http://www.vancouversun.com/business/minimum+wage+workers+falling+further+behind/2752317/story.html
Summary
In the past year, every province in Canada has had their minimum wage raised, all except the province of B.C. Nine years ago, B.C. used to have the highest minimum wage of any province when it was raised to $8 an hour while the elected Liberal government introduced the new training rate of $6 an hour. However, the eight-year freeze on minimum wage has resulted in B.C. having the lowest minimum wage in the country. On the other hand, Nova Scotia’s lowest-paid workers received a raise, and Ontario’s minimum wage was increased to $10.25, which is currently the highest minimum wage in the nation. Nova Scotia has now raised their regular minimum to $9.20 today and $9.60 in October, and has also raised its training minimum from $8.10 to $8.70.
Connection
Many may argue that in the perspective of the business, an increase in minimum wage would have a negative impact on the company. To compensate the rising cost of hiring new employees, employers may be forced to lay off several employees or cut back on their working hours. As the accountant, keeping track of payroll requires great responsibility because working hours as well as overtime hours have to be calculated. Based on the amount of taxable earnings and the employee's net claim code, the amount of income tax to be deducted can be found using a table. Businesses not only have to pay the employees a certain amount, but deductions that are taken from the employees, such as CPP, EI, RPP and health insurance, have to be correctly matched and remitted to the government.
Reflection
For a company, paying the employees is a major expense in the current recessive economy. With an increase in minimum wage, more of their profit will have to be used to pay the employees instead of increasing the profitability of the business. As a student working part-time, increasing minimum wage in B.C. sounds like a wonderful idea initially, but when we look deeper in the issue, this may not be the case. It is undeniable that people who are working a full-time job at $8/hour and have to support family are suffering from the low minimum wage and the increasing cost of living in B.C. However, if the minimum wage was increased, businesses will have to work harder to make a profit in the current economy, and as a result, they may increase the prices of their products to compensate for their increased payroll expenses with inflation.
Thursday, April 29, 2010
Monday, April 12, 2010
Shoppers drops on proposed pharmacy reforms
http://www.financialpost.com/story.html?id=2777670
Summary
On Thursday, April 8, 2010, the shares of Shoppers Drug Mart Corp. plummeted significantly, from $43.17 on Wednesday down 9.8% to close at $38.92 on Thursday. The dramatic fall in share price was due to the proposals published by the Ontario government, which stated that the province says it plans to reduce reimbursement rates for generic drugs from 50% to 25% of the branded drug cost. Shoppers CEO Jurgen Schreiber believes that these changes will negatively impact the success of the company in the future because the government is ignoring the reform proposals from the community pharmacy, and therefore risking the long-term sustainability of community pharmacy in the Province of Ontario. However, the changes appear to only have a temporary negative effect, as Mr. Schreiber states that Shoppers Drug Mart, with its leading market share, will adjust to the changes announced and reveal the successful players in retail pharmacy to be those with size, scale, and leverage efficiencies.
Connection
In Chapter 15, we learned about the different perspectives that a company would be judged from. For example, when the announcement for pharmacy reforms came out on Thursday, outsiders such as investors would judge the profitability of Shoppers Drug Mart based on its recent news. At the moment, several investors are considering to sell their shares of the company because for the short-term, the trend seems to follow the falling of share prices. Looking at the financial ratios of Shoppers Drug Mart, their financial position seems to have improved from 2009 as compared to 2008, as their current ratio increased from 1.62 to 1.29. Since the current ratio measures a business’s ability to pay its debts, a higher ratio indicates a company has a better change of paying off its debt because they contain a much greater proportion of assets than liabilities. However, the inventory turnover has risen since 2008, as the ratio decreased from 4.79 down to 4.77. This indicates that it takes longer for the company to deplete its inventory and the company would end up with excess inventory.
