sibiya, M. N. (2019). Financial management roles of nurse             managers in selected public hospitals in KwaZulu-Natal province, South Africa. African           journal of primary health care & family medicine11(1), e1–e8. 

Rundio A, (2016) “Budget development for nurse managers” Reflections on Nursing Leadership.


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 Prepaid expenses

A prepaid expense is defined as any form of payment that is made in advance to accommodate expenses and services that will be provided at a future time. since the payment made covers expenses that will be incurred in future, it is recorded as a current asset on the balance sheet and these payments include insurance premiums and retainer fees as is the case with Kirkland & Ellis.

Kirkland & Ellis are one of the top international law firms in the world and they specialize in private equity, litigation, government and white-collar disputes, intellectual property matters and other corporate transactions. In its 100 years of experience, firm has established 15 offices around the world and has employed more than 2700 attorneys to handle its clients’ needs (Kirkland & Ellis, 2020). The law firm works with a diverse workforce that has helped the organization to attract bright legal talent to form a dynamic team.

The organization’s prepaid expenses are as a result of the prepaid legal fees that its clients are expected to pay as retainer. A legal retainer is the advance payment that is issues to a law firm or a lawyer to secure legal services of attorney offered to the client. The law firm determines a fee that is determined by the number of hours the firm will represent the client as well as the nature of services to be offered. The amount paid is recorded as a debit to Kirkland & Ellis’ account and also as a credit to the cash account (Kirkland & Ellis, 2020). Once the service has been provided by the firm, the payment is credited to the prepaid fee account and debited in the legal fee expenses account. Since the money paid to the Kirkland & Ellis acts as an advance payment for the services that the firm is willing to offer and any costs incurred in the process, the retainer is thus the firm’s prepaid expense.




Kirkland & Ellis, (2020) “About Kirkland” retrieved from,



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 Record Keeping

Keeping accurate and up-to-date records is important for a business to succeed.  Record keeping is one of most important management tools that a business should posses and, therefore it should be allocated due importance. Any record keeping system should be accurate, reliable, easy to follow and consistent ( Asefeso 2012).Good record keeping is vital in regards to meeting the financial commitments of the business by ensuring that the basis used is very simple and easy to follow.  Record keeping is also important as it helps monitor and record the business activities and requirement under the taxation laws.

Business records can be kept online, computerised on a spreadsheet or manually depending on the type of business.  To ensure that the process is not daunting, I will break things down into a series on straightforward and manageable tasks. I will also hold on to my receipts, bank statements and invoices in case I ever need to outsource the work.

In order to improve my business l have decided to internally manage my record keeping. This will help my business look more professional as well as attract foreign investors.  I choose to manage my record keeping internally as a means to cut cost as well as ensure the process is done thoroughly. Managing your tax affairs and obligations as an employer is an integral part of your business. In Australia, business's tax obligations and entitlements vary according to the type of work you do, the number of staff you employ and the kind of benefits you offer. Operating a business as a sole trader, company or a trust will have different tax implications, and it's important to consider these implications when you are choosing the best legal structure for your business.

The first thing I would consider is getting an Australian business number (ABN). This will help me to manage my tax and business obligations ( Parsons 2017).The number is used as a reference by the Australian Taxation Office to track my business. One also requires this number when dealing with other businesses and government departments.  Under this tax law anyone carrying on a business must keep full records to explain all transactions. The records have to be kept in English language and must be clear enough for the Tax office to ascertain the correct taxable income of the business( Deutsch 2017).

It is also important to understand the Tax obligations for paying staff under the country you choose to operate in. As an employer, you must be aware of your tax obligations when paying staff, including pay as you go, withholding tax and superannuation. Depending on the size of your business, you may also need to pay payroll tax (Gitman 2008).  As an employer, it is important for you to understand employment-related legislation and your obligations towards the people who work for you.It is also important to analyse Issues such as tax and pay, annual leave and time off for your employees in order to have a smooth-running business. The rights if the employees are covered by employment legislation and must be applied fairly to employees across your business. Observing the rules also helps to keep staff morale high and reduce staff turnover.










