Explain Accounting Cycle In Detail With Examples

 Explanation Of Accounting Cycle In Detail With Examples

The accounting cycle can be defined as an accounting activity of identifying, recording, and processing financial data from the beginning and resulting in financial statements at the end of the period (Wood & Sangster, 2005). Therefore, the sequence is made up of steps that have to be followed from the beginning to the end of an accounting period. Accountants of businesses – including the most popular Amazon, Facebook, Microsoft, Google, and Apple – have to account for, document, and report useful financial information of their business to the public. This provision allows those who have an interest in the business to view this important information because it shows how the business performed financially. When preparing financial statements like the income statement, statement of Retained Earnings, balance sheet, and cash flow statement, accountants must go through each step of the accounting cycle across the year to ensure accuracy (Betz, 2019). In addition, most businesses use software that processes massive accounting information.

Officially, an accounting cycle has eight accepted steps, especially when the double-entry system of bookkeeping is being used to record transactions (Hinojosa, 2021), but other businesses may decide to add additional steps to the eight.

The eight phases of the accounting cycle:

Step 1. Identifying and analyzing transactions from source documents

Step 2. recording transactions to journals

Step 3. posting to ledger

Step 4. prepare trial balance before adjustments

Step 5. Adjust entries for accuracy of worksheets

Step 6. Prepare Adjusted Trial balance

Step 7. Prepare Financial statement

Step 8 Closing Entries

Step 1. Identifying and Analyzing Transactions

The first step in the accounting cycle involves getting information from a source and identifying its purpose as a financial transaction. A source document will have details of a business transaction. sales receipts and purchase orders are examples of source documents. A business transaction can be viewed as a starting point for creating financial statements of a business because these transactions affect the financial information being reported on financial statements. Investments, borrowings, and selling goods and services are business transactions.

For instance, An accountant hired by Alan Gunna (which is a made-up business) looks through  source documents where she identified and analyzed the following business transactions for the month ending June 2021:

June 1st Started business with $50,000 cash.

June 3rd Paid for rent with $6,000 cash.

June 10th Purchased goods with cash for $7,500

June 17th Purchased machines on an account worth $15,000

June 28th Received $12,500 service fees cash.

Step 2. Recording Transactions To Journals

Betz (2019) showed how the transactions - identified in step 1 - are posted to the journals. Journals are sometimes called books of original entry. Ideally, Journals should be organized chronologically, starting with the first transactions of a certain period. All the transactions have to be recorded in their respective journals, using the accounting equation - which states that the business’s total assets should be equal to its liabilities and equity at a particular period. The journal entry should have at least two opposing transactions which are balanced (or equal).

Looking at the previous example of the Alan Gunna business,  the accountant will enter the identified transactions into journals as follow:

The Journal Entries

The Journal

2021 1st June Cash Alan. G Capital

Dr $ 50,000

Cr $ 50,000

The Journal

2021 3rd June Rent Expense Cash

Dr $ 6,000

Cr $ 6,000

The Journal

2021 10th June Stock Cash

Dr $ 7,500

Cr $ 7,500

The Journal

2021 17th June Machine Account payable

Dr $ 15,000

Cr $ 15,000

The Journal

2021 28th June Cash Service Revenue

Dr $ 12,500

Cr $ 12,500

Step 3 Posting To Ledger

Once the accountant records the transactions into a journal, they can now post them into the general ledger. This ledger is used by a business to track financial activities. Betz (2019) called a general ledger a summary of a business’s accounts. Since a Ledger account is a collection of all journal entries, it shows all the debits and credits of each business transaction. Wood & Sangster (2005) showed how accounts can be visually represented in a form of a T-account. This type of account has the debit side on the left and the credit side on the right: both sides are usually made equal by balancing the totals.

