200 words

1. Mr. Jimmy recently accepted you as a new partner for his mobile phone trading business. Upon joining the partnership, you requested to look at the financial records of the business. You were shocked to find that the accounts were prepared not in accordance with the generally accepted accounting principles (GAAP). You have found that your partner, Mr. Jimmy, combines all his personal expenses with the business transactions. The accounts, although were complete, is based on cash basis and several policies such as depreciation were non-existent and others were adjusted regularly depending on how Mr. Jimmy wants to review the financial health of the business. In the partners meeting, you have highlighted these issues and seek explanation from Mr. Jimmy. It was found that Mr. Jimmy believes that the accounts should be prepared in a way that he could understand. He argues that the business is not too big and does not involve many stakeholders. Therefore, financial information should be presented in a format that he could comprehend. Furthermore, there are no legal requirements for partnership business to maintain books of account. You have decided to prepare the accounts and implement accounting policies as per GAAP. To do that, you have to explain the importance and benefits of doing so to Mr. Jimmy. Discuss your views on the current accounting practice by Mr. Jimmy