Bookkeeping for a small business organization Case: Fantastic Coffee Roaster and Academy Ltd Background Joseph has just graduated from the Bachelor of Commerce program at York University. He has been working in a local coffee shop over the past 4 years to pay for part of his tuition. While working in the coffee shop, Joseph learned how to roast coffee beans, and to make latte art when customers order latte. Even though he majored in Accounting he always dreams of opening a coffee roastery. Also, Joseph would like to purchase unroasted coffee beans from suppliers who promote fair trade. Joseph shared his business idea with his parents, and his parents would like to gift Joseph $5,000 so that he can pursue his interest. However, Joseph insisted to pay them interest as he will be earning income from other sources. When Joseph was preparing for the documents required to incorporate his business in a coffee shop, he ran into his friend, Joanne, and Joseph shared his proposed business with her. Joanne said: "That's fantastic! Joseph! I am feeling excited for you." Joanne then recommended to deliver workshops to teach latte art and offer training to barista. She is confident that this would help expand Joseph's clientele as they might come back ordering coffee beans from him. Also, this could be a corporate team-building event. Joseph has started looking for a place to rent so that he can have the space for coffee roasting equipment, and a place for Joseph to hold the workshop, Joseph also needs to purchase 2 commercial coffee machines with steaming function. It was the end of February when Joseph realized that his dream would come true very soon. With the help from the lawyer recommended by his parents, Joseph was able to open his coffee shop on Mar 1, 2023. However, he wanted to focus on selling coffee supplies and offer training for coffee knowledge for the first 2 months. Until May, he started by purchasing equipment to be used for roasting coffee and latte art. Capital and Financing Joseph was successfully pre-approved for a line of credit (LOC) of $10,000 with interest rate of 8% per annum from SDC Bank Canada. At beginning of May, Joseph borrowed $X,000 (where 69 is the last digit of your student number) from the LOC to cover the expenses for the business. The interest of the LOC would be compounded monthly, and interest will be paid through the bank account automatically on the third day of the following month.

Set-up Cost The lawyer from legal firm "The LA&PS Law" conducted a name search and found that the name he wanted to use, "Joseph Coffee Roaster and Academy Ltd", was not approved. As such, he changed his business name to "Fantastic Coffee Roaster and Academy Ltd" (FCRA). The legal firm also provided necessary legal advice and did all the necessary paperwork to incorporate as a Canada Business Corporation. FCRA is authorized to issue unlimited number of shares. Joseph invested $8,000 of his savings in exchange for shares, and he is the sole shareholder and director of the business. Accounting Joseph's interest is to roast coffee bean, and design different latte art. Thus, he would like to hire his sister, Shirley, to help with managing the bookkeeping of the business. Shirley has explained the fee and Joseph has agreed to retain her services for the next six months. Bank Joseph contributed his money received from his parents, and his own savings in exchange for 8,000 of the shares for the business. Shirley advised Joseph to open a corporate bank account that she set up with SDC Bank Canada, with the LOC account Joseph opened. The bank account is a standard commercial chequing account with the lowest monthly fees. However, Joseph must do most of the banking online. The benefit of this account is that the business can have unlimited debit/credit transactions. Thus, Joseph does not have to worry about the cost if the business makes payments using the bank account automatically using interact eTransfer. Website In addition to selling the products in the store, Joseph would like to sell his product online. Customers can place order online, and Joseph will deliver the products to them on a cash on delivery basis. He thought this can help develop a good relationship with his customers. He then sought help from his friend, Alan, who is an IT programmer to design and develop a website for FCRA. Joseph decided to amortize the website over 3 years. Additionally, Alan referred Joseph to a website hosting company with monthly charges of $100 to host the website and offer tech support 24/7. The website hosting company offers a special discount to Joseph with a very generous payment term for the first 3 months. Rent Joseph needed a place where he can put the equipment for roasting coffee beans, to store the coffee beans and to conduct latte art workshops. His uncle, Godfrey, agreed to rent the storefront of his shop. Godfrey would like to support Joseph to pursue his dream and not requiring the business to pay any deposit. Also, Godfrey offered a discount on the rental.

