Question

1. Choose at least two (2) specific transactions and determine the types of accounting methods that would be available for your business. Recommend the method that would minimize the tax liabilities for the company. Provide support for your rationale.

2. Of the two specific transactions you selected in Part 2, propose one (1) special accounting method, which your company would use to account for these transactions. Indicate any significant tax consequences that may result from the method you proposed.

the part 2 here is referring to question 1 above question 2

Answer 1

Answer 1.

1. Choose at least two (2) specific transactions:-

Sr. No.	Specific transaction
1.	Service revenue
2.	Rent

2. The Determine types of accounting methods that would be available for your business:-

• Accrual method
• Cash method

?

3. Recommend method that would minimize tax liabilities for company:-

Cash method offers several advantages: it is simpler than accrual method; it provides a more accurate picture of cash flow; & income is not subject to taxation until money is actually received. A disadvantage of cash method is that expenses & revenues are not matched in time. For example, if a company provides landscaping services to a client in early April, it will likely send that client an invoice in can & cannot receive payment for services provided until June. Meanwhile, employees will be paid for time they spent on the project in April & Can. Accordingly, accounting records will show high expenses in April & May with no corresponding income.

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