Q1: Time and Billing
The company you work for uses the time and billing feature in its computerized system. You get a call from an angry client insisting the labor on the job has been overbilled by more than twice the amount of time the employee actually spent there. You are in the business of outsourcing temporary clerical help, and you bill the client according to the reported time by the employee. Keeping this in mind, answer the following questions:
- What is the first step you would perform to investigate this client complaint? Give detailed reasons.
- What type of proof might be available to support the amount of time entered?
- What would be the incentive for an employee to enter time dishonestly, knowing the client will most likely catch it? Explain in detail.
Q2: Inventory Tracking
Inventory tracking is an advantage of using a computerized system. Inventory balances are calculated using one of the three methods: FIFO, LIFO, and average costing. You have an option to select any of these methods in Peachtree. Based on your knowledge of Peachtree, answer the following questions:
- Which of these three methods has been set as default in Peachtree? Do you agree with this method being the default? Why or why not?
- Under which of these methods do we normally recognize the highest net income? Why?
- Under which of these methods do we normally recognize the highest ending inventory balance? Why?
- Do you think companies consider the highest net income or the highest ending inventory while choosing a method? Why or why not?