The next morning t owner prepares a bank deposit into

form and the receipts are dropped in a night deposit safe in the store’s office. The next morning, the
owner prepares a bank deposit into the business’ cash account. All the routine business activities (i.e.,
complete video rentals, sell merchandise, check-in and shelve videos) are performed by the managers
and the clerks.
All the employees and the owner are paid an hourly wage on a biweekly payroll. Paper
timesheets are kept in the office which the employees, including the owner, complete each day they
work. At the end of the pay period employees total and verify their hours worked on their timesheet and
sign the timesheet. The owner verifies the hours worked and prepares the paychecks drawn on the cash
account and makes all appropriate accounting entries. The pay period ends on Friday and the paychecks
distributed the next Friday. At the end of the calendar year, which is also the accounting period, the
owner distributes to himself 80% of the profits generated during the year out of the cash account. The
remaining 20% of the profits are held as retained earnings in the cash account.
Prior to three years ago, the owner only distributed 25% of the profits to his personal account and
used the rest as operating capital for the upcoming year. However, concern for growing competition
from Internet movie downloads, cable and satellite on-demand movies, large chain video rental stores,
and Red Box dollar movie rentals has made him concerned about the long term viability of his business.