Supplies There are different materials to be used during the daily operation of the shop, including the raw coffee beans, milk, disposable cup, and packaging. Joseph purchased the materials from a supplier. Inventory Joseph has done some research and found that there is a huge demand for the tools and equipment to be used by a barista in a coffee shop. He then contacted some suppliers and was able to obtain a bulk purchase discount with a trade terms of n/120. If the balance has not been paid in 120 days, there would be a penalty of 10%. According to his experience as a barista, Joseph knows that there is a huge demand for milk frothing pincher, digital scale with timer function and hand grinder for coffee beans. As expected, he sold all the inventory in March and April. Joseph then placed an order during the last week of April to keep up with customers' demand. The inventory arrived the next day and Joseph recorded the purchase on account. He planned to make payment on June 1, together with the orders he will place in May. Insurance Joseph purchased a third-party liability insurance just in case a customer or attendees of workshops suffered an unintended accident in the store. He contacted an insurance company and found a policy that suits the need of the business. The insurance agent allowed Joseph to sign a 2-month contract at a special discount, with the payment in May. Joseph then signed a 10-month contract and paid the premium in May as well. Equipment Joseph plans to start conducting latte art workshop and roasting his own coffee beans in May. He purchased the equipment to roast the coffee beans, and the coffee machine for the latte art workshop in May. Shirley suggests Joseph to record both the coffee beans roaster and coffee machine as "Equipment" and depreciate over 5 years. Promotion When Joseph worked as a barista over the past few years, he found social media to be very effective to increase the exposure of the business. As such, he contacted a local foodie, Paul, to help promote his coffee shop. Paul is a renowned caf-hopper-visiting different.

Income Tax Shirley advised the estimated income tax expense each month, and Joseph would record the expense as payable. As it is the first year of operation, CRA allows the business to file the first tax return at the end of the year and pay the tax before the due date. (https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/ corporation-payments/paying-instalments/when-you-have-pay-instalments.html) 3 Employee expense During the first 2 months of operation, Joseph conducted workshops such to teach hand- pour coffee and basic knowledge of coffee. Joseph and Shirley figured out a way to pay for Joseph's service, including the time he spent to deliver the online orders. Revenue: Workshops and Merchandise Joseph is confident that his customers will pay for the workshops, so he is comfortable in collecting the service fees from them at any point in time: prepaid, with cash/cheque on the day of the presentation or within the next 60 days. Customers can also send money via interact eTransfer. Some corporate customers are so interested to arrange a latte art class to their employees as a team-building events, they already paid in advance. Dividends Joseph decided not to pay dividends during the first year of operation as he would like to re-invest the profit for future development. His plan is to purchase few more coffee machines and a more sophisticated coffee bean roaster in the following year. Accounting Shirley decided to set up the following records: 1) Chart of Accounts, 2) General Journal, 3) Sales Journal and 4) Disbursement Journal and 5) General Ledger. Unexpected Event An event happened near the end of May that left Joseph somewhat distressed and depressed. A recent study published on a newspaper revealed that coffee beans contain a small quantity of a compound called acrylamide. In high amounts, acrylamide can be harmful. There are even concerns that it may also cause cancer. Joseph received a letter from a lawyer stating that a lawsuit had been launched against his coffee shop for huge sums in punitive damages. On consultation with the lawyer of LA&PS Law, Joseph contacted a laboratory to test whether the acrylamide contained in his coffee beans is over the limited imposed by the Canadian Government. While waiting for the test result. the lawyer advised Joseph that the suit would probably deem frivolous and there was no need to accrue for it. A financial statement footnote would be appropriate until such time as a court decision was reached. LA&PS Law did inform him that the expected legal fee for his defense would be equal to the amount paid to incorporate his company, but a billing would not be prepared until there is a confirmed court date.

