In: Business and Management

Submitted By tasniaj
Words 1735
Pages 7
BBean Coffee Inc
BBean Coffee Inc

To: BBean’s Management
From: Accounting Advisor
Re: Accounting Policy

Before we can assess and begin treatment of issues, it is essential that we determine a context for the recommendations that will be made. BBean Coffee Inc. is a public company, and on this basis, will have to adhere to financial statements within the constraints of GAAP.

BBea Coffee Inc. initially sold larger franchises in urban locations, for which they recognized payment of $400,000 at the point of sale. They later increased their options by selling $300,000 franchises and offering a new method of payment. Franchise purchasers were now given the option to pay a deposit of $100,000 when signing the contract, and then pay annual installments of $50,000 over four years.

BBean Coffee Inc. now wants to continue to recognize payment at the point of sale. This conflicts with the auditor because this method of recognizing payment will be overstating BBean Coffee Inc.’s net income. The auditor wants to alter the way your company recognizes to accurately portray the company’s economic performance.

As an accounting advisor, I ask you to consider our recommendations and review the full analysis on the situation that we have provided.

Users and Objectives

Financial statements are utilized as a frontier for communication, and with GAAP’s set of rules and regulations, statements are made ideal for public distribution. The basis of any other decisions will derive from the users of the statements. From the information available (the fact that BBean’s is a public company), it is apparent that there are a variety of users. However, the three main users of BBean Coffee Inc. are: Management, Shareholders, and Auditors.

Users approach financial statements with different needs and objectives. As the management team of BBean, one of your top…...

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