Case study overview

We will start the course with some information about the company files and our case study. A company file is the term used in AccountRight Live to name the company's data. If we were a brand new business with a brand new data file, creating a new data file in MYOB AccountRight Live is very easy, using the New Company File Assistant. All the figures will be entered as they happen. Whereas an existing business that has decided to move from a manual system to a computerized system needs to be done at the beginning of a reporting quarter or at the beginning of a new financial year.

This is known in AccountRight Live as the conversion month. We will learn more about our case study shortly. Some data that will be required includes bank statements to give bank account figures, copies of outstanding supplier bills which need to be paid, copies of outstanding customer invoices which are still waiting on payment, last year's tax return for any figures relating to the balance sheet, like assets. Other key pieces of information, which are needed are the ABN, the company name, address and phone numbers.

In this case study, we'll be setting up an AccountRight Live file for Carol's Cleaning. Carol's Cleaning is a small cleaning business whose main services are general, window, carpet and floor cleaning. The business also sells window, carpet and stain removal products. Carol's Cleaning uses an accrual accounting system, where all the sales both cash and credit, and all expenses, both paid and unpaid, are entered into the data file. This accrual system results in more accurate reporting of business trends but involves more data entry.

The alternative is to use a cash accounting system, which means that only cash that is actually received and payments that are actually made, are entered into the data file. Bills from suppliers are only entered when the account is paid. Using a computerized accounting software package like AccountRight Live, makes double-sided book keeping so easy. Double-sided bookkeeping tracks where the money came from and where the money is allocated to. Each transaction must be analyzed to determine what type of accounts are affected, and whether each account is increased or decreased in value, so as to determine whether the accounts are to be debited or credited.

Each accounting transaction should have two complementary entries. This diagram illustrates the accounting equation and the accounting rules that dictate which accounts are debited or credited. Note that the rules for liability and owner's equity accounts are the opposite of the rules for asset accounts. If $100 was spent at a stationery supplier, this is the double-sided entry in a computerized accounting system. $100 from the check account, which is an asset type account, to stationery, which is an expense of $90.91, and $9.09 of GST paid to the supplier, which is a liability account.

A list of accounts can be generated by AccountRight Live based on templates within the software, or we can choose to build our own chart of accounts. The accounts list, or chart of accounts as it's sometimes known, includes assets, liabilities, equity, income, cost of sales and expense accounts. Which will report the financials. We’re going to use the service template to start the accounts list. Carol Shines started the business in July 2014.

However, she has decided to commence the company data file on the first of January, 2015. As the previous six months have been recorded manually, we are therefore working in the financial year 2014-15. All screen shots and dates in this course reflect the financial year 2014-15. We'll learn more about Carol's Cleaning as we work through the videos.