Question

In: Accounting

Occurrence- transactions, and event that have been recorded have occurred and pertain to the entity Completeness-...

Occurrence- transactions, and event that have been recorded have occurred and pertain to the entity

Completeness- all transactions and events that should have been recorded have been recorded

If assets, liabilities, or equity are not complete balances may be understated or overstated

With regard to the answer, what might be the reasons why when performing balances managements, one can find that:

Assets > Liabilities+Stockholders equity ? In your answer provide specific examples and ways to mitigate the errors.

Expert Solution

Accounting Equation : Assets = Stockholder's Equity + Liability

This equation is the foundation of double accounting system and it represents the company's financial position in equation form. Therefore, based on above equation, accounting ensures the balance of Assets is equal to Stockholder's Equity + Liability. All transactions are recorded by applying double entry system in which the Debit amount must be equal to Credit amount of respective head of Accounts.

However, if something is wrongly recorded either by way of wrong amount or wrong place then accounting equation may create this type of situation like Assets>Liabilities+Stockholders equity. This type of errors occur due to negligence and called as clerical errors and technically know as error of inadvertence.

Following are some examples of this types of errors along with solution to mitigate the same:

Double Posting: Double Posting in any single account for the same transaction will result in this type of error and will affect the accounting equation like Assets of $10,000 purchased on credit basis and double amount posted in Assets Account. This problem will over-cast the balance of Assets and can be resolved by passing an adjustment entry in the following manner:

Suspense A/c Dr $10,000

To Assets A/c $10,000

(Being Amount over-stated by $10,000)

Wrong Posting in Ledger: While posting transactions in ledger, if wrong ledger is selected then it will also affect the accounting equation like Loan and Advance of $5,000 give to staff and Ledger of Loan & Advances (Liability) is selected while posting then Assets will be understated by the advance amount. This problem can be resolved by following adjustment entry:

Loan & Advance (Assets) Dr $5,000

To Loan & Advance (Liability) $5,000

(Being Amount wrongly posted in Liability Ledger)

ekkarill92 answered 16 hours ago

A. Suppose you have three possible outcomes following the occurrence of an event. These are {no...

A. Suppose you have three possible outcomes following the occurrence of an event. These are {no harm, some harm, a lot of harm}. Are elements of this set of outcomes mutually exclusive? Statistically independent? Can they be both? Why or why not? B. Suppose you have three dimensions of harm of concern - confidentiality, integrity, and availability. Following the occurrence of an event, you may or may not suffer a breach of confidentiality, integrity or availability. Whether you suffer loss...

Jan 1, Abi started a photography business. During January, the following transactions occurred and were recorded...

Jan 1, Abi started a photography business. During January, the following transactions occurred and were recorded in the company's books: Abi invested $13,700 cash in the business in exchange for common stock. Abi contributed $22,000 of photography equipment to the business. The company paid $2,300 cash for an insurance policy covering the next 24 months. The company received $5,900 cash for services provided during January. The company purchased $6,400 of office equipment on credit. The company provided $2,950 of services...

During November, the first month of operations, the following transactions occurred: Date Event 1-Nov Paid $7,200...

During November, the first month of operations, the following transactions occurred: Date Event 1-Nov Paid $7,200 for 12 months rent on office space 2-Nov Purchased office furniture for $8,950. 3-Nov Purchased $11,354 of additional office supplies on account. 8-Nov Borrowed 20,000 from the bank for operating cash. The note has a 3% interest rate (simple interest) and is to be paid back in 4 years 15-Nov Received $10,800 from Fortuna Inc. for work to be performed over the next 12...

1. Unearned revenue a.is recorded when services have been performed for the customer. b.is recorded in...

1. Unearned revenue a.is recorded when services have been performed for the customer. b.is recorded in an asset account (other than cash) when cash is received. c.represents future revenue. d.All of these choices are correct. 2. The adjusting entry to record accrued expenses includes a a.credit to an expense account. b.debit to an expense account. c.credit to an asset account. d.debit to a liability account. 3. The adjusting entry to record accrued expenses a.is the same journal entry as recording...

You have been hired as a CPA to perform an audit of an entity. You do...

You have been hired as a CPA to perform an audit of an entity. You do not have any evidence that suggests the organization is a government organization. No evidence suggests that the government has the power to dissolve of the entity. All net assets are allocated to among different entities, which do not revert to a government. Additionally, it does not seem that the organization has the power to enact a tax levy. Analyze the organization to determine if...

Give an example of a situation you have been in where Groupthink or Groupshift has occurred....

Give an example of a situation you have been in where Groupthink or Groupshift has occurred. Describe the situation, why you think it is an example, and what the outcome was.

The American Heart Association is hosting an awareness event in your community and you have been...

The American Heart Association is hosting an awareness event in your community and you have been assigned the task of planning a Fun Run/Walk to raise money for the event. Decide on and explain the use of a time table that you could use in planning this event and show the time table you would develop for the event.

Under current U.S. GAAP, assets that have been donated to a company are recorded at fair...

Under current U.S. GAAP, assets that have been donated to a company are recorded at fair value. By basing your argument on the conceptual framework, argue in favor of the current GAAP treatment for donated assets.

Question 2 (optional) You have been appointed the Head of Administration of a public sector entity,...

Question 2 (optional) You have been appointed the Head of Administration of a public sector entity, which is currently applying cash basis of accounting to the recognition of financial transactions and events. You have a strong conviction that the use of accrual basis of accounting is most appropriate for the entity. Required: Write a Memorandum to the Principal Spending Officer of the entity advocating for the immediate adoption and implementation of the accrual basis of accounting for the entity. In...

Problem Description You have been asked to develop basic Event Broker functionality for a piece of...

Problem Description You have been asked to develop basic Event Broker functionality for a piece of home automation software. Your system needs to: Subscribe event handlers to handle different types of events when they occur Unsubscribe event handlers that no-longer need to handle specific events Receive emitted events Handle events by calling subscribed event handlers Events & Handlers: Each event has a type Event handlers may subscribe to be handle events of a given type An event handler can handle...