Example:

Dr Cash Cr

June 1^st 50,000 June 3^rd 6,000

28^th 12,500 10^th 7,500

balance c/d 49,000

62,500 62,500

balance b/d 49,000

Capital

balance b/d 50,000 June 1^st 50,000

50,000 50,000

balance b/d 50,000

Rent Expense

June 3^rd 6,000 balance c/d 6,000

6,000 6,000

balance b/d 6,000

Stock

June 10^th 7,500 balance c/d 7,500

7,500 7,500

balance b/d 7,500

Machine

June 17^th 15,000 balance c/d 15,000

15,000 15,000

balance b/d 15,000

Accounts payable

balance c/d 15,000 June 17^th 15,000

15,000 15,000

balance b/d 15,000

Service Revenue

balance c/d 12,500 June 28^th 12,500

12,500 12,500

balance b/d 12,500

Step 4 Prepare Trial Balance Before Adjustments

The unadjusted trial balance is prepared to find errors that might have occurred when entering financial information during the previous steps. AccountingTools (2021) states that the trial balance can be viewed as a list of all ledger accounts from the previous step and the balances on the debit side are expected to equal those of the credit side. When not equal, they are adjusted in the next step of the accounting cycle. During this step, the accountant takes the information in the general ledger to a trial balance that shows all total balances of debits in one column and credit entries in another column, at the same time. These total balances are obtained by adding all the debit balances and all the credit balances.

Step 5. Adjusting Entries For Accuracy Of Worksheets

At this step of the accounting cycle, the errors made from previous steps are edited and an ‘extended trial balance’, or worksheet is prepared: the debit and credit balances of the trial balance have to remain equal even after the adjustments. There are situations when the total balances of debits and credits are equal but errors exist, errors as posting to the wrong account (Hinojosa, 2021).

Example: If the accountant hired by Alan Gunna finds that the total debits and credits were $77,500 and $60,500 respectively. He has to go through all the journal entries carefully and identify the missing  $17,000 on the credit side before adjusting to the correct figure.

This step is important for accounting for accruals and deferrals. On one hand, the accruals are revenues or expenses that were incurred, but not recorded like payable wages, but on the other hand, deferrals are receipts of payments made in advance or treated as upcoming expenses such as prepaid insurance.

Step. 6 Prepare Adjusted Trial Balance

The adjusted trial balance is prepared after adjusting the entries and when the debit and credit totals are still equal.

For example, the accountant hired by Alan Gunna will prepare the following adjusted trial balance :

Alan Gunna

Trial balance

Period ending June 2021

Cash Rent expense Stock Machine Accounts payable Service Revenue Capital	Debit $ 49,000 6,000 7,500 15,000	Credit $ 15,000 12,500 50,000
Total	77,500	77,500

Step 7 Prepare Financial Statements

According to FreshBooks staff (2021), once the above trial balance is complete, it’s used to prepare financial statements like the income statement, Statement of Retained Earnings, the Balance Sheet, and the Cash Flow Statement. The net income found after the preparation of an Income Statement is used when preparing the statement of Retained Earnings, the ending balance in the Statement of Retained Earnings is used when preparing the balance sheet, and the statement of cash flow is the last one to be prepared because it uses information from the other financial statements.

The income statement reports the income of the business when expenses are deducted from revenues over a measured period. Therefore, it shows the financial performance of the business in a certain period. The balance sheet will show the financial position, in terms of assets compared with the liabilities and Equity, of a business at a point in time. In other words, the balance sheet presents a snapshot of the organization at the date for which it was prepared (Wood & Sangster, 2005). The cash flow statement gives light on the cash situation in a particular period, that is exactly where the cash was coming from, and where it went (inflows and outflows) and the cash flows are organized into categories of operating, investing, and financing activities. The preparation of these statements is necessary and they are reported for the whole public to see. The public may have different interests in a business and may want to know whether the business made profits, increased share values or assets, rewarded shareholders, and growth, etc. Therefore, critical information is required by the tax authority, society, customer, supplier, investors, partners, employees, and media. And, the financial statements prepared from the accounting cycle provide the required financial information.

Example

The preparation of Income Statement for Alan Gunna:

Alan Gunna

Income Statement

Period ending June 2021

Revenue:
Service Revenue	$ 12,500
Total Revenue		12,500
Expenses:
Rent Expenses	$ 6,000
Total Expenses		6,000
Net income		$6,500

Preparation of Statement of Retained Earnings for Alan Gunna:

Alan Gunna

Statement of retained earnings

Period ending June 2021

Balance 1/1/21	-
Net Income	$6,500
Less: Dividend	$6,500 -
Balance at end	$6500

Preparation of Balance Sheet for Alan Gunna

Alan Gunna

Balance sheet

Period ending June 2021

ASSETS	LIABILITIES
Cash $ 49,000 Machine 15,000 Stock 7,500	Accounts payable $ 15,000 EQUITY
	Capital $ 50,000 Retained income 6,500
Total Assets $ 71,500	Total Liabilities and Equity $ 71,500

Step 8 Closing Entries

Usually, the last step of the accounting cycle involves closing (or zeroing down) the Income Statement account at the end of the financial period and moving the balances to the balance sheet. Contrary, the balance sheet account is not closed because it shows the business’s financial position at a given period. The reason why the income statement account is zeroed down is to allow for the tracking of both revenues and expenses in the coming financial period.