STEP 1: Prepare the Financial Statements by doing the following (you decide on the order to follow: 1. Check and use the Chart of Accounts provided (do not create new accounts). 2. Prepare the bank and cash reconciliation for May 31st 2023 (Note: cheque #426 is an outstanding cheque in the Bank reconciliation done on April 30th). 3. Prepare the General Journal for the month of May (all journal entries including AJE). Prepare Closing Entries for the month of May to continue with business in the month of June as the next period. 4. Post all transactions to the T-accounts and prepare a trial balance showing the balance of each of these accounts for the month of May (end of Month), 5. Prepare the Financial Statements in good form for the month of May including contingency disclosures that are exclusive of the transactions of this case (do not include general notes). Prepare an Income Statement, a Statement of Owners Equity (Retained Earnings), and a Statement of Financial Position (Balance Sheet). Cash flow statement is not required. STEP 2: Analyze the financial statements and answer the following questions: 1. Make one clear suggestions of how the business can improve its net income? 2. With the data of the financial statements that you have completed, is the business viable? Explain why you think this is a business with future for its owner based on the results seen until the end of May.

charts of accounts:

financial statements: Financial Statements:

Retained earnings:

Fantastic Coffee Roaster and Academy Ltd Balance Sheet

ALL invoices for more information if needed below:

