Reference no: EM132380936

QUESTION

Amore Cafe Bhd is one of the largest office chains in Malaysia. You are recently appointed as the new account executive of amore Cafe by the chairman, Ms Angeliki. The cafe is in the process of preparing its draft financial statements for the year ended 30 September 2018 and three issues have been arisen:

Issue 1:

On 15 August 2018, Amore Cafe ordered 88 bags of coffee beans from Kenco Barista at the price of RM2,640. The coffee was delivered to Amore Cafe on 20 September, but Ms Angeliki requested you not to recognize this credit transaction until cash payment is made to Kenco Barista.

Amore cafe

Issue 2:

On 26 September 2018, Mickey ordered 200 cups of coffee from Amore Cafe to be delivered to Tim & Tim Agency on 28 September. Due to shortage of coffee beans, 180 cups of coffee were delivered on the actual day. Ms Angeliki argues that 200 rather than 180 cups of coffee should be recognised as the sales of the cafe.

Issue 3

Due to high costs of preparing and producing the financial statements, Ms Angeliki said to you that: "Nobody reads the financial statements. So, don't prepare a complete set of the financial statements. Prepare only the statement of financial position, statement of profit or loss and other comprehensive income, and statement of cash flows that are requested by our banker".

REQUIRED:

Based on the conceptual framework, identify the assumptions or principles that are violated if you were to follow the suggestions of Ms Angeliki and explain how Amore Cafe should account for the above issues 1 to 3 in its financial statements.