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TAX 650 Milestone Two Guidelines and Rubric

In this short paper, after differentiating between accrual accounting and cash basis methods, you will recommend an accountin g method for the client described in the final project. Based on your recommendation, determine when revenue would be recognized on the sale of inventory and how this impacts the client’s financial situation.

Specifically, the following critical elements must be addressed:

A. Differentiate between accrual accounting and cash basis. Based on the type of business and the client’s accounting system, what is the impact when

revenue is recognized? Which option would you recommend for the client? B. Based on the decision of accrual vs. cash basis, describe when revenue would be recognized on the sale of inventory, and how the accrual reporting

differs from cash basis. C. Determine the economic impact on the client’s financial situation. Based on your decision, determine the potential tax liability, keeping in mind

appropriate Internal Revenue Code and Treasury regulations. D. Summarize the cash or accrual accounting method in relation to the selected business entity.

Guidelines for Submission: Your paper must be submitted as a 2–3-page Microsoft Word document with double spacing, 12-point Times New Roman font, one- inch margins, and at least three sources cited in APA format.

Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions.

Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value

Accrual Accounting vs. Cash Basis

Di fferenti ates between accrual accounti ng and cas h bas i s and i denti fi es the i mpact of the revenue

Di fferenti ates between accrual accounti ng and cas h bas i s and i denti fi es the i mpact of the revenue, but the detai l s are

i naccurate or curs ory

Does not di fferenti ate between accrual accounti ng and cas h bas i s or does not i denti fy the i mpact of the revenue

25

Revenue Recognized on the Sale

Des cri bes when revenue woul d be recogni zed and how the reporti ng di ffers for accrual

accounti ng vs . cas h bas i s

Des cri bes when revenue woul d be recogni zed and how the reporti ng di ffers but detai l s are

i naccurate or curs ory

Does not des cri be when revenue woul d be recogni zed or how the reporti ng di ffers

25

Economic Impact Determi nes the economi c i mpact on the cl i ent’s fi nanci al s i tuati on and potenti al tax l i abi lity, and determi nati ons are cons i s tent

wi th Internal Revenue Code and Treas ury regul ati ons

Determi nes the economi c i mpact on the fi nanci al s ituati on and potenti al tax l i abili ty, but ei ther the referenced I nternal Revenue

Code and regul ati ons are i naccurate or detai l s are curs ory

Does not determi ne the economi c i mpact on the fi nancial s i tuati on and potenti al tax l i abi lity

20

Summary: Cash or Accrual Basis Accounting System

Summari zes cas h or accrual basis accounti ng s ys tems i n rel ati on to the s el ected bus i nes s enti ty cons i s tent wi th appropri ate

Internal Revenue Code and Treas ury regul ati ons

Summari zes cas h or accrual basis accounti ng s ys tems i n rel ati on to the s el ected bus i nes s enti ty, but detai l s ei ther are curs ory or

contai n i naccuracies

Does not s ummari ze cas h or accrual basis accounti ng s ys tems i n rel ati on to the s el ected bus i nes s enti ty

20

Articulation of Response Submi s s i on has no major errors rel ated to ci tati ons , grammar,

s pel l i ng, s yntax, or organi zati on

Submi s s i on has major errors rel ated to ci tati ons , grammar,

s pel l i ng, s yntax, or organi zati on that negati vel y i mpact readabi l ity and arti culation of mai n i deas

Submi s s i on has criti cal errors rel ated to ci tati ons , grammar,

s pel l i ng, s yntax, or organi zati on that prevent unders tandi ng of i deas

10

Earned Total 100%