Tomasic, R., Bottomley, S., & McQueen, R. (2002). Corporations law in Australia.           Leichhardt, NSW: Federation Press

Asefeso, A. (2012). CEO guide to doing business in Australia. Harlow: AA Global Sourcing.

Gitman, L. J., & Joehnk, M. D. (2008). Personal financial planning. Mason, OH:   Thomson/South-Western.

Parsons, R. W. (2011). Income taxation in Australia: Principles of income, deductibility and        tax accounting. Sydney, NSW: Thomson Reuters.

Deutsch, R. L., Friezer, M. L., Fullerton, I. G., Hanley, P. J., Snape, T. J., & Institute of    Public Accountants (Australia). (2017). Australian tax handbook: Tax return edition      2017

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 Impacts of Accounting



            An accounting transaction is a business occurrence that has a monetary impact on the financial statements of a business (Hermanson, 2018).  A financial statement can also be regarded as a written record of the business financial situation. Financial statements include, balance sheets, income profit and loss statements and cashflow statements (Hermanson, 2018). Financial statements are essential in a business since they are the main means of communicating financial information. When designing financial statements, it is important to put into consideration the needs of diverse users, including the potential owners and creditors.  According to the Financial Accounting Standards Board (FASB), the elements of a financial statement include; assets, liabilities, equity, revenue, expenses, gains, investment by owners, distribution to owners, losses and comprehensive income (Hermanson, 2018). 

Assets are a major element of a financial statement; they are defined as the economic benefits that are obtained as a result of transactions that had been made in the past (Fazal, 2011). Comprehensive income occurs while there is a change in equity, comprehensive equity includes all the changes in equity that have taken place in a period.  Distribution to owners is described as the decrease in net assets of a particular enterprise, distribution owners occur as a result of transferring assets, giving services and incurring liabilities (Fazal, 2011). This element is responsible for causing a decrease in ownership interest in a business.

Equity is described as the remaining interest in the assets after liabilities have been deducted. In businesses equity can be referred as the ownership interests (Fazal, 2011).  Expenses are described as outflows of assets, or the cost that is incurred in a business while delivering or producing goods. Gains are simply an increase in equity or the net assets from a transaction.  Liabilities are defined as an obligation the business has to pay for as a result of a past transaction (Fazal, 2011).  Losses are a decrease in equity and lastly revenues are inflows of assets.

A financial analysis is an indicator of the financial state of an enterprise. Investors are in a position to utilize financial analysis to make informed decisions on investment. Financial analysis can also be utilized as a policy to support the preparation of long term and short-term business plans and objectives.  A financial analysis has five key components; revenue, profit, operational efficiency, capital efficiency and solvency and liquidity (Hermanson, 2018).  Revenue is the businesses main source of capital; revenue is responsible for determining the long-term success of a business.  Growth, concentration and per employee revenue is an indicator of the amount of revenue that the employees of a business bring to the business. Revenue concentration indicates the amount each client brings to the business enterprise. If much of the revenue in the business comes from clients the business has a high possibility of failing or suffering a loss if the clients reduce or stop purchasing from the business.

For a business to maintain its longevity it is necessary to make profits, making profits is the main aim of businesses. A detailed overview of the profit margins of a business can assist in painting the financial picture and indicating the financial position of a business. There are three types of profits, gross profit, operating profit and net profit, each of these margins has a mathematical equation that utilizes information that is derived from financial statements (Periu, 2019). Profits are an indicator of the financial strength of the business, profits also determine if a business is able to pay the operating cost in the events of loss and subsequently be able to re-invest in the company.

Operational efficiency is responsible for measuring how business resources are being allocated and utilized (Periu, 2019). The absence of operational efficiency can be a major contributor to slow growth in business and reduced profits.  Accounts receivable turnover measure how the business manages the credit that is extended to customers (Periu, 2019). A higher number of accounts receivables turnover is an indicator that the business is effectively managing credits. Inventory turnover, is reviewed to show how well the business manages its inventory, a higher number of inventory turnover is an indicator that the business is performing well while a lower number is an indicator that the business is not selling well or the production rate exceeds the business’ level of sales.

