ACCOUNTING FOR MANAGEMENT DECISIONS – ACC601

Individual Assignment – Date due: End of Week 6 Using Accounting Software

This case study is designed to introduce you to using double entry computer accounting software for a small business. It covers many of the common business transactions including those which have covered in class. This assignment will also include Goods and Services Tax (GST) calculations as this is embedded in the accounting software, but is not examined.

This assignment is not meant to be a data entry exercise, but you are required to carefully record each transaction, understand how the software records these transactions in both the general and subsidiary ledgers and create reports and then analyse and understand these reports.

Accountants were one of the first professions to use accounting software. XERO is a relatively new and now widely used software as it has a number of innovative features, such as: -

• The software application is in the ‘cloud’ so it can be accessed anywhere in the world on any connected device and there is no software to load onto computers;
• The software is updated regularly by Xero, so no updating required by users;
• The software links to other applications easily such as bank accounts – bank transactions are uploaded automatically when the user logs into the application;
• Written in user friendly language rather than being for ‘accountants’.

The Manly Surf and Wellness Shop Pty Limited

The Manly Surf and Wellness Shop is a store located in Manly, overlooking Manly Beach focusing on the surfing market, providing surfing and yoga lessons

as well as equipment and clothing and other merchandise sales.

Equipment is sold to the general public as well as in bulk to sporting clubs and schools. Surfing and yoga lessons are usually held in groups.

The store is owned by two people - Indira Jones and Simon Fitzgerald. They have been operating the store for 2 years after initially investing $50,000 each of their own money into the business. They are joint Chief Executive Officers (CEO’s) and equal shareholders.

Surfing lessons are conducted seven (7) days per week subject to the weather. These lessons are mainly catered to tourists and / or local residents wanting to learn surfing.

Yoga classes are also conducted most days from 6 am to 10 am every day and from 7 pm to 9 pm 4 days per week (Monday to Thursday).

Equipment is included in the cost of surfing lessons however it is available for hire by other customers 7 days per week from 7 am to 4 pm.

Clothing is available for sale in the shop 7 days per week as well as by bulk orders from surfing clubs and schools.

The store has operated the business using a manual accounting system since it started on 1 July 2016. Accounting is getting too complicated and time consuming for Indira and Simon and they have appointed you as their new Accountant. They have heard about Xero as an easy to use accounting system and they would like you to set up their accounts on this system and also manage the accounting from now on.

You gather the following information that will help you set up the company in XERO:

Company Information

Company name: The Manly Surf and Wellness Shop

ABN: 54 174 259 919 (This is the ABN of ICMS)

Address: 400 North Steyne, Manly NSW 2095

Phone: 9444 4444

Current Financial Year: 2018

Financial Reporting period: 1 July 2017 to 30 June 2018

Conversion Month: March Accounting Periods: Twelve

This information is necessary to create the company file in XERO

This list below can be used to create an accounts list with the account opening balances.

Goods and Services Tax (GST): Sales and Purchases

GST of 10% is charged on all revenue and is charged at 10% on all purchases of inventory. For all business expenses other than bank charges, wages and superannuation, the business pays GST of 10%.

All in-store sales are either EFTPOS, Credit Card or Cash. Cash is banked every day as there is an express Virtual Bank facility located next door to the store which is operated 24 hours per day, 7 days per week. This policy of banking all takings each day is implemented for security reasons so as no money is left in the store overnight. This means that all income received from in-store sales can be entered into Xero’s bank account immediately after each transaction.

Class price List as at 31 March 2018

Ensure that these items are set up as inventory items.

The above prices include GST. All classes revenue is strictly cash based, where customers pay before the service is performed.

Supplier details

There were no amounts owing as at 31 March 2018.

The following is a list of inventories on hand and the suppliers as at 31 March 2018.