Conclusion

The accounting cycle is an important process for any business that wishes to report the financial statements to those interested, including people and other institutions. The steps in the accounting cycle may be titled differently by accountants or software might be used to come up with reports, but no matter the title or software used, the same accounting principles are considered, especially when reporting transactions that happened during a certain period. Therefore, Gilbertson et al. (2013) show how all businesses (including well-known ones like Amazon and Facebook) have to disclose their financial performances to the public for their fiscal period.

References

• Wood F., Sangster A. (2005) Business Accounting 1 (10th ed.). Pearson Education Limited.

• Betz, J. (2019. August 16) What Is the Accounting Cycle? (+8 Easy Steps). learn.g2. https://learn.g2.com/accounting-cycle

• Hinojosa, A. (2012. July 2) What Is the Accounting Cycle? (With Steps and Examples). indeed. https://www.indeed.com/career-advice/career-development/accounting-cycle

• AccountingTools Team (2021. April 12) Adjusted trial balance example and explanation. AccountingTools.https://www.accountingtools.com/articles/what-is-an-adjusted-trial-balance.html

• lumen learning Team. (2021) Chronological, Step-by-Step, and Spatial Organization. lumen learning.https://courses.lumenlearning.com/wm-publicspeaking/chapter/chronological-step-by-step-and-spatial-organization/

• Gilbertson B. C., Lehman W. M., Harmon-Gentene D. (2013) Century 21 Accounting: General Journal, Introductory Course (10th ed.). Cengage Learning.

• Freshbooks Team. (2021) How to Prepare an Income Statement? A Simple 10 Step Business Guide. Freshbooks. https://www.freshbooks.com/hub/accounting/prepare-an-income-statement

1. Describe the steps in recording and posting the effects of a business transaction and provide some examples of source documents used in these steps.

solution

When recording accounting information, look through the source documents and identify all the business transactions. These transactions are then analyzed and measured for their effects on the business’ accounts. The transactions identified are then entered into their respective journals, and to ensure the accuracy of all the records, those journal entries are transferred to the general ledger.  The general ledger is separated into accounts, called T-accounts, showing what has been debited or credited.

2. Which steps in the accounting cycle are performed throughout the accounting cycle?

solution

The accounting cycle is a continuous eight-step process performed periodically and used by businesses to identify records, and process financial information. This information leads to financial statements that are disclosed to the public. Therefore, since the accounting cycle is continuous, the following steps are performed throughout the cycle: Identifying and analyzing transactions, recording them to journals, posting them to the ledger, preparing an adjusted trial balance, adjusting the entries, and preparing an adjusted trial balance.

3. Which of the steps in the accounting cycle are performed only at the end of the accounting period?

solution

The accounting cycle is a continuous process that never ends. That is, as long as the organization is still in business, the accounting cycle plays its parts, ensuring that accurate information is processed and reported to the public. Nevertheless, the step performed only at the end of the cycle is close entries of the temporary accounts (mostly) of the income statement.

4. What is the purpose of the "dividends" account and under what circumstances would this account be increased?

solution

The “dividends” account is for rewarding the stockholders (or owners) of the business with cash, during profitable times. Stockholders are rewarded for owning shares – or part of the stock. The management has a choice of retaining the earnings, instead of paying them out as dividends. Therefore, since retained earnings account increases with credits, the dividends account must increase with debits.

6. Describe the nature and purposes of the general journal, ledger, and chart of accounts.

solution

The general journal has the original entries of the business transactions. Therefore, It’s where the transactions are recorded first. The records of a transaction here can be traced easily when needed. 

The ledger is where the journal entries are posted and classified clearly to see which parts of a transaction are debits or credits. This information will be needed to prepare the trial balance, which in turn shows all the total debits and credits.

The chart of accounts (COA) is a financial organizational tool that provides a complete listing of every account in the general ledger and it clearly breaks them down into subcategories. This makes it easier to locate specific accounts because each chart of accounts typically contains a name, brief description, and an identification code.

