Reference no: EM132968885
Question - A student organization has only $50 in its checking account and is planning a fundraiser to raise money for a school project. The fundraiser will involve selling candy bars throughout the neighborhood. The members will take advance orders by giving order forms to all students to take home. Payment will be collected when the candy is delivered. The organization also will set up concession stands to sell the candy bars before and after school and during lunch periods. Finally, members will go door-to-door to make sure all area residents have an opportunity to participate.
The organization will buy the candy bars from a local candy company that specializes in packaging candy for fundraisers. Each bar will be wrapped to indicate the name of the organization. The bars will be purchased for 50¢ each, and the organization will sell them for $1 each. The company will sell the candy on credit and allow the organization to pay when the fundraiser is over. The members will pick up the candy at the company so there will be no delivery charges. Volunteers will help count inventory and keep track of sales.
Based on this information and your knowledge of accounting, help the organization set up an accounting system. You will need to recommend an accounting method so that the group can handle the financial information. Also, you will need to decide what type of financial reports to prepare.
Consider the following questions before making your recommendation:
1. How should the organization keep track of the number of candy bars ordered and the number sold?
2. How will the organization obtain cash to operate concession stands and provide change?
3. When organizing the financial information, which two categories will be the most important to the organization? Why?
4. Should the organization use the cash accounting method or the accrual accounting method? Why?
5. What type of financial report should the organization prepare?
6. Is it really necessary for the organization to have an accounting system? Why or why not?
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