invoice:LA&PS Law, LLP Invoice

invoice 2

Ace Website Hosting Service

invoice 6

SDC c

Chart of Accounts Financial Statements: Fantastic Coffee Roaster and Academy Ltd Statement of Retained Earnings for the month ended April 30, 2023 Retained Earnings 670.001,635.002,305.00 7 Fantastic Coffee Roaster and Academy Ltd Balance Sheet as of April 30, 2023 Assets Current Assets Accounts Receivables Cash Supplies Inventory Prepaid Rent Prepaid Promotion Capital Assets Website Accumulated amortization - Website Organizational Costs Total Assets Liabilities Accountant Fee Payable Advances from Customers Income Tax Payable Insurance Payable Accounts Payable - Inventory Website Hosting Payable Organization Costs Payable Shareholder's Equity Share Capital Retained Earnings Total Liabilities and Shareholders Equity \begin{tabular}{rr} 2,920.00 & \\ 4,535.00 & \\ 510.00 & \\ 270.00 & \\ 200.00 & \\ 1,350.00 & 9,785.00 \\ \hline & \\ 1,800.00 & \\ (100.00) & 1,700.00 \\ \hline & 2,500.00 \\ \hline & 13,985.00 \\ \hline \end{tabular} \begin{tabular}{rr} 990.00 & \\ 620.00 & \\ 200.00 & \\ 180.00 & \\ 270.00 & \\ 170.00 & \\ 1,250.00 & \\ \hline & 3,680.00 \\ 8,000.00 & \\ 2,305.00 & 10,305.00 \\ \hline & 13,985.00 \\ \hline \hline \end{tabular} Fantastic Coffee Roaster and Academy Ltd Sample General Journal (assuming the last digit of your student number is 1) LA\&PS Law, LLP Invoice To:From:Terms:Date:Re:cheque.#428FantasticCoffeeRoasterandAcademyLtdWinnieAnderson50%dueApr1,2023with50%dueMay1,2023February24,2023Incorporatingabusinessandnamesearch#400and For services rendered in connection with the incorporation of Fantastic Coffee Roaster and Academy Ltd. Including but not limited to: - Filing application for articles of incorporation as a Canada Business Corporation Securing trademark protection on the name Fantastic Coffee Roaster and Academy Ltd. - Filing necessary documents with the Canadian Registrar of Companies - Filing appropriate documents as required under the Ontario Directors' Act to name corporate directors - Register the Internet domain name (www.fcra.ca) - Various legal advice on these and other matters The amount of \begin{tabular}{l} \hline$2,500 \\ \hline \hline \end{tabular} LA\&PS Law, LLP Certified Document To: Fantastic Coffee Roaster and Academy Ltd From: Winnie Anderson Date: February 24, 2023 Re: Initial contribution Hereby I certify the following items were agreed and happened with me as a witness: Fantastic Coffee Roaster and Academy Ltd has issued 6.000 shares Mr. Joseph Wong contributed the amount of $8,000 in exchange for 1,000 shares of the company - The contribution was made in cash and deposited in the bank account of the company. Coffeeholic Supplies Fantastic Coffee Roaster and Academy Ltd paid Paul William the amount of $2,000 for 200 posts / stories to be shared on social media within the next 6 months. This document acts as a receipt to both parties. Number of posts shared an social media Paid with Mareh 25 cheque \#405 April 40 May (7) Gaeeph Wang Paul Villiam (7) The amount must be equal to 5 times the last digit of your student number (promotion) Joseph Wong representing Fantastic Coffee Roaster and Academy Ltd paid Joseph the amount of $40 per hour of (8) hours of various workshops for individual and corporate customers. This document, issued on May 30,2023 , acts as a receipt to both parties that the service has been delivered in full and paid in full. Paidwith cheque #433 Qoseph QlVong 15 Joseph Wong has agreed to retain Shirley Wong as the accountant for his business. Given the services agreed to be provided, the fee of $33 per hour would be charged and payable every 3 months. The first payment is due on May 31, 2023. Total houns worked each month: Paidwith mareh 10 cheque #432 April 20 Quseph Uleng May 2x Shirley Wang (10) The number of hours worked on May are 2X where X is the last digit of your student number To:From:Subject:Date:JosephWong@Email.caShirley@theaccountant.caEstimatedtaxforMay2023May24,2023 Joseph, This is to inform you that I have estimated the income tax liability of your business as $120. I have Accrued the income tax expense, and I will send you the monthly financial statements next week. Thank you. Shirley Notes: (11) The amount must be equal to $,000 where X is . (loan payable) (3) The amount must be equal to 240 times the last digit of your student number plus the balance owed on April 30,2023. (4) The amount must be equal to $1600 where. (5) The amount must be equal to 68 times (equipment) (9) The amount must be equal to 1800 times (supplies) provided in May, plus 650 times the last digit of your student number for revenue collected in cash for sales of merchandise in May, plus 550 times % for prepaid revenue (money collected but services not provided yet) in May (9b) plus, collection of 60% of accounts receivable that were outstanding on April 30,2023 Coffee Supplies Invoice / Facture Invoice Number: 456789454 Date: May 1, 2023 Bill To: Fantastic Coffee Roaster and Academy Ltd Qty Description Amount 5 Barista grade - Oat Milk 100 Disposable cup 1000 Coffee beans (grams) 500 Sealed bags Amount (5) Terms: Payable in cash or cheque upon delivery All sales final - Supplies left before May were all used up during May. - Value of supplies on May 31 (5a) (5) The amount must be equal to 68 times the lasterigiteof youp studemammber (5a) The