Indicating the conventional accounting procedures

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Question - Little People Daycare of Toronto, Ontario, has applied to the bank for a loan. The bank manager has some doubts about the financial statements and asks Fateh, a public accountant, to audit the books. The records that Little People Daycare has submitted to the bank indicate that the business is quite profitable. However, their recordkeeping techniques are unusual.

In order to save time Little People Daycare does not use a journal but records all accounting entries directly in the ledger accounts. In addition, they do not keep a file of business papers. Three days into the audit, Fateh finds that he cannot proceed any further until some questionable entries are explained.

Required - Write a short report to the bank manager indicating the conventional accounting procedures that should be followed by Little People Daycare. Your report should also indicate the importance of such procedures.

Reference no: EM133103202

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