Capital efficiency and solvency is another element of a financial analysis the both of them are of interest to lenders and investors (Periu, 2019).  Return on equity represents the returns the investors are generating from the business, debt on equity is an indicator of the amount of leverage the business is utilising to operate. Leverage has been known to vary but should not exceed an amount that is reasonable for the business (Periu, 2019).  Liquidity analysis shows if the business has the ability to generate enough cash to cover for cash expenses. Current ratio in liquidity measures the business’ ability to settle short term obligations from the cash and current assets of the business. Interest coverage in liquidity measures how capable the business is when it comes to paying interest expense from the cash the business generates.

In conclusion, A financial statement is a written record of the business financial situation. A financial analysis is an indicator of the financial state and health of a business. Investors are in a position to utilize financial analysis to make decisions.  


















Fazal, H., (2011). What are the Elements of Financial Statements? Retrieved from;   

Hermanson, R. H., Edwards, J. D., Maher, M., & Donelan-Knox, K. (2018). Accounting principles:         A business perspective.

Periu,M., (2019). 5 Key Elements of a Financial Analysis. Retrieved from;             insights/articles/financial-analysis-small-business-health/


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Contrast between Financial Accounting and Managerial Accounting

Financial accounting refers to processing or records, summarizing and reporting transactions resulting from business activities and operations that occur over a duration of time. The transactions are summarized for the purposes of preparing for financial statements such as the balance sheet and cash flow (Mathur, 2011). Financial accounting is designed to accurately reflect on business activities; help organizations or companies abide and meet the requirements of stipulated by the law. They also reveal financial accounts to entrepreneurs, allow for the upgrading evaluation, and enable efficient resource allocation

            On the other hand, Management accounting refers to a procedure of preparing an organization report and interpretations that offers precise and on time fiscal and numerical data required by a manager to carry out daily immediate decision-making (Mathur, 2011)..

Financial accounting outputs yearly reports  for exterior stakeholders  whereas managerial accounting  comes up with report every month  or very  week meant  for a company’s internal audience,  for example departmental managers  and  chief executive officers (Mathur, 2011).

In terms of past and present usage, Data generated from financial accounting is historical and is collected over a period (Mathur, 2011). On the other hand, managerial accounting focuses on past performances and comes up with information that can be used for 1future business forecasts.
















Mathur, S. B. (2011). Accounting for management. New Delhi: Tata McGraw-Hill Education.

Weiss, J. W. (2014). Business Ethics: A Stakeholder and Issues Management Approach. San Francisco, US: Berrett-Koehler Publishers.

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Tax memo

Tax issues

  1. How can tax shield be used as a financial strategy to minimize the amount of taxable income for Wheelie Corporation?
  2. Will the gain from sales of investment land be considered an income? Can the Wheelie Corporation claim exclusion of capital gains to minimize its capital gains liability?
  • What are the principles behind the various timeshare tax deductions that Aloha Inc. can claim?
  1. When can Aloha Inc. claim deduction on the timeshare interest expense?
  2. Does the loan taken by Aloha Inc. (seven year note) to pay for the timeshares deductible?


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       Liability of Accountants for Negligence Mistakes

An action is termed to be deceitful in accounting when data provided by the accountants to other individuals that justifiably rely on is mispresented and hence becomes damaging to them. An accountant’s balance sheet can encourage a prospective purchaser or seller so when it is misrepresented it becomes an illegal action by the accountant.  The reliance of the ordinary creditor or investor on balance sheet is justified because it helps them to get the information that they require on the financial conditions of their companies. When an accountant fails to present authentic data through the balance sheets, this is negligence and it is a liability that the accountant should be held responsible for.