amount must be equal to 12 times the last digit of you Fantastic Coffee Roaster and Academy Ltd Invoice Summary for May 2023 (9) The amount must be equal to 3,000 times the last digit of your student number it is broken down as follows: 1,800 times the last digit of your student number is revenue collected in cash for services provided in May 650 times the last digit of your student number is revenue collected in cash for sales of merchandise in May 550 times the last digit of your student number for prepaid revenue (money collected but services not provided yet) in May* (9a) 1,100 times thetene .6(5ix) is revenue still not collected but services have been provided in May (9b) Joseph collected 60% accounts receivable that were outstanding on April 30, 2023 (9c) Joseph provided services to 90% of prepaid revenue that were outstanding on April 30,2023 Joseph Wong has agreed to retain Shirley Wong as the accountant for his business. Given the services agreed to be provided, the fee of $33 per hour would be charged and payable every 3 months. The first payment is due on May 31, 2023. Total houns worked each month: Paidwith mareh 10 cheque #432 April 20 Quseph Uleng May 2x Shirley Wang (10) The number of hours worked on May are 2X where X is the last digit of your student number To:From:Subject:Date:JosephWong@Email.caShirley@theaccountant.caEstimatedtaxforMay2023May24,2023 Joseph, This is to inform you that I have estimated the income tax liability of your business as $120. I have Accrued the income tax expense, and I will send you the monthly financial statements next week. Thank you. Shirley Coffee Supplies Invoice / Facture Invoice Number: 456789454 Date: May 1, 2023 Bill To: Fantastic Coffee Roaster and Academy Ltd Qty Description Amount 5 Barista grade - Oat Milk 53.25% Milk 100 Disposable cup 1000 Coffee beans (grams) 500 Sealed bags Amount (5) Terms: Payable in cash or cheque upon delivery All sales final - Supplies left before May were all used up during May. - Value of supplies on May 31(5a) (5) The amount must be equal to 68 times the last digit of your student number (5a) The amount must be equal to 12 times the last digit of your student number Fantastic Coffee Roaster and Academy Ltd paid to Alan Wan the amount of $1,800 for designing and developing a website for FCRA. Paid on Mar 10, 2023. This document acts as a receipt to both parties that the service has been delivered in full and paid in full. Fantastic Coffee Roaster and Academy Ltd agreed to pay Godfrey Cohen the amount of $200 for rental charge for May 2023 on April 30, 2023. This document acts as a receipt to both parties that the service has been delivered in full and paid in full. godfreycohen Paid with cheque \#426 Chart of Accounts Financial Statements: Fantastic Coffee Roaster and Academy Ltd Statement of Retained Earnings for the month ended April 30, 2023 Retained Earnings 670.001,635.002,305.00 7 Fantastic Coffee Roaster and Academy Ltd Balance Sheet as of April 30, 2023 Assets Current Assets Accounts Receivables Cash Supplies Inventory Prepaid Rent Prepaid Promotion Capital Assets Website Accumulated amortization - Website Organizational Costs Total Assets Liabilities Accountant Fee Payable Advances from Customers Income Tax Payable Insurance Payable Accounts Payable - Inventory Website Hosting Payable Organization Costs Payable Shareholder's Equity Share Capital Retained Earnings Total Liabilities and Shareholders Equity \begin{tabular}{rr} 2,920.00 & \\ 4,535.00 & \\ 510.00 & \\ 270.00 & \\ 200.00 & \\ 1,350.00 & 9,785.00 \\ \hline & \\ 1,800.00 & \\ (100.00) & 1,700.00 \\ \hline & 2,500.00 \\ \hline & 13,985.00 \\ \hline \end{tabular} \begin{tabular}{rr} 990.00 & \\ 620.00 & \\ 200.00 & \\ 180.00 & \\ 270.00 & \\ 170.00 & \\ 1,250.00 & \\ \hline & 3,680.00 \\ 8,000.00 & \\ 2,305.00 & 10,305.00 \\ \hline & 13,985.00 \\ \hline \hline \end{tabular} Fantastic Coffee Roaster and Academy Ltd Sample General Journal (assuming the last digit of your student number is 1) LA\&PS Law, LLP Invoice To:From:Terms:Date:Re:cheque.#428FantasticCoffeeRoasterandAcademyLtdWinnieAnderson50%dueApr1,2023with50%dueMay1,2023February24,2023Incorporatingabusinessandnamesearch#400and For services rendered in connection with the incorporation of Fantastic Coffee Roaster and Academy Ltd. Including but not limited to: - Filing application for articles of incorporation as a Canada Business Corporation Securing trademark protection on the name Fantastic Coffee Roaster and Academy Ltd. - Filing necessary documents with the Canadian Registrar of Companies - Filing appropriate documents as required under the Ontario Directors' Act to name corporate directors - Register the Internet domain name (www.fcra.ca) - Various legal advice on these and other matters The amount of \begin{tabular}{l} \hline$2,500 \\ \hline \hline \end{tabular} LA\&PS Law, LLP Certified Document To: Fantastic Coffee Roaster and Academy Ltd From: Winnie Anderson Date: February 24, 2023 Re: Initial contribution Hereby I certify the following items were agreed and happened with me as a witness: Fantastic Coffee Roaster and Academy Ltd has issued 6.000 shares Mr. Joseph Wong contributed the amount of $8,000 in exchange for 1,000 shares of the company - The contribution was made in cash and deposited in the bank account of the company. Coffeeholic Supplies Fantastic Coffee