ADMS 2500 Introductory Financial Accounting

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ADMS 2500 Introductory Financial Accounting


ADMS 2500 Introductory Financial Accounting

Tony has been working for years during a large construction company performing diverse tasks, but lately has been specializing in plumbing. Being good at it with up so far certifications within the profession and having an outsized network of friends because of his involvement within the baseball landscape of the region, he's experiencing and increase demand for his services to perform small jobs on top of his activities as employee. After some potential jobs couldn't be performed due to his inability to issue official receipts, he decided to make his own company to supply small plumbing services which will be completed over one weekend (Saturday and Sunday).

Tony has accumulated savings but they could not be enough to hide the primary expenses. None of the banks he approached offered him an inexpensive answer; therefore he made the choice of using his mastercard and accumulates debt there. However, his wife offered Tony short term loans at a price of 1% per month, which is significantly cheaper than accumulating debts with the mastercard . Both were proud of the proposed solution and agreed thereon . Tony would let his wife know via e-mail the quantity of cash needed. this is often done to go away a clean record to calculate the interest due.

Tony Thoron asked his cousin for advice about incorporating; his cousin may be a lawyer that works for a well known legal firm within the region. Tony had heard stories from friends about plumbing repairs going wrong and customers trying to sue the contractors and him certainly didn't want to show him thereto quite risk. The legal firm The 6 Law provided the required legal advice and did all the required paper work to include as a Canada Business Corporation. Initial capitalization allowed for 100 no face value shares. Tony and his wife were named Directors of the Corporation which was called Tonys Plumbing Services Inc. The lawyers also checked that the name wasn't already registered and register his Internet domain.

Tony contributed his money in exchange for 50% of the shares. The checking account a typical commercial chequing account that gave cheques returned with monthly statements for a monthly fee. This account doesn't leave bank overdrafts and every returned cheque features a very high processing cost.

Tony’s interest was to figure the maximum amount as he can during the week for his employer and on weekends for his own company, therefore he hired you to be his accountant. you've got explained your fee and Tony has agreed to retain you for the entire year. you've got prepared a document with the terms of engagement and payment thereon .

Tony needed to maneuver around with equipment; therefore he needed to use his SUV. You, the accountant, informed Tony that if his company would use his SUV to conduct business, the corporate pays rent to Tony for its use. Similarly if he uses a part of his house to storage material, supplies and equipment, his company pays rent for the utilization of that portion of the house. The rent has got to be reasonable for the Canada Revenue Agency.

From the very beginning Tony realized his company needed some kind of third party insurance just just in case employment went wrong and damages to property caused by his action or inactions. Tony reached out his insurance agent who suggested a product that was only for his needs, it had been not expensive so Tony signed off on an annual contract.

His job are often optimized with some equipment that normally lasts two years when not used intensively as are going to be his case. Although he uses an equivalent equipment as an employee, for his company and therefore the jobs he performs is best for Tony to possess and use his own equipment. He estimates than on the average the equipment will last for twenty-four months with 20% of residual value.

Materials like pipe insulation, cements, connectors, sealants, couplings, tape, adhesives and acetylene gas are considerably needed for his job. The inventory of faucets, fixtures and other parts and accessories is zero because it's purchased for a particular job and when it's completed the customer would keep what was left. Tony was ready to compute affect the supplier where he would make one payment at the top of every month covering all the supplies purchased during the month. a part of the deal was to secure a deposit at the start of operations. On April 1st Tony opens an account with the supplier by making a deposit. At the top of every month Tony would pay the supplies taken during the month (the deposit will remain with the supplier and can be returned only Tony closes the account).

Seeing how well his activity was going, Tony decided to form his presence more noticeable by printing cards and flyers to be distributed at various baseball events. He also decided to put a series of ads in local magazines.

Under the corporate name, Tony signed a 25 months contract for a replacement phone. His use wasn't very intensive but you the accountant explained that a proportion are often claimed as a trade expense .

When a customer requires a fixture that's not carried by Tonys regular supplier, Tony would ask the customer to shop for it. If the customer prefers to not roll in the hay , Tony would ask the customer for details (specifications, features, brand, etc.) and would hire his wife to try to to the search and attend the precise store that has the fixture to shop for it.

At the top of the month once you , the accountant, had a thought of Tonys business size, you estimated the tax liability of the month. to stay things simple Tonys received an e-mail with the small print .

Tony knew most of the purchasers but he had the need of collecting some beforehand to get all supplies needed for the work . He knew that everyone would pay eventually so he was comfortable in collecting some portion of his service fees latter. He accepted cheque or cash and kept an in depth record for tax purposes because his services included HST at 13%.

Tony decided to declare dividends for an amount reasonable that might not drain the remaining cash from the corporate . You explained to Tony that only net that accumulates in Retained Earnings are often distributed as dividends. Tony understood and decided to distribute 25% of income if possible while the remainder would be maintained within the corporate .

In terms of 


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