Client Understanding

Client Understanding

Latrice Alston

University of Phoenix

ACC 541: Financial Accounting

Dr. Wilson

November 23, 2012

Client Understanding

The relationship between clients and organizations chosen to assist in important matters concerning the preparation of financial statements and other documents is critical to ensure the success of the organization. Most organizations select firms to assist them in regard to financial matters who are adept in analyzing information and providing accurate and appropriate guidance. This being noted, clients while very well versed in the nature of their respective businesses are not accountants. Accounting is the foundation of governments, public and privately owned organization, and nonprofit organizations. The rules and procedures that govern the science of accounting and therefore business are evolving; however, much of the traditions of accounting will remain. Governing bodies responsible for ensuring the continuity of accounting practices (AICPA, FASB, and SEC) maintain by means of the application of law the standard by which accounting professions and organizations are required to comply. To this end, this paper will address several concerns of a new client regarding the following topics:

• Adjusting lower cost of market inventory on valuation

• Capitalizing interest on building construction

• Recording gain or loss on asset disposal

• Adjusting goodwill for impairment

By addressing each of these topics the goal is to ensure the client has more than a cursory knowledge on how each of these topics impact business and how they should be reported in accordance with generally accepted accounting principles (GAAP)

Market Inventory on Valuation

  General accounting principles regarding inventory hold that reserves (inventory) is stated and valued based on the market value method or cost method depending on which is lower. If the cost of inventory exceeds market...