Question

1. You work for Mooney’s Consulting. They have assigned you to an engagement with Anavrin a healthfood café based in Los Angeles. The company currently only produces and sells organic sandwiches, pastries, coffee, and smoothies. They currently spend anywhere from $5,000 to $25,000 per year on marketing with the majority of this being on billboards and viral media targeted at the Los Angeles market. They maintain all their records within an Access database. They have provided you with access to their database which contains the last eight years of data about the company, including all sales, spending, customers, vendors, and employees. Anavrin has hired Mooney’s Consulting (You) to determine if their advertising budget and approach is optimal.

Required: Below, write each step of the IMPACT cycle then determine the steps you would take pertaining to this specific engagement for each step of the cycle. Be specific on what actions you would take, writing at least 3 sentences describing your actions for each step.

Answer 1

The impact cycle or the financial impact cycle consists of the accounting steps that we must take in order to determine whether our business is in credit or debit. Any operational business deals with the financial impact cycle. The following are the steps impact cycle-

1. Identify Transactions- Since Mooney’s deals with coffee, pastries, smoothies and organic sandwiches, we take into account that the transactions would be based on the following commodity only. We might insert the commodities pricing per piece in our software.

2. Record Transactions in journal- Being an student of finance we are well versed with journal entries. The process of transactions has to be recorded into journals. Preferably use an double entry system of accountancy.

3. Post journal to a ledger- Post the journal entry of the whole month into an ledger. Bassically all the accounts form a part of the ledger. The aggregate of all the accounts would be known through a ledger.

4. Prepare Trial Balance- Prepare an trail balance from the ledger.

5. Record adjusting entries- These entries are recorded at the end of the accounting period. The adjusting journal entries include prepayments, accruals and non – cash expenses.

6. Prepare adjusted trail balance- The adjusted trail balance is finally prepared from the adjusted entries of the records.

7. Prepare the financial statements- Financial statements are the basic and formal annual report. The financial statements would include The income statement, Balance sheet and Statement of cash flows.

8. Post closing entries- The final outcome of the accounting cycle of Mooney’s is posted in the closing entries. Deviations are checked on the basis of principle of matching in accounting.