As part of your continuing professional development as a graduate accountant at Prider & Copeland Accounting Services, the Managing Partner (Scott Prider) has asked you to assist a new client, Bonnie Jovi, who owns and operates Vinyl Countdown, a record store specialising in albums and CDs from the 1980s. Bonnie was referred to Prider & Copeland Accounting Services by her good friend Stanley Noife

Scott Prider has already spoken with Bonnie, and he has told you that she is quite skeptical about coming to see an accountant. She doesnt understand the concept of accrual accounting and believes that adjusting her accounts will just delay the preparation of her statements. She also believes that as the adjustments are so small, they will make no difference and are a waste of time. She also doesnt understand why money she withdraws for her own expenses from the business are not treated as an expense.

Bonnie has provided the following Income Statement (prepared using cash accounting) and additional information related to the transactions she has recorded.

Vinyl Countdown Income Statement For the year ended 30 June 2022
Income: Record sales	$240,000
Less: Expenses	$198,000
Profit	$42,000

Record sales earned made in the year ended 30 June 2021 for $5,000 were collected in the current year and have been included in the revenue above.

Record sales earned in the year ended 30 June 2022 of $8,000 are expected to be collected in the following year. These have not been included in the revenue above.

Salaries owing to staff at 30 June 2021 were $2,000. These were paid in July 2021 and have been included in the expenses above.

Salaries owing to staff at 30 June 2022 were $2,700. These were paid in July 2022 and have not been included in the expenses above.

Depreciation expense of $6,300 has not been included in the expenses above.

During the year, Bonnie withdrew $1,900 per month for her own personal expenses, and these have been included in the expenses above.

REQUIRED:

The Managing Partner (Scott Prider) has requested that you do the following:

Using the above information, prepare an Income Statement using accrual accounting, showing all relevant calculations. (5 marks)

Explain why the revised statement is considered to be a better measure of profit. (2 marks)

Explain why it is correct accounting procedure to exclude drawings from expenses. (2 marks)

Scott has asked that you prepare your responses in a formal business letter addressed to him (not the client). He will then review your work, and he will use it as the basis of a response to Bonnie.

The remaining 3 marks will be awarded for following the formatting requirements below:

Date your letter 15 August 2022

Address your letter to Scott Prider (Managing Partner), Prider & Copeland Accounting Services, 516 Glynburn Rd, Burnside SA 5066

Any formal business letter format is acceptable. Please note that a template has not been provided. Students are expected to research business letter formats themselves.

Set out your letter with subheadings to separate each of the required responses.

Use an appropriate professional way to begin and end your letter. You must consider the context of the letter who are you writing it to, and how would you communicate with them?

The use of appropriate language, accounting terminology and reference in your letter to the specific information presented in the question.

No specific word count is prescribed. However, given the nature of the questions, it would be expected that the entire letter (including address and signoff) should require no more than one A4 page.