The changing landscape of accrual accounting

Running head: MEMO ON REASONS FOR DELAYED WAGES 1

MEMO ON REASONS FOR DELAYED WAGES 4

MEMO ON REASONS FOR DELAYED WAGES

Name

Institution affiliation

MEMO

To: The Management

From: Chief Financial Officer

Date:

Subject: Reason for delayed Wages

Good afternoon, Staff Members,

This is to sincerely apologize to all staff members for the delayed one-month wages and give adequate reasons behind the delay. Despite the great sales that we have received this year, there is a short in terms of cash in the company due to the accounting system employed in the company. Our cooperation is still new and we are trying hard to penetrate the market as well as stay competitive while considering sustainability. To achieve the above, the company has to put the needs of the clients as its primary priority to gain their trust and loyalty. Thus the company has employed accrual accounting and partly cash accounting.

Cash accounting is the simplest way and efficient to use since it favors the company. This method records cash inflow when it is received and cash outflow when it is paid (Hribar & Yehuda, 2015). Taxwise, this method seems to favor the firm since a new business can suspend recording of income until the following financial year. However, this accounting method is mostly employed by small corporations or large firms that have already established themselves in the market. On the other hand, accrual accounting records cash inflow and outflow regardless of whether the cash has reached the financial offices. The method involves recording income and expenses immediately a transaction is conducted rather than when payments are done (Modugno & Di Carlo, 2019). The method is an asset to our company since it presents the whole picture of our financial position.

Firstly, BizCon Company offered 6 months- financing which means that our regular customers will not be paying for services for the said termed phase which contributes to the shortage of cash in the company. Secondly, our equipment sellers demand cash on delivery which means they are paid with the little cash earned since our company records cash inflow the moment an invoice is generated. Moreover, the company was forced to pay a pre-insurance which is also a great contributor to cash shortages. Thus the promising sales we realized this year are not in cash terms but mostly in invoices and the little cash collected was used for the above-mentioned expenses.

Nevertheless, BizCon Company urges the staff members to be a little bit more patient as we collect cash depending on the dates of invoices. The company’s establishment rate is also promising, which means that cash shortages will be minimal as time passes by which means that delayed wages issues will not occur again. However, any staff with a question or additions is welcomed to present them to the financial offices or contact us through bizcon.co@gmail.com. Lastly, the company appreciates your patience so far and promise to make it up to every one of you.

Signature:

Reasons for delayed wages

Bizcon.co@gmail.com

References

Bushman, R. M., Lerman, A., & Zhang, X. F. (2016). The changing landscape of accrual accounting. Journal of Accounting Research, 54(1), 41-78.

Hribar, P., & Yehuda, N. (2015). The mispricing of cash flows and accruals at different life‐cycle stages. Contemporary Accounting Research, 32(3), 1053-1072.

Modugno, G., & Di Carlo, F. (2019). Financial Sustainability of Higher Education Institutions: A Challenge for the Accounting System. In Financial Sustainability of Public Sector Entities (pp. 165-184). Palgrave Macmillan, Cham.