7. What are the purposes of an unadjusted trial balance? Describe the types of accounts that would appear on this type of trial balance.

solution

The unadjusted trial balance is prepared to find errors that might have occurred when entering financial information during the previous steps. the trial balance can be viewed as a list of all ledger accounts and the balances on the debit side are expected to equal those on the credit side.

8. If you found that the total of the debits column of the trial balance for a company is $200,000, while the total of the credits column is $180,000, what are some possible causes of this difference?

solution

When the trial balance totals are not the same, we might consider that there were some mistakes when entering data into the journals and ledgers. For example, the might have been unbalanced entries, some entries might not have been made at all,  information may be entered more than once,  and some entries might have been entered into wrong accounts.

Part 2

Invested $20,000 cash in the golf course business.

Purchased Hampstead Golf Land for $15,000 cash. The price includes land $12,000, shed $2,000, and equipment $1,000.

What are the factors that influence an organization’s choice of entry mode in a country? Discuss how the chosen model fits with an organization's goals and objectives.

 #1: What are the factors that influence an organization’s choice of entry mode in a country? Discuss how the chosen model fits with an organization's goals and objectives.

#2: What are the country factors that influence an organization’s decision to enter that country? What is the impact of the culture and geography on the organization’s value-chain activities being relocated to the country?

• In your discussions, cite examples when you describe theories from your reading and research. You may use examples from your organization or industry, current or recent newsmakers, or other reliable sources.

Solution

Introduction

According to Lamb et al. (2015), there are lots of ways a company can enter a foreign market in today’s globalized world and all the options available have their own risks and rewards. Therefore, for a company to succeed in deciding the best entry mode, the management has to carefully access the long-term vision, goals, internal capabilities, and the foreign market in its entirety, to fully understand the risks and challenges of its international entry strategy. Leeman (2021) defined entry mode as the institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a market.

1: The factors influencing an organization’s choice of entry mode in a country

When it comes to choosing the entry mode, an organization’s choice is influenced by both external and internal factors. The external factors include target country market, production capacity, and environmental factors. While internal factors include the company’s resources, products, internal processes, and capabilities.

Target country market

Before entering a foreign country, a business would want to know the overall size of the market, the infrastructure, and the availability of buyers (Guenzi & Geiger, 2011). For small markets, the management may decide to enter using less risky modes because of the low sales while for larger markets they may opt for higher risk modes because of the high sales volumes. For instance, the banking industry has a larger sales potential market. therefore banks usually enter new markets by investing in subsidiaries and branches enough to cover a wider geographical area in a country.

Target country production capacity

The factors of production in a foreign country will determine the mode of entry, for instance, the cost, quantity, and quality of land, labor, energy, and other useful economic elements influence the mode of entry.

Target country environmental factors

The choice of entry can be influenced by government policies, regulations, economic benefits, and socio-cultural conditions of the target country. Tax restrictions, tariffs, geographical distance, cultural distance, and other barriers may force a multinational company to have a base in a county instead of exports from one country to another.

How the chosen mode that fits with an organization's goals and objectives.

Exporting

This is an externalized way of establishing a physical presence in a foreign market by direct marketing and selling goods produced in the home country to another country (Kotler et al., 2019). This mode of entry is best for a company with the aims and objectives of not investing in a foreign market, minimizing risk, and testing the market before fully committing. For example, a clothing brand may quickly enter a foreign market and earn short-term benefits by exporting.

Joint Ventures

This entry mode involves a strategic alliance or partnership between parties (from the home country and a foreign country) to contribute resources and share the benefits or any losses. For example Starbucks - a company famous for its coffeehouses and roastery services- first entered the Japanese market through joint ventures like SAZABY INC with the aims and objectives of partnering with companies in Japan that know the culture and the business environment (Strehle & Cruickshank, 2004).

Licensing and Franchising

These involve allowing the foreign company to use intangible properties like copyrighted material, patents, and trademarks in exchange for payments with the objective of obtaining extra income and reaching new markets without risks of capital investments. Coca-cola has entered some markets by licensing and franchising its trademark, brand, and capabilities. The company does this to reach new customers, utilize local economies, and avoid trade barriers (W, 2019).