Roaster and Academy Ltd paid Paul William the amount of $2,000 for 200 posts / stories to be shared on social media within the next 6 months. This document acts as a receipt to both parties. Number of posts shared an social media Paid with Mareh 25 cheque \#405 April 40 May (7) Gaeeph Wang Paul Villiam (7) The amount must be equal to 5 times the last digit of your student number (promotion) Joseph Wong representing Fantastic Coffee Roaster and Academy Ltd paid Joseph the amount of $40 per hour of (8) hours of various workshops for individual and corporate customers. This document, issued on May 30,2023 , acts as a receipt to both parties that the service has been delivered in full and paid in full. Paidwith cheque #433 Qoseph QlVong 15 Joseph Wong has agreed to retain Shirley Wong as the accountant for his business. Given the services agreed to be provided, the fee of $33 per hour would be charged and payable every 3 months. The first payment is due on May 31, 2023. Total houns worked each month: Paidwith mareh 10 cheque #432 April 20 Quseph Uleng May 2x Shirley Wang (10) The number of hours worked on May are 2X where X is the last digit of your student number To:From:Subject:Date:JosephWong@Email.caShirley@theaccountant.caEstimatedtaxforMay2023May24,2023 Joseph, This is to inform you that I have estimated the income tax liability of your business as $120. I have Accrued the income tax expense, and I will send you the monthly financial statements next week. Thank you. Shirley Notes: (11) The amount must be equal to $,000 where X is . (loan payable) (3) The amount must be equal to 240 times the last digit of your student number plus the balance owed on April 30,2023. (4) The amount must be equal to $1600 where. (5) The amount must be equal to 68 times (equipment) (9) The amount must be equal to 1800 times (supplies) provided in May, plus 650 times the last digit of your student number for revenue collected in cash for sales of merchandise in May, plus 550 times % for prepaid revenue (money collected but services not provided yet) in May (9b) plus, collection of 60% of accounts receivable that were outstanding on April 30,2023 Coffee Supplies Invoice / Facture Invoice Number: 456789454 Date: May 1, 2023 Bill To: Fantastic Coffee Roaster and Academy Ltd Qty Description Amount 5 Barista grade - Oat Milk 100 Disposable cup 1000 Coffee beans (grams) 500 Sealed bags Amount (5) Terms: Payable in cash or cheque upon delivery All sales final - Supplies left before May were all used up during May. - Value of supplies on May 31 (5a) (5) The amount must be equal to 68 times the lasterigiteof youp studemammber (5a) The amount must be equal to 12 times the last digit of you Fantastic Coffee Roaster and Academy Ltd Invoice Summary for May 2023 (9) The amount must be equal to 3,000 times the last digit of your student number it is broken down as follows: 1,800 times the last digit of your student number is revenue collected in cash for services provided in May 650 times the last digit of your student number is revenue collected in cash for sales of merchandise in May 550 times the last digit of your student number for prepaid revenue (money collected but services not provided yet) in May* (9a) 1,100 times thetene .6(5ix) is revenue still not collected but services have been provided in May (9b) Joseph collected 60% accounts receivable that were outstanding on April 30, 2023 (9c) Joseph provided services to 90% of prepaid revenue that were outstanding on April 30,2023 Joseph Wong has agreed to retain Shirley Wong as the accountant for his business. Given the services agreed to be provided, the fee of $33 per hour would be charged and payable every 3 months. The first payment is due on May 31, 2023. Total houns worked each month: Paidwith mareh 10 cheque #432 April 20 Quseph Uleng May 2x Shirley Wang (10) The number of hours worked on May are 2X where X is the last digit of your student number To:From:Subject:Date:JosephWong@Email.caShirley@theaccountant.caEstimatedtaxforMay2023May24,2023 Joseph, This is to inform you that I have estimated the income tax liability of your business as $120. I have Accrued the income tax expense, and I will send you the monthly financial statements next week. Thank you. Shirley Coffee Supplies Invoice / Facture Invoice Number: 456789454 Date: May 1, 2023 Bill To: Fantastic Coffee Roaster and Academy Ltd Qty Description Amount 5 Barista grade - Oat Milk 53.25% Milk 100 Disposable cup 1000 Coffee beans (grams) 500 Sealed bags Amount (5) Terms: Payable in cash or cheque upon delivery All sales final - Supplies left before May were all used up during May. - Value of supplies on May 31(5a) (5) The amount must be equal to 68 times the last digit of your student number (5a) The amount must be equal to 12 times the last digit of your student number Fantastic Coffee Roaster and Academy Ltd paid to Alan Wan the amount of $1,800 for designing and developing a website for FCRA. Paid on Mar 10, 2023. This document acts as a receipt to both parties that the service has been delivered in full and paid in full. Fantastic Coffee Roaster and Academy Ltd agreed to pay Godfrey Cohen the amount of $200 for rental charge for May 2023 on April 30, 2023. This document acts as a receipt to both parties that the service has been delivered in full and paid in full. godfreycohen Paid with cheque \#426