Managerial Accounting

Sharee Sewell

Unit 1 DB

My outlook on Randy's reasoning

In my opinion, Randy is going to explore whatever option he wants to. Nevertheless, if the accrual basis of accounting is used then he must accumulate the cost (Paul, 2008). While, if he is using cash basis of accounting Randy can exclude it. However, this action pertaining to loan should record as accrual and the opposite on cash basis accounting taken in as debt (Bradford, 2007). Randy omitting asset and liability will change owners' equity. This is a bad idea, and will lead to issues in terms of jail time due to falsifying financial statements if omitting is made.

Randy's choice okay beneath GAAP and conditions in which it would not be acceptable

The General Accepting Accounting Principles (GAAP) guidelines, states smaller businesses like randy's are only required under specific situations obligatory by contract (Paul, 2008). The GAAP requirements that every organization be reliable and consistence, since they need all business to show clearly the happenings in their company depicting economic reality. Randy can be fined by the GAAP for falsifying financial statement for any purpose (Paul, 2008).

Is Randy's choice acceptable according to GAAP? One should think about the type of accounting reporting practices Randy uses in his company. Cash basis accounting is once income accepted as cash is taken in and expense is verified as cash is compensated. While accrual basis accounting is changing procedure to be familiar with income when receive and expenses when acquire (Wild, Shaw, Chiappetta 2009). So if Randy choose to utilize cash basis accounting it's considered suitable under GAAP procedures.

Randy's actions under GAAP actions are unacceptable depending on set up of accounting periods and financial data recording. Meaning consistency connecting periods and organization should not modify the method of reporting supply each period without make a note of legitimate grounds for change (Bradford, 2007). Which depicts Randy purpose for altering inventory reporting method is to petition the bank for a loan. This is unacceptable and wrong.

Reference

Bradford, T. (2007). GAAP and Accounting Standards. Retrieved from

http://tiffany-bradford.suite101.

Paul, S. (2008). General Accepted Accounting Principles or GAAP: What does it mean? Retrieved from http://www.legalzoom.com/business-management/running-your-business/general-accepted-accounting-principles-or

Wild, J.J., Shaw, K.W., Chiappetta, B. (2009). Fundamental Accounting Principles. New York, NY:

McGraw-Hill.

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