Internalize / Wholly-Owned Subsidiary

In this last mode of entry, a company completely owns and controls the foreign entry mode to gain the highest possible degree of control by owning and managing both local and foreign country’s value chains (Udroiu & Bere, 2018). This is done by companies with the aim or objective of having full control of the value chain. For example in the motor manufacturing industry, Toyota and Volkswagen enter business-friendly countries by establishing subsidiaries.

Raczkowski and Schneider (2013) explain that there are two primary ways for direct investments: direct acquisition and Greenfield investment. Therefore a company can enter into a foreign market by acquisition – purchasing part or a whole of another company – to establish a presence and combine strengths while mitigating its own weaknesses. Greenfield investment is the establishment of a new wholly-owned subsidiary like building factories and offices from scratch with aim of having full control of the foreign market by eliminating intermediaries. For example, McDonald's and Starbucks are great examples of US firms that have invested in greenfield projects around the world

#2: Country factors that influence an organization’s decision to enter that country

Economic factors

Before an organization decided to enter into a country and commit its resources they have to study the economic factors such as people’s disposal income, currency stability, and the country’s standard of leaving. These are important indicators of the level of risk associated with entering that country. Then the level of competition in that market for the company’s goods and services will also affect the choice of entry.

Social and cultural factors

Even with globalization, Societies and cultural practices still differ in most countries. People still communicate differently, have entirely different customs, and practice different religions. A company might have to change some of its messages or create different marketing mixes before entering a different country.

Political and legal factors

An organization trying to enter into another country should, first of all, understand the legal and regulatory policies, history records towards foreign companies, together with total political attitude towards foreign investments because they greatly influence the decision to enter a new foreign market. The company has to also understand that governments protect local industries in terms of taxes, labor unions, and use of resources. For example, Germany has a social market economy where enterprises are free to operate although there is some legal control from the administration to prevent the bigger enterprises from damaging the interests of smaller enterprises from unfair competition, protection of the environment, and protecting employees.

Target Market factors

The target market potential in terms of potential revenue to be generated, access to the market, and competition in the market contribute to the decision to enter a country. Companies will invest in bigger markets with less competition because they are attracted by the potential to earn more revenues. The competition will determine the entry mode which best suits a foreign market. For example first entrants in the foreign market experience advantages like low competition and consumer loyalty, although they may experience higher entry costs associated with the promotion and physical presence.

The impact of the culture and geography on the organization’s value-chain activities being relocated to the country

Gaps exist between cultures of different countries and the management of an organization’s value chain has to understand all differences to develop the kind of working relationships that lead to acceptance of the organization’s activities being offered abroad. Otherwise, any misunderstandings lead to loss of business contracts, rejections, and loss of money. A company that enters a new market without completely understanding the culture and traditions of its host country usually fails (Udroiu & Bere, 2018)

Ann Murray, a strategic director of a logistics provider once said culture is a learned experience that starts in our childhood, and we have to learn to work with people with different cultures by developing multi-cultural teams to handle business issues across boundaries and making better decisions that can be accepted by others. For example, the Chinese Guanxi culture - a network of personal connections - is embodied in friendship and affection among powerful persons or the government (Kaynak et al., 2013). To be able to deliver more value, an organization has to implement these cultural practices.

Geography

geographical distance, communication, and transportation infrastructure all impact how products are delivered to the target market through the organization’s value chain. For example, According to a 2017 report by PWC, Germany is an EU member state that offers a first-quality manufacturing, energy, and communications infrastructure and state-of-the-art transportation networks that provide quick access to domestic and international markets. As well as a stable and transparent legal environment that provides investors with a secure legal framework and the ability to quickly enforce their rights. On the other hand, there are some remote countries with Inefficient transport and logistics services and together with multiple border crossings requirements making it difficult for logistics to take place.

References

• Lamb, C. W., Hair, J. F., & McDaniel, C. (2015). MKTG 9. Cengage Learning.

• Leeman, J. (2021). Export Planning: A 10-step approach -2nd edition- (2nd ed.). Books on Demand.

• Guenzi, P., & Geiger, S. (2011). Sales Management. Palgrave Macmillan.

• Kotler, P. T., Armstrong, G., Harris, L. C., & Hongwei He, P. H. (2019). Principles of Marketing. Pearson Education Limited.

• Strehle, P., & Cruickshank, M. (2004). Starbucks. International Business Concept and Starbucks in Germany. Beltz Verlag.

