Goran Triagin Runs a Tennis Equipment Sales and Training Business

question 1

Essay

Goran Triagin runs a tennis equipment sales and training business.
Following some help from a friend who did accounting at secondary school 15 years ago,Goran has prepared his own Income Statement and Balance Sheet for the last accounting period.He brings them to you for checking.
On inspection and following discussions with Goran,the following points arise:
• His Income Statement shows that only cash receipts and cash payments have been included as revenues and expenses.
• Goran withdrew $100 per week cash from the business during the year.This has been included as a business expense.
• When Goran valued his tennis racquets,nets and other equipment at the end of the year,he estimated their current value according to prices of similar second-hand items being advertised in the NZ Tennis national monthly magazine.
• Goran had several bad customers who left to go to Australia in 1999,who still owe Goran's business money.No adjustments to Goran's accounts have been made for these amounts owing,even though the accounts are now 5 years old;all attempts to contact the customers have failed.
• Goran states 'I want you to check over my financial statements,and to make any adjustments necessary to show the best possible net profit and the highest possible owner's equity.That way,if I want to sell my business,I will get the best price possible,even if I have to pay higher tax on my profits.I don't think it is necessary to show everything in my financial reports;in fact,if there are any items that don't look so good,please hide them somehow.'
State what accounting principle or rule is violated by each of the above scenarios.

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Definitions:

Biofeedback Training

A technique that teaches individuals to improve their health by controlling certain bodily processes that normally happen involuntarily, such as heart rate or blood pressure.

Meditation

A practice of concentrated focus upon a sound, object, visualization, the breath, movement, or attention itself, to increase awareness of the present moment, promote relaxation, and enhance personal and spiritual growth.

Hypnosis

A hypnotic state characterized by concentrated focus, diminished awareness of surroundings, and an elevated receptivity to suggestions.

Mindfulness Meditation

A practice of focusing one's mind on the present moment, while calmly acknowledging and accepting one's feelings, thoughts, and bodily sensations.