The company in this scenario is a small, local CPA firm. The personnel at the organization include three new CPAs and an office manager. Primarily, the company’ s business consists of tax and write-up work. However, recently the company has required a new client: a homeowner’ s association with a total of 150 homeowners. The firm has agreed to provide the homeowner’ s association with several services. Service AreasThere are six service areas that the company has agreed to service the homeowner’ s association with billing, collection, payments, reporting, tax, and advisory. With billing, each homeowner will be sent an itemized bill each quarter, dues being payable by the month.
Late fees accumulate at one percent of the unpaid balance each month that passes. On the first day of the last month of the quarter, bills are mailed out to the homeowners, and payment is expected by the quarter’ s end. With the collection, the accounting firm is responsible for collecting the payments from the post office box that it has rented specially for the homeowner’ s association. They are also responsible for depositing the checks they collect. As far as payments, about five checks are written per month.
These go to the monthly fee, a lawn maintenance company, a refuse removal company, taxes, postage, supplies, etcWith regard to reporting, the firm is responsible for reporting on all checks written, collections, outstanding homeowners’ balances, and quarterly financial statements. As far as taxes are concerned, the firm must prepare the homeowner’ s association’ s federal and state tax returns. This can be accomplished by hand or through tax preparation software. Finally, with advisory, the firm is responsible for advising the board when they deem it is necessary.
This is particularly true with regard to budgeting, investment, and purchasing. To Be ComputerizedWith the large, new client, the company is hoping to expand that area of their practice by computerizing the main functions of their system. The goal of the company is to computerize the system’ s main functions. The main focus of the computerization will be on billing and reporting. Other than the actual interface of the new system, the checking account, financial statements, and tax preparation parts will not be computerized at this time. Instead, the billing and collections portions of the system will be computerized. The System and Manual Functions (Inputs, Outputs, and Controls)BusinessTown (2008) tells us to “ Think of the accounting system as a wheel whose hub is the general ledger (G/L).
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