Expert answer:Assignment 2.3: Justification Report – Part 3 (F
Answer & Explanation:Assignment 2.1 _Justification Report _Part 1.doc Assignment 2.2 Justification Report Part 2.doc Assignment 2.3: Justification Report – Part 3 (Final)Needs to be at least 4 to 5 pagesDue Week 7 and worth 180 pointsIn Assignments 2.1 (Part 1) and 2.2 (Part 2) of the Justification Report, you built up the major parts of your formal, researched justification report (Problem Statement, Overview of Alternatives, Criteria, Methods, Evaluation of Alternatives, Findings and Analysis, and References). For Part 3 you will begin by inserting your revisions of Parts 1 and 2 based on your instructor’s suggestions. Then, you will include a few new sections. Note: Some sections presented below are out of order so pay attention to where the section should go (for instance, the Transmittal should be the second page of your report based on the provided template). It is essential that you present the final report in the correct section order.Use the basic outline below to draft your paper. Organize your responses to each question under the following section headings:Preliminary Parts (for Question 1)Introduction (for Question 2)Problem Statement (for Question 2b)Terminology (for Question 2c)Major Sections of the Report (for Question 2d)Scope and Limitations of the Research (for Question 2e)Recommendation (for Question 3)References (for Question 4)Using the provided template from Week 7, write Part 3 to complete a single-spaced report in which you:Create the preliminary parts of the report that precede the Introduction (after reading Chapter 11 in the textbook). Each element (1a to 1d) appears on a separate page (1a should be page 1, 1b should be page 2, etc.). The preliminary part includes:Title PageTransmittal (stand-alone business letter)Table of ContentsExecutive SummaryCreate an introduction that tells what your report is about. The introduction includes:Begin with a general introduction paragraph that gives the reader any needed background information on the company or problem.Include the Problem Statement that you already created and revised in Part 1.Include terms that readers will need to know in order to understand the report.Briefly summarize the major sections and findings of the report developed in Parts 1 and 2. Note: This is in addition to including the revised sections not instead of including the revised previous sections from Parts 1 and 2.Discuss what your report will cover and what it will not (including limitations such as research, time, information, or any other factors the reader should consider when reading the report).Create the Recommendation section of the Report.Provide a one to two (1-2) sentence recommendation based on what your Evaluation of Alternatives and Findings and Analysis sections have determined is the most feasible alternative (i.e., solution) to the problem in the Problem Statement.Create the References section, which goes at the end of the Report by pasting in your revised References page.Note: Remember to organize the report by the section headings. The report should reflect a style and format appropriate for business; single spacing and bullet points are acceptable for formal business reports.
assignment_2.1__justification_report__part_1.doc
assignment_2.2_justification_report_part_2.doc
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Assignment 2.1: Justification Report – Part 1
Assignment 2.1: Justification Report – Part 1
The root cause of the problem
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For a long period of time, our highly esteemed clients have been deciding on the type of
accounting methods that they like their own accounts to be handled. There are many times that
these clients make us of one or even more accounting methods. Many of our clients want what is
convenient to them and this is what usually guides them. Nevertheless, the most complaints that
we are receiving is that most of them are making massive losses in their businesses. As a matter
of fact, our firm has been operational for around twenty years now. We know that there is a
tendency of people starting up a new business and tend to remain operational for about three
years and then become bankrupt. According to the research we have carried out this businesses
end up falling because of the accounting criteria being used (Hung, 2000). For this reason, if the
problem that is facing us as well as other business is not operational accounting but related to
business running, then we would manage to retain and maintain many clients. This would lead to
increase in profitability as well as increased operations.
Alternative solutions that needed
Many businesses normally get to blunt side because of the tax burden they experience in
their operations. In order to manage arriving at the required tax, we normally use accounting
periods that accounts annually showing different operations that have take place during that
period. The two main accounting methods that we have already adopted are accrual accounting
method and Cash accounting method (Hung, 2000).
To start with Accrual accounting method is referred as the method where various
transactions are updated as soon as they occurred. This is mostly in disregard to the time when an
item is paid for or delivery time of that item. However, the cash system method is where
transaction is update especially when payment has already been permitted and delivery of that
item made. For example, if the sale of an item was made on November and the payment of that
item was done in February, according to accrual method of accounting, the update of this item
will be made in the month of October however, in the cash system, the update of the item will
actually be made in February.
As a matter of fact, the main victims of our business are the small business entities. In
oder to make clear on basic need of settling for one accounting method especially for these
business , we need to set criteria to be followed for these small businesses and see whether they
will change in profitability and management in the next fiscal year (Sekaran, 2006)..
Criteria of choosing from the best alternatives
For the accrual and cash method we may subject various businesses with the following; per
year, the business should at least have a turnover of less than three million dollars. The second
thing is that they are required to have a tax levy pay of lea than a million dollar annually.
Thirdly, we may consider any business that can run on accrual or cash system despite of the tax
figures that business is subjected to. Some of these businesses may include charity organizations
and scholarly institutions. Another thing to put into consideration is whether the businesses have
always made all their tax levies entirely on accrual system or the cash system. Therefore, these
will always subject the businesses to the preference they may have always held. Finally our firm
may consider the businesses mostly on the basis of the preference in order to avoid situations that
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JUSTIFICATION REPORT
are contradictory with clients on ways of handling all their accounts. Thus, in this case the
businesses will need to be consulted and give feedback on what they intend to have.
