FACULTY : FACULTY OF ACCOUNTANCY
PROGRAM : MASTER OF ACCOUNTANCY
COURSE: MANAGEMENT CONTROL AND DECISION MAKING
COURSE CODE : MAC 700

Case Study 1
BATES BOATYARD
Upon returning to civilian life after several years in the Navy, Sarah Bates sought a small business that she might buy. Being a thrifty person with no dependents, she had built up a fair amount of savings, the accumulation of which had been aided by the fact that she had seen considerable duty in areas where there had been nothing to buy.
Bates finally located a small boatyard for sale in a town on the coast of Maine where she had spent many summers. The proprietor was getting along in years and wished to retire. He was offering the yard for sale at what Bates believed to be a fair starting price that could probably be worked down to a very reasonable figure through negotiation.
It is not necessary here to go into the details of investigation and negotiation. Bates bought the yard. The business being somewhat larger than she could finance alone, she had borrowed the additional funds required from a friend, giving a mortgage on the property as security.
Bates realized the need for adequate accounting records if she was to manage the business successfully. The records on hand were for cash receipts and disbursements only. Actual balance sheets and profit and loss statements that had been prepared for the former owner for tax purposes were also available. A person who was a reasonably capable bookkeeper and general office factotum had been inherited with the business.
Having had a course in accounting in college, Bates felt capable of using cost and financial information with some intelligence, but did not capable of initiating a suitable accounting system. Knowing that you, an old friend of hers, have been studying such matters, she has asked your advice as to what kind of accounting records