Reading review problem.According to its Web site (www.rkr.csupomona.edu), “The Restaurant at Kellogg Ranch (RKR) is a student-operated restaurant, serving both lunch and dinner. The restaurant is part of the Hospitality Management curriculum at The Collins College of Hospitality Management at Cal Poly Pomona.”
RKR’s chart of accounts is block coded. For example, assets related to food and beverage operations all have four-digit account numbers that begin with “1.” Expenses for nonsalable items (such as cleaning supplies for the kitchen) have four-digit account numbers that begin with “7.”
RKR’s transaction processing software, developed and created by Lawrence Browning, is called Data Trap; it runs as an add-on to Excel. Data Trap organizes RKR’s accounting and operating data into several worksheets within a single Excel file. Some of those worksheets include net sales, counts of lunch and dinner items, credits for lunch and dinner items, waste, crew meals for both lunch and dinner, and inventory. RKR uses those data to complete a weekly income statement summary sheet that reports both financial data (such as revenue from lunch, revenue from dinner, breakage expenses, supplies expense) and nonfinancial data (such as the number of guests for lunch and dinner, food cost as a percentage of food revenue).
RKR’s transaction processing is complicated a bit by its relationship to the University. It must periodically transmit its financial data to the Cal Poly Pomona Foundation (http://foundation.csupomona.edu/), but the Foundation uses the principles of not-for-profit accounting, not the traditional accrual accounting businesses use. In effect, that reporting arrangement requires RKR to maintain two sets of accounting records: one for internal purposes, which is used for student assignments and management decision making, and one for use by the Foundation as part of its financial relationship with the University.
a. Is transaction processing more closely related to accounting or bookkeeping? Explain your response.
b. What does it mean to say RKR’s chart of accounts is “block coded”? What other coding systems are available, and when might they be most appropriately used?
c. How should RKR maintain strong internal control over its transaction processing activities?
d. Suggest three to five transactions RKR would need to record on a routine basis. Indicate which accounts would be debited and credited for each transaction.
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