Reflection
As a result of the pharmacy reforms, Shoppers Drug Mart will have to reduce its pharmacy services and patient care in the province. With the imposed lower generic prescription drugs prices, the Ontario government hopes to maintain or lower its health care costs. Due to the announcement outbreak on Thursday, it is difficult for the financial ratios of Shoppers Drug Mart to reflect these changes until April 28, when the financial report for the first quarter of 2010 will be released. Reports showed that some pharmacies refused to fill prescriptions for their patients for one hour on Wednesday, which I find irresponsible for the pharmacies because they are holding the patients hostage for something they cannot control. After the store warned that they will cut back on staff and opening hours, I think some patients may begin to turn away from Shoppers Drug Mart and instead turn to smaller unaffected pharmacies. However, it seems likely that Shoppers Drug Mart will be capable of returning back to its original share price in the long term, after the changes in pharmacy reforms have been settled.
Summary
On Thursday, April 8, 2010, the shares of Shoppers Drug Mart Corp. plummeted significantly, from $43.17 on Wednesday down 9.8% to close at $38.92 on Thursday. The dramatic fall in share price was due to the proposals published by the Ontario government, which stated that the province says it plans to reduce reimbursement rates for generic drugs from 50% to 25% of the branded drug cost. Shoppers CEO Jurgen Schreiber believes that these changes will negatively impact the success of the company in the future because the government is ignoring the reform proposals from the community pharmacy, and therefore risking the long-term sustainability of community pharmacy in the Province of Ontario. However, the changes appear to only have a temporary negative effect, as Mr. Schreiber states that Shoppers Drug Mart, with its leading market share, will adjust to the changes announced and reveal the successful players in retail pharmacy to be those with size, scale, and leverage efficiencies.
Connection
In Chapter 15, we learned about the different perspectives that a company would be judged from. For example, when the announcement for pharmacy reforms came out on Thursday, outsiders such as investors would judge the profitability of Shoppers Drug Mart based on its recent news. At the moment, several investors are considering to sell their shares of the company because for the short-term, the trend seems to follow the falling of share prices. Looking at the financial ratios of Shoppers Drug Mart, their financial position seems to have improved from 2009 as compared to 2008, as their current ratio increased from 1.62 to 1.29. Since the current ratio measures a business’s ability to pay its debts, a higher ratio indicates a company has a better change of paying off its debt because they contain a much greater proportion of assets than liabilities. However, the inventory turnover has risen since 2008, as the ratio decreased from 4.79 down to 4.77. This indicates that it takes longer for the company to deplete its inventory and the company would end up with excess inventory.
Reflection
As a result of the pharmacy reforms, Shoppers Drug Mart will have to reduce its pharmacy services and patient care in the province. With the imposed lower generic prescription drugs prices, the Ontario government hopes to maintain or lower its health care costs. Due to the announcement outbreak on Thursday, it is difficult for the financial ratios of Shoppers Drug Mart to reflect these changes until April 28, when the financial report for the first quarter of 2010 will be released. Reports showed that some pharmacies refused to fill prescriptions for their patients for one hour on Wednesday, which I find irresponsible for the pharmacies because they are holding the patients hostage for something they cannot control. After the store warned that they will cut back on staff and opening hours, I think some patients may begin to turn away from Shoppers Drug Mart and instead turn to smaller unaffected pharmacies. However, it seems likely that Shoppers Drug Mart will be capable of returning back to its original share price in the long term, after the changes in pharmacy reforms have been settled.
Thursday, March 25, 2010
Police: Manager stole $300 000
http://www.berkeleydailyplanet.com/issue/2010-02-04/article/34580?headline=Daily-Planet-Hit-by-Massive-Payroll-Fraud
Summary
For more than five years, Cynthia Jo Lark has been continuously forging payroll cheques with Fasold’s signature (as president of the Northumberland Sewer Authority) and those of Jack Synder (authority treasurer). Recently resigned from the Borough Council member, Cynthia claimed to be able to create fake cheques as part of her role as office manager, resulting in a scam totaling approximately $300 000. Charged with forgery, theft, and receiving stolen property, she was originally hired in 1994 as a clerk with accounting and payroll duties, later transferring money from the authority’s general account at the bank into the payroll account. To take advantage of the system, she wrote cheques for herself with an excess amount than the authorized pay, by forging the names Fasold and Snyder. In addition to writing fake cheques, she also created fictitious audits to make it appear official that she was keeping the accounting books in order.
