Accounting decisions Case: Accounting at MacCloud winery
Accounting decisions
Feb 25, 2016
Accounting decisions. Case: Accounting at MacCloud winery. Methodological note. We want to distinguish between Economic “facts/data” No need to discuss them Taken for granted Accounting “issues” The topic of our discussion We will follow the order of the case questions. - PowerPoint PPT Presentation
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Accounting decisions
Case: Accounting at MacCloud winery
Accounting at McCloud Winery
Methodological note
We want to distinguish between Economic “facts/data”
– No need to discuss them– Taken for granted
Accounting “issues”– The topic of our discussion– We will follow the order of the case questions
Accounting at McCloud Winery
The MacCloud winery 5 acres of land One building
Accounting at McCloud Winery
1: The building Worth $32,000 Leased for 10 years for $5,000 per year How do we account for it?
Accounting at McCloud Winery
2: The bank loan $180,000 3 years maturity $ 10,000 annual repayment 10% interest rate
Accounting at McCloud Winery
3: The land and the grapevines The vineyard is certainly an asset Cost of this asset? Depreciation?
Accounting at McCloud Winery
4: Vines’ diseases
Highly damaging event Possible, but not certain How do we account for this?
Phylloxera Pierce’s disease
Accounting at McCloud Winery
5: The oak barrels Two types
– High quality (5 + 10 years of economic life)– Low quality (10 years of economic life)
Is it an asset? Depreciation?
Accounting at McCloud Winery
General questions that we have tackled today
What do we mean by “accounting decisions”?
Why is it necessary to make accounting decisions?
What are the consequences of these decisions?
Accounting at McCloud Winery
The accrual principle: an example
Begin. day 1 End of day 1 End of day 2
I/S day 1Wealth
300
BalanceSheet
I/S day 1
BalanceSheet
Wealth
350
BalanceSheet
Wealth
360
Cash flow day 1
Cash flowday 2
Cash
0
Cash
250
Cash
360
Profit = 50 Profit = 10
Cash increase = 250 Cash increase = 110
Cash flow logic
Accrual logic
Different!
Accounting at McCloud Winery
Accounting and Financial Analysis
Raw dataAccounting decisions
FinancialStatements
FinancialAnalysis
Double-entry
Accounting at McCloud Winery
Summing up
The need to make accounting decisions because of– Accrual principle– Uncertainty
Accounting standards guide these decisions, but never eliminate them
Financial statements are “chosen”– Ethical issues– Communication strategy
Related Documents
