AFA 100 case - case PDF

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April 2, 2019

AFA 100 CASE ASSIGNMENT

To: Linda Lee, CEO (Toronto Tour Company) From: Naval Sharma, Junior Accountant, (School of Accounting and Finance) Date: February 4, 2019 RE: Internal Controls for your Business

Hello Linda, upon reviewing the day to day activities of your business I have found some minor adjustments that can be made in regard to your internal controls. If implemented these adjustments will provide safety for you and your business.

Internal Control Weakness 1 Description of weakness: Firstly, you noted that you have not been able to keep up with your daily transactions, and this has led to missed opportunities to receive a discount. Explanation of what can go wrong as a result of weakness: You have only missed a discount thus far but not being able to keep up with payments can lead to a bad credit score, and even penalties from creditors. Recommended Change: To solve this problem, you should implement a cash budget, where you forecast all your outstanding payments at the start of the month. In doing so you will be prepared to make payments, and this will give you an idea about how much money you will require over the following month. Also, this will help minimize the risk of theft as you will be aware of when you will need to make payments, and how much money you should have.

Internal Control Weakness 2 Description of weakness: Secondly, you stated that you carry about $500-$1000 in cash every day at the end of the day in your backpack. Explanation of what can go wrong as a result of weakness: Carrying a large amount of cash in downtown can lead to a possible robbery and this can put your life in danger. Recommended Change: Considering most people have credit cards and fewer people are using cash, you should invest Intuit Go Payment. Intuit Go Payment is a credit card reader that will connect right to your phone and the payments will go straight to your bank account. They are

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relatively cheap as they cost $20, but for every transaction there will be a 2%-3% credit card fee. Intuit Go Payment is owned by Quick Books, so you can synchronize it with your Quick Books account. When the two accounts are synchronized it will automatically update your books whenever you process a transaction, and since you do not have time to update your books on a daily basis this will be perfect for you. Along with limiting the cash you will have on hand it will limit your trips to the bank and update your books in a fast and efficient manner.

If all of these internal controls are implemented, I can guarantee, the integrity of your financial statements will stand, and the bank will see that. Forecasting your cash outflows will lead to payments that are not late, and the use of a credit card reader will provide safety and efficiency. Safety in the sense as you will not have as much cash on hand. Please consider implementing these controls and if you have any questions feel free to contact me.

Income Statement (ASPE) Naval Sharma|AFA100

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The Toronto Tour Company Income Statement For the month ended, January 31, 2019 Revenues Service Revenue Sales Discounts

$18,600 (500) $18,100

Net Sales Expenses Operating Expenses Supplies Expense Utilities Expense Prepaid Insurance Expense

$460 175 150

The Toronto Tour Company Balance Sheet As at, January 31, 2019 Assets Current Assets Cash Accounts Receivable Supplies Prepaid Insurance Prepaid Rent Total Current Assets Non-Current Assets Furniture $ 5,000 Acc Dpr - Furn 525 Equipment 6,000 Acc Dpr - Equip 200 Total Non-Current Assets Total Assets Liabilities Current Liabilities Accounts Payable Accrued Liabilities Unearned Service Revenue Income Tax Payable Balance Total Liabilities Ad Shareholders’ Equity Common Shares Les Retained Earnings Balance Total Equity Total Equity + Liabilities

$ 24,160 2,250 1,200 600 1,900 $30,110

4,475 5,800 10,275 $40,385

$

2,180 175 3,640 1,135 $7,130 20,000 13,255

0 33,255 $40,385

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General Journal Date

Jan 1, 2019

Jan 1, 2019

Jan 4, 2019

Jan 6, 2019

Jan 8, 2019

Jan 10, 2019

Jan 12, 2019

Jan 18, 2019

Jan 25, 2019

Jan 25, 2019

Account Title and Explanations Cash Accumulated Depreciation - Equipment Loss on Sale of Equipment Equipment Sold equipment for a loss. Equipment Cash Purchased Video equipment. Accounts Payable Cash Paid off the accounts payable from December 2018. Retained Earnings Cash Withdrew $2000 from the company in the form of a dividend. Unearned Service Revenue Service Revenue Completed service that was prepaid for in December 2018. Supplies Accounts Payable Purchased supplies on account. Accrued Liabilities Cash Paid the December 2018 cell phone bill. Cash Accounts Receivable Received payment for services provided in December. Bus Rental Expense Cash Accounts Payable Paid some bus rental fees in cash rest is on account. Cash Unearned Service Revenue

Journal Entries

Ref

14

Amount Debit Credit 3,000 4,000 1,000 8,000 6,000

15

6,000 2,700

1

2,700 2,000

2

2,000 1,900

11

1,900 280 280

3 190 6

190 3,960

8

3,960 9,600 7,700 1,900

16 3,640 12

3,640

General Journal Naval Sharma|AFA100

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Date Jan 29, 2019

Jan 31, 2019

Jan 31, 2019 Jan 31, 2019 Jan 31, 2019 Jan 31, 2019 Jan 31, 2019 Jan 31, 2019 Jan 31, 2019 Jan 31, 2019

Account Title and Explanations Cash Sales Discounts Service Revenue Received cash for services provided and gave a 10% discount Accounts Receivable Sales Discounts Service Revenue Provided services on account and gave a 10% discount. Supplies Expense Supplies Adjusting entry for supplies remaining on hand. Prepaid Insurance Expense Prepaid Insurance Adjusting entry for prepaid insurance remaining. Prepaid Rent Expense Prepaid Rent Adjusting entry for prepaid rent remaining. Utilities Expense Accrued Liabilities Adjusting entry for cell phone used in January. Cash Service Revenue Received cash for services provided. Depreciation Expense Accumulated Depreciation - Furniture Depreciation of furniture in January. Depreciation Expense Accumulated Depreciation - Equipment Depreciation of equipment in January. Income Tax Expense Income Tax Payable Income tax of January to be paid in February.

Ref 10

10

Amount Debit Credit 2,250 250 2,500 2,250 250 2,500

3

460 460

4

150 150

5

1,900 1,900

6

175 175

9

11,700 11,700

13

75 75

15

200 200

17

1,135 1,135

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