• W. (2019). In Good Company: Managing Intellectual Property Issues in Franchising. World Intellectual Property Organization (WIPO).

• Udroiu, R., & Bere, P. (2018). Product Lifecycle Management. IntechOpen.

• Raczkowski, K., & Schneider, F. (2013). The Economic Security of Business Transactions. Chartridge Books Oxford.

• Kaynak, E., Wong, Y. H., & Leung, T. (2013). Guanxi. Taylor & Francis.

• PwC Annual Report 2017, pwc.com. https://www.pwc.com/my/en/publications/pwc-annual-report-2017.html

One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie’s fine European mixers,

One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he

sells specialty coffees and prepares and sells muffins and cookies. He is eager to

buy one of Natalie’s fine European mixers, which would enable him to make larger batches of

muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks

Natalie if she would be willing to sell him the mixer on credit. Natalie comes to you for advice.

Natalie is also thinking of buying a van that will be used only for business.

Natalie is concerned about the impact of the van’s cost on her income statement

and balance sheet. She has come to you for advice on calculating the van’s depreciation.

solution

Part 1

1. My advice to Natalie on financial statements

The financial statements you have received from Curtis should help you evaluate his business and get helpful information for deciding if you should extend credit to him for the European mixer. You will see if his business makes a profit, the financial position, and the cash available to fulfill obligations. You can study the income statement, balance sheet, and cash flow statement (Franklin et al., 2019). The income statement will tell you if he is making profits. The balance sheet will show if he is in the position to pay his creditors and the cash flow statement will indicate the level of cash and cash equivalents available to pay you. Analysis ratios can be used on these financial statements to calculate and determine whether Curtis is capable of fulfilling his credit obligations. For example, the liquidity ratios will determine his ability to convert assets into cash and pay you on time.  Profitability ratios will determine if his business is growing financially and the ability to cover creditors. The Leverage ratios will compare his business’ level of debt against financial statements to measure the ability to repay his debts.

2. Alternatives to extending credit to Curtis for 30 days.

There are several alternatives to extending credit to choose from and I will provide a few here. The first one is Factoring Receivables and it involves selling your receivables (What you sold customers on credit) to a factor (another financial institute) and that factor pays you part of the amount. The factor will then be responsible for collecting the receivables and once the customers pay, you will be paid the remaining amount minus the factoring fee. Another alternative is Accounts receivable loans which involve securing a short-term loan from a bank using your accounts receivables as your collateral. Cash flow Management is another one and it involves tracking, analyzing, and improving the amount of cash coming in and moving out of your business, to anticipate how much cash will be available in the future helpful in covering all your operating expenses, investments, and for planning

3. Advantages and disadvantages of letting customers pay by credit cards

For your business to grow and accommodate all kinds of customers you have to add a credit card option because lots of customers shop on credit and you don't want to lose them. According to Weygandt et al (2011), once you accept credit cards, the issuer (business providing you will the service) will be responsible for most of the work: investigation of customers, maintaining customer accounts, undertaking the collection process, and absorbing losses. Your business will receive cash quickly from credit card issuers. Therefore, your business sales will increase. The disadvantages of adding a credit card option to your business are: you will witness extra expenses like setup fees, monthly fees, interchange, and processing rates. Lastly, the biggest drawback of credit cards is fraud and security issues. Your business can be at risk when you accept stolen cards and you will be responsible for the safe guide of sensitive personal information stored on those cards.

Part II

1. Determining the cost of the van = Van at cost $36,500 + Cost of painting the van $ 2,500 + cost of installing shelving units $ 1,500 = $40,500

2. Preparing depreciation tables for the years 2020, 2021, and 2022 see the excel file attached

In the year 2020 the van will be used only for 3 months (September-December) Therefore:

• Under straight line method -depreciation expense will be $33,000*20%*3/12 =$1,650

• Under Double-declining - annual depreciation expense is 40,500 * 40%* 3/12 = $4,050

• Under Unity of activity depreciation - $0.17*15,000 miles*3/12 = $638

3. The impact of the methods of depreciation on Natalie’s balance sheet on December 31, 2020.

Natalie’s balance sheet will be affected by the accumulated depreciation once she buys assets such as the van. In addition, the choice of depreciation method can impact the book value of the net fixed assets on the balance sheet, like property, furniture, and equipment (Hermanson et al., 2018). On December 31, 2020, depreciation is likely to reduce the fixed assets’ book value on the balance sheet, and this will result in a proportionate reduction in the equity of shareholders (Franklin et al., 2019).

