Reference no: EM131146166

Question 1

Some in your department at work are arguing that accounting changes are the same thing as accounting errors. Based on your study of accounting changes, what key points would you address concerning this issue and why?

Respond to this...I would say that accounting changes are not the same as accounting errors. An error might include a mathematical mistake, the misapplication of an accounting principle or standard, or an oversight or misunderstanding of fact(s). In some cases, the error will be material and result in inaccurate financial statements. Other times the errors will be insignificant and be ignored. On the other hand, an accounting change occurs when there is a change in an accounting principle, an estimate, or an entity type, as defined in the FASB reporting framework. A change in an accounting principle indicates a change in policy to use an alternate standard under GAAP. Estimates can be changed when new, or updated, information becomes available that is relevant to the estimate. Finally, a change in accounting may occur when a company's subsidiary organization changes, or the company's entity type changes. These changes are not errors. Even though accounting changes are often made as a result of an error, there are other reasons to make a change. For example, an accounting change may increase accuracy, provide a better representation of the facts, or improve accounting policy in general. Accounting changes and accounting errors are not the same thing. Accounting errors do not always force change, and accounting changes do not necessarily indicate an error.

Respond to this...The first thing I would tell the others in my department is changes are not the same as errors. There are many things that can change in the life of a business requiring accounting changes. Sometimes at the time you make an entry you do not have all of the information, and have no way of getting the information until a later date in time. For example there is something called a 1031 exchange in real estate in which you can sell a property and buy another property and deffer the taxes. You would transfer the basis from one to another, this could carry over from one period to the other and you might not know the cost of the property you are buying.

Another accounting change can come from rules the IRS has, for example as a restaurant reached a certain amount of sales it is required to be on accrual accounting, if you were on a cash basis before that you would make the changes and let who ever is reviewing the financial of the change and the impact it made on the periods before and after the change.

So in summary before one should get to worked up and calling something an error, one should see why a change is being made. There is a chance it could be an error and then would just need to be fixed too.

Question 2

Absorption costing is the required method in use in most modern countries for reporting external inventory costs in the financials. Management often prefers this method to other conventional inventory tracking and measurement systems as it gives them a better feel for the true costs of inventory that is being carried.

Taking into consideration the benefits of absorption costing and management's preferences, why do you feel that absorption costing might be a good choice for internal inventory measurement? Select one example for use in your explanation as to why this method might or might not be the best route to go for inventory.

Respond to this...I believe that absorption costing will give me a better feel, for the real cost of what was produced within a period of time for the company. Overhead costs are allocated to each unit produced during a given period of time. If I were a manufacturing company that produced doors, I would at the end of the month divide all of my overhead costs into the number of doors produced. This would give me an accurate per door cost when determining their over profit margin for the company. Using absorption costs, I feel would give me, as a manager, knowledge to make good decisions.

Reference

Johnston, K. (2016). Advantages & Disadvantages of Using Absorption Vs Variable Costing. Retrieved 20 July, 2016, from https://smallbusiness.chron.com/advantages-disadvantages-using-absorption-vs-variable-costing-34282.html

Question 3

The Internet presents business with the challenge of protecting individual privacy. Provide an example illustrating the need for privacy protection. Within your example, explain how the concepts of responsibility, accountability, and liability apply. Why are these concepts important to business?

Respond to this...The main reason for privacy protection is to keep one's sensitive and confidential information, well, private. This information could be anything from our names, age, address, spouses, children, account information, banking numbers, social security numbers, etc. There is always more risk, too, when using public or work computers versus a personal, home computers as well as the type of Internet access. There is a reason why wifi/internet access asks if it is a personal, work, or public computer. The type of computer or access determines the level of security for one's information while using the internet. This is especially pertinent to online shopping, as many of us frequently do and enjoy. There's something about the level of convenience associated with online shopping: the ease of never leaving your home, not having to speak with anyone or wait in line. It's truly quite comfortable when shopping online. But, we need to proceed with caution and use secured websites, because hackers will definitely get ahold of our personal information is we aren't being careful. This is why we need the many levels of security, and to be cautious when making online purchases. We just need to think about the number of information breaches that have happened in the last few years. I'm sure the one that stands out in everyone's mind is the Target Credit Card breach. Numerous amounts of people had their information stolen and even if it wasn't, Target covered their behinds and issued new cards for all users.