Accounting and Auditing: Crazy computers

FASB (Financial Accounting Standards Board) plays the role of determining Generally Accepted Accounting Principles to ensure proper accounting standards are followed. According to FASB, revenue is recognized once it is earned.

Commission in Crazy Computer’s case is recognized immediately since Crazy Computers collects the cash on behalf of Third Party insurance and then pays it. Commission however should not be added to sales because when balancing the equation, Sales is equal to opening stock plus purchases less closing stock.

This means that by adding commission to sales the equation may not balance and it will be exaggerated. The commission revenue consists of income and it is therefore used in the final statements of accounts to calculate the profit of the business.

Commission received from TPI can therefore be used when coming up with profits for the year. In case Third Party Insurance agrees to re insure, revenue to be obtained from Third Party Insurance (TPI) will only be recognized after Third Party Insurance pays up the amount to Captive Insurance Company (CIC).

Commission revenue can only be recognized immediately if Crazy Computers will automatically be deducted from the $110 that the company gives to Third Party Insurance so that it does not have to wait for TPI to pay. This would mean that Crazy Computers would have $165 at the end of the sale then give $25 to TPI.

However, it may not show whether the computers on their own were able to sustain themselves without the boost from the commissions earned. When Crazy Computers introduce CIC, they will still get the commission but it will be offset when the amount received from TPI is added.

Even as Crazy Computers recognizes revenue from sale of third party insurance on behalf of TPI, it should be careful when it comes to receiving the money back for re-insurance through CIC. The best method to account for the funds to be collected from the Captive Insurance is to do them separately from Crazy Computers.

This is because Crazy Computers and CIC are two different kinds of businesses. FASB advices that in order to check the progress of a business it is good to gauge its profitability which is done by subtracting the expenses from sales made by the business.

This will ensure that when it comes to paying claims, revenue received from Crazy Computers should not be used for CIC obligations. It will also ensure that the money collected from CIC is not to be used in the computer business unless Crazy Computers borrows from CIC.

If Crazy Computers was to account for CIC revenue together with the computer revenue, calculating profits would get complicated since the revenue received is not made from sales only. In other words, treating the two businesses as separate entities will ensure the profitability of the two can be determined.

Crazy Computer’s idea to create a wholly owned subsidiary would be a good idea if the Third Party Insurer agrees to re-insure with them. Based on the transaction illustrated in the case study, currently Crazy computers pay $110 for insurance such that TPI takes responsibility for any obligations from customers.

Because CC gets commission for every sale made then from the $200 received it is left with $80 after paying the sales persons $10. With the introduction of CIC and if TPI agrees to re insure with CIC, CC will get $ 85 back out of the $110 paid to TPI.

This means that cash received goes up from $80 to $165. CIC would therefore be profitable. However, in case of any third party obligations CIC will be solely responsible. This is why it is extremely important for Crazy Computers to ensure that CIC’s income does not mix with computer income so as to ensure each department can sustain its own expenses.

Word count (635).


FASB. (2008). Financial Accounting Standards and Revenue Recognition.

            from http/

Writing Quality

Grammar mistakes

F (43%)


B (87%)

Redundant words

D (62%)




F (50%)

Total mark


Calculate the price
Make an order in advance and get the best price
Pages (550 words)
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with MyStudyWriters
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Leadership Studies
excellent job
Customer 452773, August 26th, 2023
Business and administrative studies
excellent, got a 100
Customer 452773, May 17th, 2023
Social Work and Human Services
Great work I would love to continue working with this writer thought out the 11 week course.
Customer 452667, May 30th, 2021
Customer 452591, March 18th, 2021
Business and administrative studies
Customer 452773, February 23rd, 2023
Thank you for your hard work and help.
Customer 452773, February 13th, 2023
Business and administrative studies
Customer 452773, February 23rd, 2023
Business and administrative studies
excellent paper
Customer 452773, March 3rd, 2023
Business and administrative studies
Customer 452773, March 3rd, 2023
Business Studies
Thank you very much for a good job done and a quick turn around time.
Customer 452615, March 31st, 2021
Thank you!
Customer 452545, February 6th, 2021
Human Resources Management (HRM)
excellent work
Customer 452773, July 3rd, 2023
Customer reviews in total
Current satisfaction rate
3 pages
Average paper length
Customers referred by a friend
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat

Sometimes it is hard to do all the work on your own

Let us help you get a good grade on your paper. Get professional help and free up your time for more important courses. Let us handle your;

  • Dissertations and Thesis
  • Essays
  • All Assignments

  • Research papers
  • Terms Papers
  • Online Classes
Live ChatWhatsApp