Credit and Collection Corporation :: essays research papers

Case Study Credit and Collection grassCredit and Collection Corporation ( 300) is looking to offer stocks to a meeting of private investors. CCC manages and collects chronicles receivables for three different types of customers. CCC uses a topical anesthetic certified public accountant firm to prepare and given an tactual sensation on its pecuniary statements. To improve the favorability of the equity offer CCC has determined it needs an opinion on its financial statements from one of the Big Six CPA firms.The setoff type of accounts receivable CCC purchases are delinquent accounts. CCC reviews a companys delinquent accounts receivables, removes problem and bankrupt accounts from the list and because assumes collection responsibility for the collection for a management fee of 30 percent. The second type of accounts receivables are current and delinquent accounts receivable. CCC reviews a companys accounts receivables then pays the company 95 percent of the quantify of the r eceivables selected. Any uncollectible accounts are exchanged with the company for new receivables or are purchased back from CCC by the company. The third type of account receivables are payments due to hospitals, clinics and doctors from third party payers. CCC reviews the accounts receivables to determine the hail that the third party payer will actually be paying. The supplier is then paid 95 percent of the determined value and CCC collects from the third party payor. For each type of accounts receivable CCC generates foil letters and does follow-up collection calls.The first Big Six CPA firm spend several days interviewing CCC personnel and poring over the financial data. The CPA firm determined they has serious reservations ab let on gross recognition. The CPA firm stated CCC was in the collections business and should agnise taxation only after accounts had been collected. The firm based its findings on judgment statement number 5. Concept statement number 5 states an stage must meet the definition of a financial statement element, the detail must have a relevant attribute measurable with competent reliability, the item must contain information capable of marking a difference in user decisions, and the information must be verifiable, representationally snug and neutral. Therefore, revenue should be recognized when realizable and earned. The firm compared CCCs business to real estate accounting rules required the deferral of revenue from a real estate sale, so long as the trafficker had any continuing involvement with the development of the property sold.(Corporate, 99) The firm did non think CCC earned its revenue until after it had sent out the dun letters, made the follow up calls and collected on the account.