Question 2

Chambuta Events (CE) is an events management company established in 2010 by Jara Sithole. The company arranges entertainment events for corporate clients, such as visits to major sporting events, the theatre and opera, as well as dinners, lunches and formal receptions.CE is normally busiest in the last quarter of the year with activities slumping to the lowest in the first quarter. CE's customers are very demanding and the entertainment services they require vary considerably. Arrangements are often altered at a late stage, due to changing requirements of the client or even, in the case of sporting events, unexpected weather conditions.

Clients expect a very high quality of service. Some clients approach CE to arrange an event specifically for them.

However, for major sporting events, CE sells tickets and then either hires a hospitality suite or erects a marquee to provide customers with high quality meals before, during and after the event. For these events, advertising costs can be high.

Cash flows are often a critical problem for CE, because it usually has to pay for tickets and venues well in advance of receiving payment from clients.

It is also important for CE that each individual event should be profitable. Despite wanting high quality, clients are often reluctant to pay high prices and negotiate with CE's representatives to obtain the best deal they can get.

Representatives may therefore be asked to reduce the quoted price, or provide more in the entertainment package: prices are commonly negotiated and agreed on the sport at meetings between CE representatives and clients.

For major sporting events, CE buys a block of tickets which it then tries to sell within an entertainment package.

Sometimes it is unable to sell all tickets. On other occasion demand is strong, and CE then tries to obtain additional tickets to sell.

You have recently joined CE as a senior management accountant, having previously worked for a water pump manufacturer, HO3. You are aware of significant differences between CE and the company where you worked before.

Required:

a) Discuss, how the accounting information requirements of CE will differ significantly from those in a manufacturing company such as HO2. (10 Marks)

b) Discuss how an information technology (IT) system that provides instant access for management and representative to a central database can help to improve the quality of information available and the performance of CE (10 Marks)

[Total: 20 Marks]