Part 1 Bus Fp3061 Fundamentals Of Accounting Assessment 1

Part 1bus Fp3061 Fundamentals Of Accountingassessment 1 Part 1instr

Part 1 BUS-FP3061 - Fundamentals of Accounting Assessment 1, Part 1 Instructions: When placing a (+) or (-) in the appropriate cell, be sure to use ( ) around the character. Also, some cells may have both a (+) and (-) denoting an increase and decrease in the same equation category. Assets Liabilities Owner's Equity 1. Purchased supplies on account 2. Received cash for providing a service 3. Paid expenses in cash 4. Owner invested cash in the business 5. Owner withdraws cash from the business 6. Received cash from a customer who had previously been billed for services provided 7. Paid cash to purchase equipment 8. Paid employee salaries 9. Paid a creditor from whom the business had previously purchased supplies on account 10. The company sells new shares of stock 11. Paid cash for monthly rent on the office space 12. Paid cash for monthly utility bills 13. Performed services on account 14. Made a payment on a loan received from the bank 15. Purchased for cash merchandise that will be later resold for profit

Paper For Above instruction

The role of ethics in the accounting system is fundamental to ensuring integrity, transparency, and trustworthiness in financial reporting. Ethics in accounting involves adhering to principles such as honesty, objectivity, integrity, confidentiality, and professional behavior. These principles guide accountants in maintaining the accuracy of financial data, avoiding conflicts of interest, and upholding confidentiality, which collectively foster stakeholder confidence and foster a fair marketplace (Moore & McKinney, 2018). Ethical standards are embedded in regulatory frameworks like the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS), which set the benchmark for responsible behavior in financial reporting (Louwers et al., 2019). The importance of ethics becomes especially pronounced in scenarios involving financial misstatement, fraud, or misrepresentation, which can have severe legal and reputational consequences for individuals and organizations (Spear et al., 2020). Upholding ethical standards ensures that financial statements truthfully reflect an organization’s financial position, thereby supporting effective decision-making by investors, creditors, regulators, and other stakeholders.

Analysis of Business Transactions and Their Impact on the Accounting Equation

The accounting equation, Assets = Liabilities + Owner's Equity, is fundamental to understanding how various business transactions influence a company's financial position. Each transaction affects the components of the equation either as an increase or decrease, which should be accurately recorded to maintain balanced financial statements.

Scenario 1: Purchased supplies on account

Purchasing supplies on account increases Supplies (Assets) and Accounts Payable (Liabilities). This transaction results in a (+) in Supplies and (+) in Accounts Payable, reflecting an increase in both assets and liabilities, thereby keeping the equation balanced.

Scenario 2: Received cash for providing a service

Receiving cash for services increases Cash (Assets) and increases Owner's Equity via Revenue, which ultimately increases Owner's Equity. This transaction results in (+) Cash and (+) Owner's Equity, reflecting increased assets and owner’s stake.

Scenario 3: Paid expenses in cash

Paying expenses decreases Cash (Assets) and decreases Owner's Equity because expenses reduce net income, which impacts Owner's Equity negatively. Therefore, this transaction results in (-) Cash and (-) Owner's Equity.

Scenario 4: Owner invested cash in the business

The owner’s investment increases Cash (Assets) and Owner's Equity. This results in (+) Cash and (+) Owner's Equity, signifying an infusion of resources by the owner.

Scenario 5: Owner withdraws cash from the business

The owner’s withdrawal decreases Cash (Assets) and Owner's Equity because it reduces the owner’s claim on the business assets. This results in (-) Cash and (-) Owner's Equity.

Scenario 6: Received cash from a customer who had previously been billed for services provided

Receiving cash from a customer previously billed increases Cash (Assets) and decreases Accounts Receivable (Assets). The net effect is an increase in assets, as Cash increases.

Scenario 7: Paid cash to purchase equipment

Purchasing equipment with cash increases Equipment (Assets) and decreases Cash (Assets). The overall assets increase if Equipment’s value exceeds the cash paid, but generally, it involves shifting assets within the asset account.

Scenario 8: Paid employee salaries

Paying salaries decreases Cash (Assets) and decreases Owner’s Equity via Expenses, which reduces net income and, consequently, Owner’s Equity.

Scenario 9: Paid a creditor from whom the business had previously purchased supplies on account

Making a payment to a creditor decreases Cash (Assets) and decreases Accounts Payable (Liabilities), reflecting a reduction of liabilities and assets.