Impact of depreciation method on Natalie’s Income statement on December 31, 2020.

The depreciation will affect depreciation expenses in the income statement and the choice of depreciation method will impact the income of Natalie’s business. Depreciation expenses will reduce net income in the income statement and the method that gives the higher depreciation expenses will have the highest reduction in the net income and retained earnings of a business.

4. Impact of the methods of depreciation on Natalie’s income statement over the van’s total 5-year useful life.

In that period of 5-years, the depreciation expense will be affected by the depreciation of this fixed asset. In turn, this will be reflected in her net income and retained earnings. A depreciation method (like the straight-line method) shows a constant depreciation expense over the 5 years, while others might show a declining or increasing expense. Higher depreciation expense in the first years may reflect higher production value while lower expense in its last years of useful life may reflect lower production value.

5. What method of depreciation is recommended for Natalie to use, and why

I would recommend you use the units-of-activity method because it is suited to factory machinery and it allows you to measure production in units of output or machine hours, for this case you can use it to measure miles covered by the van to its production. This method is also the best for matching expenses with revenue because the productivity and miles of the van vary significantly from one period to another. The only drawback you will face using this method is that it can be often challenging to reasonably estimate total activity (or miles).

References

• Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of Accounting Volume 1 - Financial Accounting. Van Duuren Media.

• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2011). Accounting Principles (10th ed.). Wiley.

• Hermanson, R. H., Edwards, J. D., & Maher, M. W. (2018). Accounting Principles: A Business Perspective. 12th Media Services.

 

How walmart tracks its customers? pooling principle? What is Walmart's business strategy?

 How Walmart tracks its customers

pooling principle

What is Walmart's business strategy?

Inventory pooling supply chain

What is pooling in the supply chain?

Solution 

Methods Used To Match Resources With Variable Demand

Walmart dominates the retail industry through supply chain management and innovative technology. It innovated strategies for effectively matching available resources to customer demands (Nguyen, 2017). One of the ways is the pooling method, which involves consolidating resources in a single centralized system in response to customer demands, especially for those shopping online and in-stores. Walmart also uses a separate selling strategy, for instance, customers receive exactly what they want from the store near their location because Walmart has many physical stores allowing it to assign resources to specific types of customers.

Pooling Resources So That Each Resource Unit Is Available For Processing Any Customer.

The concept of pooling resources (through a location or product) refers to combining multiple resources or markets to reduce customer uncertainty, improve efficiency and match supply and demand to sustain a competitive advantage (Simchi-Levi, 2013). Walmart is doing this by having single products that satisfy different needs of customers and by combining its physical stores to its e-commerce and forming an “omnichannel” a technology where customers can have the best shopping experience whether from their mobile phones, websites, or in-store interactions. This method is known for increasing coordination of resources and customer satisfaction since there is a positive perception by customers from the low prices paid, the product variety, and better shopping experience.

Assigning Specific Resources To Specific Types Of Customers.

Walmart also uses a decentralized system to serve more customers with specific resources. It partners with key players in the value chain to benefit from the synergy (Lim, 2017). Costs are reduced and the risk is split. For example, Strategic partnerships and communication networks between Walmart and its suppliers and distributes lead to better use of the available resources. This also results in competitive advantages, which Porter (2017) discusses, by offering the right products to specific customers and meeting the demands by having warehouses in so many cities – closer to retail shops. Walmart also invests in management system software and automation technology to cut costs and operate efficiently.

Strategies That Can Improve The Perception Of Process Performance include:

Nurturing a customer-centric culture through employee training and the use of mobile applications to assist employees to deliver the best customer experience. Furthermore, Identify drivers to satisfaction through feedback from the customers, analytics, and solving issues intermediately.

References

• Thi Thu Ha, Nguyen. (2017). Wal-Mart's Successfully Integrated Supply Chain and the Necessity of Establishing the Triple-A supply chain in the 21st century. Journal of Economics and Management. 29. 102-117. 10.22367/jem.2017.29.06.

