Southern New Hampshire University
Module Four Homework
Please answer the following ques ons in paragraph form. Create in a Word document and upload.
1) What is receivables oat? Receivable oat refers to the me gap between when a customer makes a payment to when it is added to the book.
2) What is payables oat? Payables oat refers to the me gap between when the payment is made to your vendor and the me it clears your bank.
3) Name three ways to shorten the receivables cycle. 1. Payment upfront 2. Deposit 3. Cash on Delivery
4)Give one example of receivables fraud. "Lapping" is an example of receivables fraud. Lapping is when you use one account to cover fraudulent ac vi es in another.
5) Name at least two di erent types of inventory valua on methods. Discuss the advantages and disadvantages of each method. The two inventory valua on methods are First In, First Out (FIFO) and Last In, First Out (LIFO). The advantage to FIFO is that it is the easiest to use and maintain, while LIFO's advantage is tax liability being smaller. The disadvantage of FIFO is that it can mistakenly overstate the gross margin, while LIFO's disadvantage is that it is more di cult to maintain and use.
6) A controller must consider many factors to assist in the determina on of capital asset expenditures. Why is this planning important? Name two di erent accoun ng methods that might be used in the valua on of the expenditure. Discuss the advantages and disadvantages of both methods. As a controller planning is important because inves ng not only a ects the nancial
amount of money. The two valua on methods are the payback method and several rate-of- return analyses. (Bragg, 2011) The advantage of the payback method would include easy to understand, useful with a risky investment and useful with a business with low cash ow. The disadvantage of it would be that it does not consider earnings a er the ini al outlay is recouped, even though the cash ow a er payback is the real factor in determining pro tability. (Bragg 2011)
Southern New Hampshire University
References
Bragg, Steven M. (2011). The controller's func on: The work of the managerial accountant. Hoboken, New Jersey. John Wiley & Sons,