Read the following passage, then answer the question that follow. Scenario Milly decided to start a business. She does not have any previous experience, but she is confident that she can make it in the restaurant business. She wants to start a business with an initial investment of $1million dollars in a business bank account. She plans to offer both dining and take-out meal services and is anxious to give it her all. On Jan 1, 2002, she brought additional items into her business: her personal car, her stove and a refrigerator valued at $500, 000, $100 000 and $80 000 respectively. On January 6, a customer purchased 10 meals that cost $500 each for which she wrote a receipt. These meals were bought via take out service. At the end of the first week her total sales amounted to $180 000 from which $100 000 was dining room sales and $80 000 from take-out sales. She has a few friends that she allows to order- take-out meals on credit and they have agreed to pay her at the end of each week. She records these sales on the same day they are made. On January 13, she decided to order additional items for the upcoming week. These items included flour, rice, chicken, seasonings, carrots, cabbage, lettuce, beet root and kale. She had brought some similar items from the previous week and deceived to use those items first and place the most recently bought items in storage. Meal sales remained consistent throughout the three-month period. One day, a friend asked her how her business was doing. She told her friend that her business was doing well. Her friend had a puzzled look on her face. However, Milly simply said “My restaurant is doing well.” On March 31, she decided to record the sales that were made during the period January to March 2002: Jan $480 000: Feb $540 000: March $600 000 and on March 31. She also decided to prepare a mini Balance Sheet. Of note all assets had depreciated by 10%. However, they were all recorded at book values. She wanted to prepare an Income Statement for the quarter ended March 31,2002. However, she failed to include the following items in her Income Statement: Rent, Insurance and Wages. She did not think anything of this and proceeded to prepare for the next quarter. She also used some of the weekly business earnings to pay her household helper. 1. Use the Case above to show evidence of five accounting principles mentioned.
Read the following passage, then answer the question that follow.
Scenario
Milly decided to start a business. She does not have any previous experience, but she is confident that she can make it in the restaurant business. She wants to start a business with an initial investment of $1million dollars in a business bank account. She plans to offer both dining and take-out meal services and is anxious to give it her all.
On Jan 1, 2002, she brought additional items into her business: her personal car, her stove and a refrigerator valued at $500, 000, $100 000 and $80 000 respectively. On January 6, a customer purchased 10 meals that cost $500 each for which she wrote a receipt. These meals were bought via take out service. At the end of the first week her total sales amounted to $180 000 from which $100 000 was dining room sales and $80 000 from take-out sales. She has a few friends that she allows to order- take-out meals on credit and they have agreed to pay her at the end of each week. She records these sales on the same day they are made.
On January 13, she decided to order additional items for the upcoming week. These items included flour, rice, chicken, seasonings, carrots, cabbage, lettuce, beet root and kale. She had brought some similar items from the previous week and deceived to use those items first and place the most recently bought items in storage. Meal sales remained consistent throughout the three-month period.
One day, a friend asked her how her business was doing. She told her friend that her business was doing well. Her friend had a puzzled look on her face. However, Milly simply said “My restaurant is doing well.”
On March 31, she decided to record the sales that were made during the period
January to March 2002:
Jan $480 000: Feb $540 000: March $600 000 and on March 31. She also decided to
prepare a mini Balance Sheet. Of note all assets had depreciated by 10%. However, they were
all recorded at book values. She wanted to prepare an Income Statement for the quarter ended
March 31,2002. However, she failed to include the following items in her Income Statement:
Rent, Insurance and Wages. She did not think anything of this and proceeded to prepare for
the next quarter. She also used some of the weekly business earnings to pay her household
helper.
1. Use the Case above to show evidence of five accounting principles mentioned.
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