The modern accounting occupation came about as a response to the exploitations of the 19th century laissez faire centred financial guidelines that were as a result of dishonest marketers and investors. This need to change into credit fairs in the 1900s exemplified the society’s uncertainty on financiers and safeties exploiters, and it was dispelled by imperilling internal business affairs to superior public experience (Gormley, 1988). The essential principals of standard finances which stressed unconstrained antagonism remained central in financial groups such that the choice of undeviating centralized directive to control dishonesty and deception was repelled.

This forced the indispensable role of accountancy to offer the required financial publicity to be conventional. The expertise and freedom of accountants has over the years become very extensively accepted particularly since they played a great part in rooting out government exploitation in the 20th century which significantly helped to progress government competence (Larson, 2016). Public accountant roles as private entrepreneurs have become widely accepted over the years without any serious challenges. However intensive competition in the accounting industry has brought about the issue of negligence in financial data bringing about the issue of liability when it comes to accountants (Hemraj, 2002).

During the 1990s, the need for more dependable monetary information by the asset community became apparent. The responsibility of accountants has developed as the number of stockholders continues to grow and this has led the connection between business managers and stockholders to become more private (Gormley, 1988).  By confirming the public reports that jointly portray a company’s monetary status, the self-governing accountant undertakes a public concern exceeding any employment association with the client. The self-governing public auditor that is executing this distinct function owes eventual commitment to the business’s creditor and stakeholders as well as to the capitalizing public (Hemraj, 2002). To shield from admission, an expert public bookkeeper clarifications of the client’s monetary statements would be to disregard the implication of the auditor’s role as an impartial examination indicted with public responsibilities.

Appointment of damages to accountants

Auditors just like other professionals are theoretically accountable for both illegal and public offences. The faults occur when these persons or groups break a government executed law that is that oversees the dealings between units and the public. The accountants are bound by the laws that they function in and they can be impeached for performances such as deception and insider transaction (Hemraj, 2002). One common offence by auditors is perceptively or irresponsibly causing a force report to include matters that are deceptive and deceptive which is commonly known as negligence. An auditor can hence be arraigned in a criminal court of law for either perceptively or irresponsibly issuing an incorrect audit judgement (Larson, 2016).

There are two sections of the civil decree that that is precise implication when it comes to assessment line of work and they include the contract law and the law of tort.  The contract law illustrates that parties can try to find remedy from an accountant if they do not conform with standards of the commitment note (Professional liability of accountants and auditors, 2009). In the tort law, the accountants can be prosecuted on the basis of disregard if they break a responsibility of the attention towards a third party who accordingly suffers some form of damage. A neglectful actor is accountable for all the lawfully cognizable damage that she or he proximately sources.  The idea of contiguous cause still signifies a central displeasure with the concept of unrestricted tort accountability. Tort liability might prove disastrously heavy and it has always been a significant feature in the management of neglect principle (Professional liability of accountants and auditors, 2009). For most society carelessness routine in the past; accountability preventive defences and policies in cases of inseparable damages were either all or nothing dealings (Gormley, 1988). It was either the perpetrator becomes focus to the full range of compensations or he escapes accountability all together.

 The law courts in the past were always unenthusiastic in allowing for the accountability for a single harm to be apportionable. It was assumed that apportioning relationship would be problematic if not unmanageable and any other foundation of apportionment would lack systematic consistency (Gormley, 1988). Comparative disregard in the framework of jury trials has however become acknowledged and it has evidenced to be vastly effective.  Accountants today can be held liable for the amount of damage that they cause as long as a lawsuit against them produces collectible judgement and this is what happened with KPMG in the case of Carillion.

Carillion’s case scenario

It is the accountability of the board of managements within an organization to help make approvals for the corporation’s monetary accounts. The work of the auditors in the company is to ensure that they obtain assurance in regard to whether the monetary reports are free from facts misstatements. In the case where the auditors are not able to attain adequate and suitable audit indication to support the valuation, they are required to offer a modified outlook on the company’s financial records. The opinion should be followed by specific notations on the areas that of the accounts have an issue and are the cause of modification.

