9-2 Final Project Submission: Memorandum With Appendix You will submit a memorandum with an appendix to the client and all IRS tax forms and schedules necessary to support your advice. It should be...

Recommendations:
A. The business of the client can be established as any of the four types, which are a sole proprietorship, a partnership, an S corporation, or a C corporation.
Sole proprietorship is a business form where the business is fully owned and controlled by a single person and there is no legal distinction between the business entity and the owner (Permwanichagun et al., 2014).
In partnership form of business, two or more parties enter into a legal contract to operate the business mutually and share the business profits (Ng, Ding & Yip, 2013). The parties to be the partnership can be individuals as well as other business organization.
S corporation is a type of business organization which adheres to certain requirements of Internal Revenue Code. The requirements are there should be 100 shareholders or less; income, loss, deductions and credits can be passed on to the shareholders; shareholders must be either individuals or certain tax-exempt organizations or specific trusts and estates.
In S Corporation owners, shareholders and company are taxed together but under C Corporation owners, shareholders and company are taxed separately (Zadek, 2012).
Cu
ently, Bob Jones is managing the business by himself. But he is considering transfe
ing 40% of the business interest to his daughter, Mandy. So, for the cu
ent business type sole proprietorship is mostly suitable. But if the interests are shared by Bob and Mandy, then partnership form of business will be mostly suitable for the business of the client. There are no other shareholders and so corporations cannot be incorporated. The client is advised to form partnership deed between Bob and Mandy and incorporate a partnership business.
B. Under the accrual basis of accounting, revenues and expenses are recorded when they occur that is as the money is earned or is billed rather even if the actual amount has not been received or paid. Under accrual method tax is paid on the earned income that is even on the income for which money has not been received yet (Khan & Mayes, 2009). Under accrual basis allowances are to be made for the bad debts, sales returns, obsolescence of inventory, etc. The allowances are made based on the estimates of the past transactions in the company. This method of accounting is used by mainly big business houses.
Under cash basis the revenues and expenses are recorded when the money is received or paid for a particular transaction and not when the money falls due. Under cash basis tax is paid only on those incomes against which the money has been received (Pa
y-michael, 2010). No allowances are made under this method since there is no requirement for that. This accounting method is generally used by small business and sole proprietors.
Revenue recognition method has an impact on the financial statement. So, it is very important to recognize the revenue properly so that the financial statement is not overstated or understated. It is important to depict the true financial position of a company. The client company, Bob Jones Automotive Gallery is a very small company and even under partnership form there will just two owners. So, cash basis of accounting should be followed by the company.
C. Under accrual method, revenue will be recognized when the sale is made and the income is earned even if the money has not yet been received. Under cash method, revenue will be recognized when the sale is made and the income is earned and the money has been received from the client.
As found out in the above question, cash basis accounting is the ideal method for the client business, Bob Jones Automotive Gallery. So, as per this method, the sale of inventory...