• Simchi-Levi, E. (2013). The Most Important Concept in Supply Chain Management - Risk Pooling - Supply Chain 24/7. Supplychain247. https://www.supplychain247.com/article/the_most_important_concept_in_supply_chain_management_-_risk_pooling/ops_rules_management_consultants

• Lim, Stanley Frederick W.T. & Wang, Lina & Srai, Jagjit. (2017). Wal-Mart's Omni-channel Synergy. 30-37.

• Porter, M. E. (2017). Competitive Strategy. Van Haren Publishing.

It is often said that “self-insurance” is an oxymoron. Why? If it is, what are the implications for a government that is permitted

 It is often said that “self-insurance” is an oxymoron. Why? If it is, what are the implications for a government that is permitted to recognize self-insurance premiums as a general fund expenditure when paid to an internal service fund?

In what way must a government account for premium revenue differently if it accounts for self-insurance in an internal service fund rather than in its general fund?

Solution

Self-insurance is an oxymoron
The term "self-insurance" is an oxymoron.
Self-insurance is a method that is widely prevalent in government organizations, where it is carried out within the government rather than via private sector enterprises or people (McDonnell et al., 1986, para.2). It entails a government establishing a fund to cover its spending and using any surplus to subsidize the expenses of other departments or public services." The term "self-insurance" is not a popular business term, although it is used often in the insurance and risk management industries. Insurance is a type of risk management, and self-insurance is also a type of risk management.

The implications for the government

The ramifications of self-insurance include that under self-insurance, the government will not be reliant on commercial insurance firms to provide insurance for their operations, but will instead rely on the surplus in their service fund to cover the insurance expenses incurred in conducting their operations. This is especially crucial in a nation where there are few or no private insurance providers. In the case of a problem with insurance firms, the government can finance its citizens' insurance requirements. It is also worth noting that governments frequently employ self-insurance to safeguard the people from financial crises and to avoid a complete lack of insurance coverage for their citizens.

Reasons, why a government may account for premium revenue differently if it accounts for self-insurance, are in an internal service fund.

The reason for this is because, in the case of self-insurance, the government will be responsible for the premiums themselves and will not be relying on external companies for them. This means that governments will need to account for premium revenue differently in their service fund. For example, a government with a service fund may need to account for premiums differently than an insurance company because the premium revenue will be spent on the government services, and additionally, there is a need for the surplus to be invested at a higher rate to ensure that it can cover future losses. By comparison, if the premium revenue is used to provide insurance to the public, the amount of capital required to secure future losses would be lower than the premium revenue.

References

McDonnell, P., Guttenberg, A., & Greenberg, L. (1986). Self-insured health plans. PubMed Central (PMC). Retrieved October 25, 2021, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4191537/

List the major advantages of survey research methods over qualitative methods. Can you think of any drawbacks

 List the major advantages of survey research methods over qualitative methods. Can you think of any drawbacks, and if so, what are they? How and why has technology impacted data collection from the recent past through the present?

Solution 

The Advantages Of Survey Research Methods Over Qualitative Methods

There are various advantages to conducting survey research rather than qualitative research. Most notable, survey technique allows for the collection of data from larger populations far more quickly than interviewing and surveying a small sample of individuals. A larger sample size increases the likelihood that survey results will be representative of the whole population. The main benefits of survey methods over qualitative methodologies include the capacity to gather data from a large population in a relatively short amount of time, to collect data at a pretty affordable cost, to be generally free of bias, and to allow comparisons between people or groups.

Why are surveys so popular among researchers? Surveys are a low-cost and time-saving means of collecting data. For instance, If an aim is to investigate what students think about education, it is far simpler to question a hundred students than a hundred teachers. A schoolteacher is more likely than a pupil to forget to complete a survey.

Drawbacks Of Survey Research Methods

Despite the obvious benefits of surveys, the drawbacks should not be neglected. A survey is only as good as the questions it asks and the manner in which it is done. It becomes prone to prejudice as a result of people's biased responses. The responses of a small sample group may not be reflective of the entire population, and statistics may only reflect the views of a subset of the population.

How Technology Impacted Data Collection

Not only is technology increasing the speed of conducting surveys, but it may also be utilized to streamline and improve survey research. Most importantly, it is utilized to make the survey process considerably easier and faster while also minimizing the number of biases. It is being used to improve the effectiveness of surveys. A digital survey, as long as it is developed correctly and run in a fair and unbiased manner, delivers a more accurate and representative sample of the population. Social media includes features that make it simpler for businesses to reach their desired target market, and the majority of them are free to use.