The related customers balance reduced

Core 1 – Practice Case 5
Memo
To: Scott Ginny
From: CPA
Re: GPP Notes
Financial Framework
Based on that information of GPP, and that they company currently is not planning to go public as it is just a small business located in Halifax and is mainly used for the university and students in the area, GPP should look at using Accounting Standards for Private Enterprises (ASPE) as their financial framework.

If GPP used IFRS like Allison wishes to as it has more resources, there would be more required documentation and guidance that has to be followed in comparison to ASPE.

- Have been acquired, constructed or developed with the intention of being used on a continuing basis; and
o Criteria is met; All items are being used on a continuing basis in GPP for their business

- Are not intended for sale in the ordinary course of business
o Criteria is met; GPP has no mention of selling the items obtained

Issue

Scott, when too much in a hurry, will sometimes put the cash in his pocket rather than take the time to ring up the sale. This means that the revenue isn’t being recognized at the time of sale. Scott estimated that transactions worth $45,000 each year have been handled this year.

cash immediately on sale and the goods should not be returned as the job is a service.

Criteria for revenue is all met.

Revenues and expenses are recorded by reviewing the company’s monthly bank statement in conjunction with cancelled cheques. Amounts owed by customers are tracked at the time of delivery on a designated sheet of paper kept by the cash register. As cash is received, the related customer’s balance is reduced. The revenue receivable from the customer should be recognized in accordance with ASPE.

Analysis

Recommended

The amounts in accounts receivable is still revenue that should be receivable for GPP and should also be recorded for the company on their income statement revenues. This should increase the sales of GPP on the financial statements.

Under ASPE 3031, the inventory value should be the cost of inventory as well as the cost added to the inventory.

There are also two inventory cost flow choices, First-in, first-out (FIFO, and weighted average. These are used to recognize the inventory account cost at year-end.

Revised income statement
From Exhibit I in the excel documents, GPP will see an increase in net income for the year for the revised income statement.

This amount is due to the recognition of accounts receivable in sales, the amount of inventory that would be recorded due to valuation, as well as deprecation expenses for the year instead of fully expensing.

As Allison does not earn an income, therefore zero income, the babysitting will not be able to be to be claimed as the lower income person is only able to claim the child care expenses except under certain criteria of which Scott does not meet.

If Scott were not to file the personal tax return, there are late fees and penalties that he would have to pay for not filing after so long.