Confirmations used for confirming accounts receivables

a.)        ‘Positive’ confirmations and ‘Negative’ confirmation are the two types of confirmation used for accounts receivable. A positive confirmation is a communication addressed to the debtor requesting him/her to confirm whether the balance as stated in the confirmation is correct or not.

A negative confirmation is one where a response is requested from the debtor, if the balance stated in the confirmation is incorrect.

Positive confirmations are used in case of debtors where large amounts are due and the number of accounts is low. Positive confirmations are also used when there is evidence or suspicion of fraud or serious error. When regulatory authorities require balances, the positive balance confirmations are used. Negative confirmations are used when the number of ‘Accounts Receivable’ accounts is large and individual balances are small.

(b.)       For evaluating the collectibility of the Accounts Receivable, the auditors would look into the ageing of the Accounts Receivable and discuss collectibility of individual accounts with the personnel of the clients. They may also examine the correspondence with the important customers and also the financial statements of these customers.

(c.)       When the public accountant comes across an instance where a debtor fails to respond to positive confirmation, the accountant cannot presume that the debtor checked the request and did not respond because there is no error. There may be some busy customers who do not find enough time to check their confirmations. But there may be cases also, where frauds or embezzlements might have taken place. The Public Accountant may desire that such accounts may further be pursued with second positive confirmations.

(d.)       When no response is received for second positive confirmation, the auditors resort to alternative procedures for verification. They examine the customer’s formal remittance advice and cash receipts journals. Correspondence in client’s files can also be checked to for satisfactory evidence. Verification of shipping documents, sales invoices contracts and other instruments are also useful. In certain unusual cases, the auditor can telephone the client and have a discussion with him directly. In cases where substantial amounts are involved, the public auditor may go to the extent of investigating the existence of customer or his financial status.

  Avail Accounts Assignment Help at  http://assignmentdesign.com from accounting experts or mail to contact@assignmentdesign.com for help on assignments over a wide range of subjects.

Accounting Short Answer Questions

1. Explain the meaning of the terms "tangible" and "intangible" and discuss how these terms are used in describing assets.

Tangible assets are the economic resources of a firm, whose existence can be physically felt or perceived.
Examples: Inventory, land and buildings and plant and machinery.  
              
Intangible assets are non physical economic resources and rights, which carry a value with them and confer some advantage on the firm in the market place.

Examples: Goodwill, copyrights, patents and trademarks.

            In accounting, it is only the tangible assets that are found in the balance sheet. Intangible assets do not find a place in the balance sheet of the firm. But while calculating the value of the firm in the market, the intangible assts are also taken into account.

2. Discuss the advantages of establishing a line of credit

            A line of credit is a commitment from the bank to lend the firm up to a certain amount to meet various financial needs. It provides an opportunity for the firm to establish access to credit even before the exact expenditure decisions are finalized. It is more flexible than a loan, which makes finance available for a specific purpose. It can be used for different purposes. It need not be drawn at a time like a loan, but can be used as and when the need arises. The line of credit is thus the most flexible and comfortable financing arrangement for a firm to take care of its present and future needs as well as contingencies.

 Visit http://assignmentdesign.com or mail to contact@assignmentdesign.com for help on assignments over a wide range of subjects.

 Avail Accounts Homework Help at  http://goo.gl/eNe4R from accounting experts. 

Assignment Help-Corporate Accountancy Short Answer questions

1. Why is the IRS concerned with the corporate debt to equity ratio?

Investments in companies can be by two ways (1.) By equity and (2.) By debt. Equity earns dividend if the company earns profits and debt earns interest irrespective of profit earning by the company.

Dividend by companies is doubly taxed once at corporate tax point and the other at the investor as dividend income tax. Debt on the other hand is taxed only once at the interest receiver.

In view of this difference in taxation, there may be attempt by some companies and investors to show their investment in debt rather than in equity. Such companies will be thinly capitalised and debt-equity ratio would be high. IRS would then rechristen some debt as disguised equity.

IRS is thus concerned about debt-equity ratio because disguised capital may appear as debt.

2. Relative to corporate formation, how one can contribute appreciated property without gain recognition to the Transferor?

Relative to corporate formation, the corporate can contribute appreciated property without gain to the transferor by issuing company’s stock to the transferor so that he can have control in the affairs of the company. Nothing else should be given by the company to the transferor.

 Visit http://assignmentdesign.com or mail to contact@assignmentdesign.com for help on assignments over a wide range of subjects.

Avail Accounts Homework Help at  http://goo.gl/eNe4R from accounting experts.