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Unformatted text preview: CHAPTER 1 System Basics The world of accounting systems has been changing rapidly. Much of this change has been due to advances in computer and data communications technologies and new laws regulating their effectiveness. Before you can understand the relevance of these new technologies, however, you need to have a grasp of the fundamentals underlying effective accounting systems. For example, what is an effective accounting system, how are they developed, and how does one make sure they continue to work properly? What is a system problem and how do you know if you have one? These are some of the important questions addressed in this chapter. First, we begin with a case to illustrate some real world system problems. Then, we examine a number of relevant system issues raised by these problems. Finally, we explore the knowledge necessary to answer these questions. Introductory Case: Joes Ristorante "So you see, Jennifer, I am very satisfied with the growth of my business over the last three years. Since I bought the restaurant, sales and profits have completely turned around. Two of the managers have worked very hard, putting in 60 to 70 hour weeks, and the manager who replaced Leonardo has also put his back into the job. They have all responded to the new leadership and like our new image. The come for seconds buffet lines we set up in the evenings have proved to be a great success. We were able to cut back on staff requirements as well as let people see the food they were going to eat. Yes, a few folks abuse the privilege, but waste has been quite a bit lower than we expected." "When I bought out the Sabatini sisters, they were $55,000 in debt and losing $3,500 a month. The first year, I paid off most of the debt, spent $180,000 to spruce up the restaurant, and almost broke even. We had a setback when we found that Leonardo was letting his friends eat for free and there were a few other things he did that Im embarrassed to mention - but after he went, we haven't had many problems." "And I really appreciate what you have done for us. The Sabatinis kept their own books and, as you know, made a real mess of them. I still don't know how you managed to prepare that first profit and loss statement. You have looked after us personally, and I feel that you know the business side of this operation as well as I do." "But all this leads up to what I wanted to ask you. So far you have done our taxes and prepared those financials for the bank. But we badly need a new accounting system here in the restaurants those financials for the bank....
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- Spring '10