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For about a year Frank Poppa has been operating a hot dog stand in the parking lot

Design an Accounting Information System

For about a year, Frank Poppa has been operating a hot dog stand in the parking lot of a major discount retailer in a suburban area. The stand appears to be a push cart but is actually a small trailer that is towed from home each day. Frank cleverly designed the stand to include storage compartments, napkins, and the like. What started out as a “weekend gig” to pick up a few extra bucks has turned into a full-time occupation. Frank soon found thaton a hot summer day, he could easily take in more than $1000 from sales of a full line of fancy hot dogs and cold sodas.

About four months ago, Frank decided to expand to more locations. He found that large discount retailers were quite happy to provide him adequate space near the front door because customers enjoyed the convenience and the stand helped build traffic for the retailer. Frank formed Poppa’sDog’s Company and negotiated contracts with several retailers to provide push cart operations outside their stores. The contracts generally call the Poppa’s Dogs to pay a location fee to there tailer plus 3% of the pushcart’s sales.

Frank plans to be very careful when hiring the people necessary to operate the five new push cart locations. He is confident that he can assess good moral characterand avoid hiring anyone who would take advantage of him. Frank will have to spend about $3000 for each new push cart and related equipment. In addition, he will have to finance an inventory of hotdogs, condiments, and sodas for each location. A local bank hasagreed to provide financing.

Until now, Frank has maintained an in formal accounting system consisting of an envelope full of receipts, and his personal checking account. The system has served him well enough so far, but he is finding that more and more he is getting his personal financial activities confused with those of his business. Frank is positive that the business is profitable because he seems to have more money left at the end of the month than he did when he was working full time as an auto mechanic. He has decided he needs a better accounting system and has decided to consult with a CPA he knows to see what she might recommend.

(Q) What information does Frank’s current accounting system provide him? What additional information should Frank want from an improved accounting system? Make recommendations to Frank regarding how he can improve his accounting system and identify a chart (list) of accounts that you would expect to find in Frank’s new accounting system. For each account, identify whether it is an asset, liability, owner’s equity, revenue, or expense.

Apr 30 2018 View more View Less

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