With the case of Carillion, KPMG were the auditors of this company for over fifteen years since its existence from the year 1999. Such a long period may inevitably call for questions on whether they could offer the individuality and impartiality that is vital to high value review (Brooks, 2018). The regulation that was approved in the year 2014 necessitates the registered companies to alter their audit organisations after a lengthy period of twenty years. With Carillion, the transitional arrangement ensured that the company would not need to change and replace KPMG until the year 2024. Many may argue that the audit firm may have impaired because of its independence by Carillion, something that they deny illustrating that that time line was not too long to cause them to be impaired.  

KPMG issues in regard to the case Carillion were not secluded only to its reviews of the corporation. The FRC always conducts examination on a taster of reviews for every chief audit firm that operates within the United Kingdom as part of an annual audit quality review (AQR). Even though Carillion was not a fragment of 2016-2017 FRC’s KPMG sample, the report that was provided by FRC indicated the need for KPMG to look further at its approach assessment to the inspection income and the connected training that is delivered (Brooks, 2018). The report by FRC illustrated that there were inadequate income analysis that was completed on certain Carillion reviews. The report also noted some faults in KPMG’s testing for damages to goodwill further affirming that there were some inadequate encounters of management suppositions.

 In the accounts of the year 2016, it was recorded in total of 1.6 billion euros which was the 35% of the corporation’s gross possessions and more than twice its net resources of about 730 million euros (ACCA, 2018).  This good will was amassed over acquisition of because the variance amid the financial price of the company acquired and the price that was compensated by Carillion. It is in this case rational to suggest that these resources might drop over time predominantly of the acquired business evidenced to be loss making (Brooks, 2018). The auditor ethics require the expectations that are used to approximation the goodwill to be verified each and every year to help assess whether it should be decreased or condensed in worth in the financial records.

The goodwill of Carillion was never weakened in its yearly financial records. This illustrates that the company endured self-reliant that the quantity that it paid for every purchase was defensible because of the sustained financial aids that it anticipated to derive from them. It is however significant to note that this is something that can be effortlessly vindicated for some of the company’s acquisitions. In the year 2011, about 330 million euros was recorder in goodwill when Eaga was purchased, however after five uninterrupted years of extensive losses, the figure remained unaffected in spite of the corporation declaring that the acquisition was an error (Brooks, 2018). KPMG’s 2017 half year apprise to the panel specified the filminess of Carillion’s calculations that vindicated not harming any of their good will. It was established that over history at least 80% of the group’s net present-day worth has been consequential from endlessness calculations. This means that 80% of the worth of cash streams that Carillon expected to attain through purchase was established on the conventions that the cash flows would always endure in permanency (ACCA, 2018).

KPMG audited for Carillon for 19 years and the process they managed to earn 29 million euros. There is no single moment during this time that they qualified their audit opinion on the financial statements (ACCA, 2018). What they did was just sign off the statistics presented to them by the corporation’s managements. If KPMG was set and willing to contest the administration, all the warning signs were clearly there and they were highly doubtful particularly on matters of manufacture contract incomes and the imperceptible asset of goodwill. Al these conventions were imperative to the picture of commercial heath that is obtainable in assessed yearly financial records. In failing to employ and opinion expert distrust towards Carillion’s destructive bookkeeping verdicts, KPMG was complicit in them. KPMG is liable to take some share of responsibility for the consequences.


Accountants have a role to play in ensuring that they provide valid data to clients’ failure to which they can be held liable in the common law. Accountants are expected by the law to assume and to bring only a reasonable and sensible point of skill and capability to the problem on which she or he is mandated to advice and in fitting situations. It is not always easy to safeguard against every situation in which an auditor may run the risk of suffering liability for expert slackness. It is however important for accountants to take some measures for instance ensuring that the exact duties that the accountant is given to perform by a firm have been agreed upon by both parties through a form of writing.






