Acc/561 Week 3 Assignment Bizcon Memo

Memo To: Management Subject: Notification of Delayed Wage PaymentsBizCon has just finished a very successful first year of operations; the company’s sales growth has been explosive, to help in this growth the company has offered favorable credit terms that allow up to six months credit to our largest customers. On the other hand, since BizCon is a relatively new firm in business, we have not generated enough goodwill to attract credit terms from our suppliers. This means all our supplies are pain for in cash on delivery and some services such as insurance are paid for cash in advance. The import of this is that sales revenues receipts are on accrual while expenses are on cash basis. The result is that BizCon is seriously cash stressed to the extent that one full month of salaries to employees is owed at the end of the financial year. Below is an explanation of how cash and accrual accounting have affected the financial reports and why the company has reported favorable net income despite being very short of cash.The major difference between the accrual basis of accounting and the cash basis of accounting is the timing in which revenue and expenses are recognized.