Financial Accounting Free Essays

This paper seeks the locate the Balance Sheet, Income Statement and Statement of Cash Flows from the 2007 annual reports of Amazon and Dell respectively and describe the general organization of each of the three sets of financial statements. This will be followed by a determination of whether net income or cash from operating activities which is more useful in the organization for each of the two companies. The last part requires to make one prediction about each company from that company’s financial statements and to reach one additional conclusion about each company from the additional information that may be found in their annual reports. We will write a custom essay sample on Financial Accounting or any similar topic only for you Order Now The required financial statements were indeed found from the two companies. For Amazon, the general organization of each of the three sets of financial statements is as follows: The Statement of Cash Flows was presented first, followed by the Income Statement (or Statement of Operations) and then by the Balance Sheet (Amazon, 2007). Since the Statement of Cash Flows came ahead than the Income Statement, it follows that cash from operating activities is more useful than income for the organization. For Dell, on the other hand, the general organization of each of the three sets of financial statements is as follows: The Balance Sheet was presented first, followed by Income Statement and then by the Statement of the Cash Flows. The more useful for Dell, is the opposite with the case of Amazon, as this time, net income is more important than cash from operating activities because Income Statement came ahead of the Statement of Cash Flows (Dell, 2007). For Amazon, it could be predicted the revenues will grow 39% while total assets to grow by 49% in 2008 based on the Income Statement and Balance Sheet revenues figures for 2007 and 2006. For Dell, it could be predicted the sales will grow by 6% while total assets to grow by 8% based also on historical financial statement figures See Appendix 1. One additional conclusion that could be made for Dell will continue to have higher profitability that Amazon for the year 2008 in terms of return on sales and return on assets in 2007 for both companies. See Appendix 1. How to cite Financial Accounting, Papers Financial Accounting Free Essays Veronica Bradley Financial Accounting August 12, 2012 Internal Controls Case Study 2 Internal Controls LJB Company, a local distributor, has asked your accounting firm to evaluate their system of internal controls because they are planning to go public in the future. The Company has to check the internal controls of a system of checks and balances designed to detect and prevent fraud and errors. The Sarbanes-Oxley Act requires U. We will write a custom essay sample on Financial Accounting or any similar topic only for you Order Now S. companies to enhance their systems of internal control. The company hired has to detect the internal control system and meet the companies requirements. The internal control standards applicable to Sarbanes-Oxley (SOX) apply only to large public companies listed on U. S. exchanges. There is a continuing debate as to whether non-U. S. companies should have to comply with this extra layer of regulation. Debate about international companies (non-U. S. ) adopting SOX-type standards centers on whether the benefits exceed the costs. The concern is that the higher costs of SOX compliance are making the U. S. securities markets less competitive. These activities are the backbone of the company’s efforts to address the risks it faces, such as fraud. The specific control activities used by a company will vary, depending on management’s assessment of the risks faced. This assessment is heavily influenced by the size and nature of the company. The principles of internal control activities are (1) establishment of responsibility, (2) segregation of duties, (3) documentation procedures, (4) physical controls, (5) independent internal verification, and (6) human resource controls. Advise the President of what the company is doing right (they are doing some things well) and also recommend to the President whether or not they should buy the indelible ink machine. When you advise the President, please be sure to reference the applicable internal control principle that applies. The things that the company is doing well are that using the pre- numbered invoices. When the company was not using pre-numbering they violated the documentation procedures. If pre-numbered documents are not used, then it is virtually impossible to account for the documents. This will keep good documentation on some things for future reference to have on hand and things aren’t done more than one time by different people. Pre-numbering helps to prevent a transaction from being recorded more than once, or conversely, from not being recorded at all. Second, the control system should require that employees promptly forward source documents for accounting entries to the accounting department. This control measure helps to ensure timely recording of the transaction and contributes directly to the accuracy and reliability of the accounting records. With the information provided the company should invest in an indelible ink machine. This will put the company in more control of accounting procedures. And with this in hand will help reduce the chance of any fraud going on in the company with the checks being more manageable. Use of physical controls are essential. The accountant’s act of keeping the checks in a safe in his office is in accordance with the physical controls principle. This reflects the safeguarding of assets and enhances the accuracy and reliability of the accounting records. The President should also know what they are doing wrong like the petty cash situation. All employees have access to the petty cash in a desk drawer and are asked to only place a note if they use any of the cash. The company had a hard time getting the employee to admit it was him because the company does not assign individual passwords. The company is violating the establishment of responsibility, and segregation of duties, documentation procedures, independent internal verification and human resource controls. With the petty cash Internal control over a petty cash fund is strengthened by: (1) having a supervisor make surprise counts of the fund to confirm whether the paid petty cash receipts and fund cash equal the fund amount, and (2) canceling or mutilating the paid petty cash receipts so they cannot be resubmitted for reimbursement. With the establishment of responsibility the company is violating that responsibility by not assigning responsibility to specific employees. Control is most effective when only one person is responsible for a given task. Without doing this leave the door open for fraud and other possibilities to of things to occur. With the company hiring convicted felons and sex offenders with them having a human resources department this all would have been avoided. They wouldn’t have to worry about employees using the internet to view porn sites. When the company hires employees they should have an independent verification for each individual employee. This will track all the employees with their computer and signing in and out of the system and all things that require a verification to proceed. An accountant is not certifiable to interview everyone for certain positions unless it is involved with their position. The President of the company needs to do a big evaluation of the system of internal controls to make sure all the standards are being met for planning the future of the company. As discussed earlier in the requirements of the company in order for them to go public in the future. They are going to have to follow all the guidelines for the principles of internal control are: establishment of responsibility; segregation of duties; documentation procedures; physical controls; independent internal verification; and human resource controls. How to cite Financial Accounting, Papers