ACCA. (2018). The governance lessons of Carillion's collapse. Retrieved December 3, 2018,


Brooks, R. (2018, May 20). Carillion fiasco shows why auditors must be accountable to

parliament | Robert Brooks. Retrieved December 3, 2018, from

Gormley, R. J. (1988) ‘Developments in Accountants’ Liability to Nonclients for

Negligence’, Journal of Accounting, Auditing & Finance, 3(3), pp. 185–212. Available at: (Accessed: 3 December 2018).

Hemraj, M. B. (2002) ‘The Liability of Accountants and Auditors under the Federal

Securities Acts and the Racketeer Influenced and Corrupt Organizations Act in the USA’, Journal of Financial Crime, 10(2), p. 159. Available at: (Accessed: 3 December 2018).

Larson, Aaron (21 December 2016). "Negligence and Tort Law". ExpertLaw. Retrieved 3

            December 2018.

Professional liability of accountants and auditors. (2009). ACCA. Retrieved 3 December



External checks and balances. Retrieved December 3, 2018, from



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Managerial accounting provides an extensive and continuous flow of information focused on evaluating concepts such as cost center and profit center. Presently, modern day production procedures encounter a myriad of challenges such as aggressive competition among major market players and the urge to double production at abridged cost. Hence, the cost center comes into play ensuring everything pertaining price is under control. Price and authority are two elements that influence resource distribution. This essay will carry out an in-depth analysis on cost, investment, and profit centers and the contrast among the three.

Cost center

In simple terms, cost center is a section in a company that affects the profits indirectly. It adds onto a firm’s operation expenses (Suominen, & Lee, 2015). Via operation efficiency and customer service area, cost centers affect profitability of a business. Cost centers assist directors in utilizing resources wisely by availing insight into effective ways of using limited resources.

 The main goal of a cost center is monitoring a firm’s expenses hence it does not influence decision-making but later can detect any misuse (Suominen, & Lee, 2015). More so, dividing expenses into small sections helps for better management and control over resources. In the end, one is able to predict accurately on the expenses and thus better use of finances.

Profit center

It is a section within a firm that directly affects the profit margins of a company. In other words, it generates earnings based on independent factors associated with it (Clark, Lusardi, & Mitchell, 2017). The profit center allows directors to make decisions based on an item’s price and operating costs. Profit centers influence sales and the determinants that dictate a profit or a loss.

Profit centers draw the line between a loss and a win. This distinction allows for accurate evaluation and comparison. Therefore, after the study and evaluation of profit centers, managers can tell the most resourceful sections and decide on necessary actions to take on unprofitable sections (Clark, Lusardi, & Mitchell, 2017). It is vital to note that not all department are profit centers. For example, sections that gives necessary services to a business, which do incur profit.

Investment center

A section either generates profit or incurs operational costs. In the case of investment center, it handles its own revenues, assets, and running expenditures (Clark, Lusardi, & Mitchell, 2017). Therefore, it is self-sustaining. More so, the department’s tasks are unique to it. In other words, it is a subsection of a firm. Thus, it is a like an extended version of an organization or firm. It is vital to note that it can bring in profit or measure expenditure.

Multi-hospital company examples

Examples of costs centers in multi hospital organizations are the accounting sections. An accounting department audits a multi hospital’s expenditure and weighs on its losses. The auditing department itself does not generate any profit for the hospital but its services are essential for running the day-to-day operations of the hospital (Clark, Lusardi, & Mitchell, 2017). On the other hand, the services offered can be profit centers as they are part of the sales sections. A client pays in order to get service from the institution. The library and IT sections can be part of the investment department due to their self-sustaining nature.

 In short, a profit center is a department with the ability to create revenue against its expenditure consequently has effects on the overall profit margins. In the other hand, a cost center can incur expenses but not bring in profit from its expenditure. Lastly, an investment center out sources its funds and acts as an extension to the organization.

















Clark, R., Lusardi, A., & Mitchell, O. S. (2017). Financial knowledge and 401 (k) investment performance: a case study. Journal of Pension Economics & Finance, 16(3), 324-347.

Suominen, K., & Lee, J. (2015). Bridging Trade Finance Gaps. Brookings Institution, January.


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