In Each of the Following Situations, the Accountant for Sydney

Essay

In each of the following situations, the accountant for Sydney Design Services (Sydney) must decide how to record the information in the financial statements. Sydney is a proprietorship owned and operated by Gloria Steinwald.
1. Gloria would like to borrow money from the bank to expand the business. Since she owns a house that can be pledged as security for a bank loan, she asks the accountant to ensure that the house is shown on Sydney's balance sheet.
2. The accountant is confident that with the new contract that was signed, Sydney will be a successful business for many years to come. However, before that was finalized, he was curious whether there would be any effect on accounting for the assets and liabilities of the business if its ongoing viability had been in doubt.
Instructions
For each of the situations, identify which generally accepted accounting principle would guide the accountant in deciding how to report the situation, and describe the correct treatment.