Scenario 10: The company sells new shares of stock

Selling shares increases Cash (Assets) and increases Owner's Equity, as new investments are made by shareholders.

Scenario 11: Paid cash for monthly rent on the office space

Paying rent decreases Cash (Assets) and decreases Owner's Equity through Rent Expense, impacting net income.

Scenario 12: Paid cash for monthly utility bills

Paying utility bills decreases Cash and Owner’s Equity via Utility Expense, reducing net income.

Scenario 13: Performed services on account

Performing services on account increases Accounts Receivable (Assets) and increases Owner's Equity via Revenue.

Scenario 14: Made a payment on a loan received from the bank

Repayment decreases Cash (Assets) and decreases Liabilities (Loan Payable).

Scenario 15: Purchased for cash merchandise that will be later resold for profit

The purchase increases Merchandise Inventory (Assets) and decreases Cash (Assets), with the overall effect depending on the value of inventory purchased.

Calculations and Financial Analysis for the Company Scenarios

The following calculations analyze various financial scenarios based on assets, liabilities, and owner’s equity, crucial for understanding a company’s financial health.

1. Smith Company's Total Assets

Assets = Liabilities + Owner's Equity = $120,000 + $232,000 = $352,000

2. Jones Company's Total Liabilities

Assets = Liabilities + Owner's Equity; therefore, Liabilities = Assets - Owner's Equity = $190,000 - $91,000 = $99,000

3. Greene Company's Owner's Equity

Total assets = $800,000; Liabilities = 50% of assets = $400,000; Owner’s Equity = Total Assets - Total Liabilities = $800,000 - $400,000 = $400,000

4. Orange Company’s Year-End Owner’s Equity

Beginning assets = $800,000; ending assets = $800,000 + $150,000 = $950,000

Beginning liabilities = $300,000; and with decrease of $80,000, ending liabilities = $220,000

Owner’s Equity at year-end = Assets - Liabilities = $950,000 - $220,000 = $730,000

5. Orange Company's Ending Total Assets After Changes

Beginning assets = $800,000; increase in liabilities = $100,000; owner’s equity decreases by $70,000

Owner’s equity change decreases total assets proportionally; final assets = Beginning Assets + Changes = $800,000 + (Increase in assets) (assuming proportional changes), but since owner’s equity decreases, total assets could be computed based on the change.

Alternatively, using the accounting equation: Assets = Liabilities + Owner's Equity

Owner's Equity decreases by $70,000: ending owner’s equity = initial owner’s equity - $70,000. Without initial owner’s equity, precise calculation is approximate, but the key point is understanding the relationships.

6. Orange Company's Year-End Total Liabilities

Beginning liabilities = $300,000; with an increase of $100,000, ending liabilities = $400,000

Assets decrease by $80,000, and owner’s equity increases by $120,000 during the year, which affects the balance sheet accordingly.

Conclusion

Understanding how various transactions impact the fundamental accounting equation is essential for accurate financial reporting and analysis. Ethical considerations in accounting further ensure that these transactions are recorded and reported truthfully, maintaining trust in financial information. The calculations demonstrate how changes in assets, liabilities, and owner’s equity reflect a company's financial health and provide insights for managerial decision-making and stakeholder confidence. Upholding ethical standards and applying sound accounting principles are vital for sustaining transparency and accuracy in financial reporting.

References

• Moore, D., & McKinney, M. (2018). Ethical considerations in accounting. Journal of Accounting Ethics, 12(3), 45-56.
• Louwers, T. J., Ramachandran, D., Sinason, C., et al. (2019). Auditing & Assurance Services. McGraw-Hill Education.
• Spear, B., Johnson, K., & Lee, R. (2020). Financial fraud and ethical lapses: A review. Journal of Business Ethics, 162(4), 761-779.
• Gibson, C. H. (2017). Financial Reporting & Analysis. Cengage Learning.
• Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2020). Financial Accounting Theory. Wiley.
• Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2020). Financial Statement Analysis. McGraw-Hill Education.
• White, G. I., Sondhi, A. C., & Fried, D. (2019). The Analysis and Use of Financial Statements. Wiley.
• Revsine, L., Collins, D. W., & Johnson, T. (2018). Financial Reporting and Analysis. Pearson Education.
• Baginski, S. P., & Hassell, J. M. (2018). Accounting Principles. Cengage Learning.
• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting. Wiley.