Conducting the research
At the opening of the fiscal year, the business that will be selected in the above
hypothesis will need to be classified so as their transactions to be considered under the Accrual
or Cash systems. During this fiscal year, all the transactions made will strictly be put in the
above criteria and this will be done in the next three fiscal years. Therefore, the three years is
actually the time that has already been identified for any joining business to exit in our business.
At the end of the period, the businesses that have already been under evaluation will actually be
investigated as whether they already survive or has fallen (Huang, & Brown, 1999). They will
also be evaluated on how they may be fairing as well as coping up with the tax system. For this
reason, the system that will have acquired greater percentage will definitely become the main
guiding principle. In conclusion, when the favorite alternative is actually chosen as the best for
the accounting firm it will be the principles of the business to give the upcoming business on the
best accounting method that may suit best for that business to exist in the market.
References
JUSTIFICATION REPORT
Huang, X., & Brown, A. (1999). An analysis and classification of problems in small business.
International Small Business Journal, 18(1), 73-85.
Hung, M. (2000). Accounting standards and value relevance of financial statements: An
international analysis. Journal of accounting and economics, 30(3), 401-420.
Sekaran, U. (2006). Research methods for business: A skill building approach. John Wiley &
Sons.
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Assignment 2.2 Justification Report Part 2
Justification Report Part 2
Root problem of the business
For so many years, we have given our clients priority to decide on the type of accounting
methods that they would like their accounts handled as well as use more than one or even more
JUSTIFICATION REPORT
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accounting methods. As a matter of fact, many of our clients are normally guided by what they
consider to be convenient. Nevertheless, we are getting so many complaints from our clients
who are making massive losses in their businesses. It is a fact that our firm has been operational
for around twenty years now. There is a tendency of many starting businesses to remain
operational for around three years and then declared bankrupt (Chesla, 2000). To my opinion the
main problem that is making them bankrupt is the accounting criteria being applied by various
businesses. Therefore if the main problems causing the exit of many clients in the market are not
operational accounting but related to running of the businesses, then it is true that our firm will
manage to retain so many clients and end up increasing profitability as operational increases.
Alternative solutions
It is a fact that many businesses usually get to the blunt side because of the tax burden
they have on their operations. In order to reach at the tax required, we normally use accounting
periods that accounts annually together with the operations that have already taken place in that
period. The two major accounting methods that we have already adopted are cash accounting
method and Accrual accounting method. To start with the Accrual accounting method referred as
the method in which all transactions made are updated immediately they occur. This is actually
in disregard to the actual time when the delivery of item was paid for. On the contrary, the cash
system method is where you normally update transactions immediately when delivery has been
made or when the payment has been remitted (Dechow, 1994). For example, if sales were made
on November and the payment of the items was made in January, then according to the accrual
method, the update will actually be made in that month of November on the other hand, in cash
system, the system will actually be made in January.
As a matter of fact, our major casualties are those small business entities. In order to clarify the
dire need to settle for one accounting method for small entities, we are needed to set criteria for
these small businesses and see whether they be any changes especially in the profitability in the
financial year.
Criteria of choosing from the given alternatives
For both accrual and cash system we can easily subject various businesses with the
following; First of all the businesses are required to have a turnover that is less than three million
per every financial year. Secondly, the businesses need to have a tax levy that does not exceed
million dollars per every financial year. Thirdly, we may consider any business that can run on
Accrual or cash system despite the tax figure subjected to it. The business may consider
including charity organizations together with the scholarly institutions. The fourth consideration
will be on businesses that have made tax levies either entirely on cash or accrual method.
Therefore, such businesses we subject them according to the preference they have held (Hung,
2000). Lastly, we can consider businesses on their preference so as to avoid situations that are
contradictory with the clients mostly on the basis of handling all their accounts properly.
Therefore before taking any initiative our firm will have to make consultations and give feedback
on what they can have.
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Conducting the research
At the start of the financial year, the business that will be chosen following the above
criteria will be classified according to their transaction in order to be considered under the
Accrual or cash system. Throughout the financial year, their transactions will be required to be in
the above criteria and this need to be done for at least three financial years. As a matter of fact,
three years is actually the time frame that has been indentified for all businesses that are starting
operating to exit the business. Therefore, at the end of these three years these firms that have
been under evaluation and decision have to be made whether they continue their operation or be
demolished (Barth, Cram, & Nelson, 2001). Also, it will be put in consideration how they have
been coping up or fairing on with the tax system. In fact the system that will manage to yield a
great percentage of success will actually become the main guiding principle of these firms.
Therefore when choosing the alternative that is favorite as an accounting method for the firm, it
should be the principle of the firm to give all the upcoming businesses on the best accounting
method that will suit that firm in order to continue its operations in the market.
References
Barth, M. E., Cram, D. P., & Nelson, K. K. (2001). Accruals and the prediction of future cash
flows. The accounting review, 76(1), 27-58.
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Chesla, E. L. (2000). Practical solutions for everyday work problems. New York: Learning
Express.
Dechow, P. M. (1994). Accounting earnings and cash flows as measures of firm performance:
The role of accounting accruals. Journal of accounting and economics, 18(1), 3-42.
Hung, M. (2000). Accounting standards and value relevance of financial statements: An
international analysis. Journal of accounting and economics, 30(3), 401-420.
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