You are working as an accountant for a local business. The CEO says that business is going great this year in spite of the covid pandemic. The CEO states that business is so great that they can forgo including an allowance account for their accounts receivables on the company balance sheet. The CEO states that with no allowance account, the company net income will increase which means more in year-end bonuses! You on the other hand believe from all the accounting classes you have completed believe that an allowance account is mandatory when a company has accounts receivables. Please draft an accounting issues memo and an email to the CEO answering the following: 1. Use the FASB codification to determine whether GAAP requires an allowance account for accounts receivable. Please use specific Codification references to support your answer. 2. Please draft example journal entries and show how this is done if required. Also show how the accounts receivable would be shown in the financial statements. 3. Also explain how this may be unethical.
You are working as an accountant for a local business. The CEO says that business is going great this year in spite of the covid pandemic. The CEO states that business is so great that they can forgo including an allowance account for their accounts receivables on the company balance sheet. The CEO states that with no allowance account, the company net income will increase which means more in year-end bonuses! You on the other hand believe from all the accounting classes you have completed believe that an allowance account is mandatory when a company has accounts receivables. Please draft an accounting issues memo and an email to the CEO answering the following: 1. Use the FASB codification to determine whether GAAP requires an allowance account for accounts receivable. Please use specific Codification references to support your answer. 2. Please draft example journal entries and show how this is done if required. Also show how the accounts receivable would be shown in the financial statements. 3. Also explain how this may be unethical.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
You are working as an accountant for a local business. The CEO says that business is going great this year in spite of the covid pandemic. The CEO states that business is so great that they can forgo including an allowance account for their accounts receivables on the company balance sheet . The CEO states that with no allowance account, the company net income will increase which means more in year-end bonuses! You on the other hand believe from all the accounting classes you have completed believe that an allowance account is mandatory when a company has accounts receivables. Please draft an accounting issues memo and an email to the CEO answering the following:
1. Use the FASB codification to determine whether GAAP requires an allowance account for accounts receivable . Please use specific Codification references to support your answer.
2. Please draft example journal entries and show how this is done if required. Also show how the accounts receivable would be shown in the financial statements.
3. Also explain how this may be unethical.
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