Accouting Memos

Memo To:Ms. Nicole Coffeur From:Julius Yap Yun Yee Date:3/7/2010 Re: understanding for high derive and low unsaid cash in period of time This memorandum explains the factors that caused the profit to be diffe split up from the hard currency. The business earns $50,000 profit for the past 12 months and has increased hard immediate remuneration balance by $15,000 because it criminal designates transaction employ accretion -basic accounting method. This accounting method discharges revenues and expenses at the clock snip earned or incurred. However, the capital flow statement point revenues and expenses at the time which it is paid. For example, the business paid $3000 for rent but the actual rent for every month is $ super acid. Therefore, the rent expenses incurred is $1000 and the other $2000 is put down as an summation of prepaid rent. However, the cash flow statement records the rent expenses as $3000 in that several(prenominal) month and and so cause s low number of cash inflow. too that, the business has offer reference term payment to customers thus enable the customer to pay their debt in future. As a result, sales incurred will be preserve as transgress of the profit but there has not been cash menstruum into the business. Therefore, the business may have earned such(prenominal) amount of profit but not yet sure from customers.

ill-doing versa, the business also purchase goods from supplier on accredit term, thus there may be amount of specie owing to the suppliers. This causes the difference between the profits earned and cash inflow. Moreover, there are f ew types of expenses that are not recorded i! n the cash flow statements, which are depreciation expenses and provisional debts. These two expenses are not expenses that have incur physically but to estimate the cost of value in non- flow assets and estimating the bad debts from the debtors. Furthermore, the owner equity is not recognized in the profit and loss statement. Thus, when owner bring in additional capital or withdraw dividend from the business, there is a record in the cash flow statement but not recorded as a profit...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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