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Bookkeeping and Financial Statements

In order for companies to prepare and issue financial statements, their accounting equations (debits and credits) must be in balance at year end. Discuss how errors and misstatements may occur given this requirement.

Bookkeeping is largely done today using a computer and software. Discuss whether you feel this is a help or a hindrance to someone learning bookkeeping rules.

- Discuss whether or not you believe gift cards should have an expiration date.
- Based on your response, what is the implication related to the accounting treatment of the transaction

Solution Preview

-- There are two primary reasons. The first reason is because oftentimes, if debits and credits don't equal, an employee may force an entry to "make" them balance simply because the employee can't figure out where the entry is erroneous. This creates an erroneous financial statement even though the debits and credits are in balance. The second reason is because oftentimes, the trial balance is not analyzed comprehensively. The trial balance is where we identify if debits equal credits and if they don't, we then make the necessary adjustments so that they do equal. This step is sometimes skipped, which is a grave mistake because it is where we reconcile those differences to verify that our debits equal our ...

Solution Summary

This solution explains if gift cards should have an expiration date. This solution also discusses the implications related to the accounting treatment of gift card transactions.