CO5117: Introduction to Accounting

Part (a) – Online accounting practice set

This practice set provides a real-world experience in recording and posting a variety of business transactions common to a small service business, so that students gain an understanding of the flow of data in an accounting system. While businesses typically use integrated computerised accounting systems such as MYOB, Quickbooks or Xero, knowledge of a manual accounting system, provides students with an understanding of know the accounting process is completed in a computerised accounting system. This assignment will simulate a professional client relationship where you will complete the accounting records from initial transactions to the preparation of financial reports for the owner, Mario Italiano.

Mario's Pizza Palace is a small service business that has operated successfully for some years. The business buys ingredients from a number of suppliers, then makes and sells pizzas on both a cash and credit basis. The owner, Mario Italiano, operates the business as a sole trader. The business currently trades from 4pm to 9pm on Sunday through to Wednesday and is opened on Thursday, Friday and Saturday.

The owner works in the business and his wife Maria keeps the accounting records, which are recorded using the accrual basis of accounting. There is one employee who is paid fortnightly. Tax isdeducted from the employee's wages (PAYG withholding tax) and remitted to the Australian Taxation Office (ATO) on a quarterly basis.The Australian Business Number (ABN) for the business is 19 463 520 440 and although in practice, the business would be required to be registered with the ATO for the goods and services tax (GST) because of its turnover, in this practice set students are not required to account for the impact of GST on transactions.

Required:

Prepare the recording of transactions for the month of June for Mario’s Pizza Palace. This will require analysing, classifying and recording transactions, for the month of June, in the accounting information system using specialised journals and control accounts, posting to the general and subsidiary ledgers and preparation of financial reports.

Part (b): Report to owner, Marion Italiano.

An important component of accounting services in a client relationship is not only the preparation of the financial reports for the business, but the dissemination of a performance report of the entity as well as the provision of business advice to improve future performance.

Required:

Prepare a business report for the owner, Mario Italiano, the owner of Mario’s Pizza Palace. You should address the following in your report:

• Summary of the financial reports prepared for the current financial year. Identify if there are issues or concerns in the business that Mario should be aware of.

• Using the your answers in part (a), and in conjunction with the performance benchmarks for pizza shops takeaway issued by the ATO, ratio analysis for the current year and report on the profitability, liquidity and financial stability for Mario’s Pizza Palace. Note, if you are unable to calculate averages, use year-end figures instead. Identify strategies Mario could implement to improve the performance and overall profitability of the business.

• Identify any limitations in your ratio analysis.

• Mario advised you this morning that the pizza thermostat control in the pizza oven blew up last night. The pizza oven was purchased second hand at a cost of $20,000 5 years ago. Mario was informed that it would have a productive life span of 10 years when he initially purchased it. Unfortunately, the manufacturer of oven is no longer in business and Mario is unable to obtain replacement parts. He has also been informed that generic replacement parts are incompatible.

• Mario has identified that a new industrial conveyor style pizza oven will cost approximately $35,000 including installation. The productive life of this model is 15 years.

• Now that you have prepared the financial reports, discuss the accounting treatment of the old pizza oven presenting the recording procedures and provide advice on the purchase and installation of the new pizza oven.

Submission deadline for part (b): Business Report due at 5 pm on Monday 17th September 2018

Assignment Deliverables:

1. Your business report should be no more than 2 pages double sided or 4 pages in total, with 1.5 spacing and 2cm margins.

• Note: the four-page business report should include an executive summary, introduction, results/findings, discussion, conclusion and recommendations.

• A title page, table of contents, reference list and appendix containing supporting

documentation may be submitted. These do not form part of the four page restrictions. Note the reference list should contain references used in the body of your report.