Connection
In Chapter 14, we learned that good internal control is required in order for an accounting system to run accurately and efficiently. Not only is theft from customers common, but businesses are becoming more aware of employee theft and fraud because they do not want to take any chances about an employees’ honesty and dedication. To maintain strong internal control, businesses are recommended to have more than one person process and prepare the accounting documents to ensure accuracy, have different people record transactions and handle the physical assets, and have an independent public accountant periodically perform an audit to check if the accounting system is running smoothly.
Reflection
It is saddening to observe how employees would risk their honesty to the business they are working for due to greediness. In the future, businesses should be more careful about the employees they hire by checking their criminal records and possibly allocating another employee to countercheck the accounting and payroll duties to ensure accuracy. Also, instead of fully trusting the employee and asking if she has taken care of the audits, the employer should follow through with the audit to make sure it has actually been done. Although a good system of internal control may not eliminate all aspects of employee fraud, it can definitely reduce the possibility of it, leading to future successes of a business.
Summary
For more than five years, Cynthia Jo Lark has been continuously forging payroll cheques with Fasold’s signature (as president of the Northumberland Sewer Authority) and those of Jack Synder (authority treasurer). Recently resigned from the Borough Council member, Cynthia claimed to be able to create fake cheques as part of her role as office manager, resulting in a scam totaling approximately $300 000. Charged with forgery, theft, and receiving stolen property, she was originally hired in 1994 as a clerk with accounting and payroll duties, later transferring money from the authority’s general account at the bank into the payroll account. To take advantage of the system, she wrote cheques for herself with an excess amount than the authorized pay, by forging the names Fasold and Snyder. In addition to writing fake cheques, she also created fictitious audits to make it appear official that she was keeping the accounting books in order.
Connection
In Chapter 14, we learned that good internal control is required in order for an accounting system to run accurately and efficiently. Not only is theft from customers common, but businesses are becoming more aware of employee theft and fraud because they do not want to take any chances about an employees’ honesty and dedication. To maintain strong internal control, businesses are recommended to have more than one person process and prepare the accounting documents to ensure accuracy, have different people record transactions and handle the physical assets, and have an independent public accountant periodically perform an audit to check if the accounting system is running smoothly.
Reflection
It is saddening to observe how employees would risk their honesty to the business they are working for due to greediness. In the future, businesses should be more careful about the employees they hire by checking their criminal records and possibly allocating another employee to countercheck the accounting and payroll duties to ensure accuracy. Also, instead of fully trusting the employee and asking if she has taken care of the audits, the employer should follow through with the audit to make sure it has actually been done. Although a good system of internal control may not eliminate all aspects of employee fraud, it can definitely reduce the possibility of it, leading to future successes of a business.
Wednesday, January 13, 2010
Refunds offered on Baby Einstein DVDs
http://www.cbc.ca/consumer/story/2009/10/25/waltdisney-babyeinstein-refunds.html
Summary
In response to a legal challenge about the educational value of the videos, a subsidiary of Walt Disney Co. is offering refunds to those who purchased Baby Einstein videos in the last five years. More than a decade ago, Baby Einstein DVDs appeared on the market scene as an educational tool that assisted babies up to the age of two in developing cognitive skills. In May 2006, the Boston-based advocacy group known as The Campaign for a Commercial-Free Childhood had a dispute with the U.S. Federal Trade Commission regarding the videos tricking consumers into believing that babies could learn words through them even though there was no evidence of scientific research. Eventually, they approached a group of Boston lawyers with their complaints and threatened a class-action lawsuit against Disney.
Connection
In the accounting books, when refunds are allowed, businesses use special “returns and allowances” accounts to record these transactions. For example, in this case, if the customer paid by credit, a credit invoice would be issued by Disney to the customer. In the journal, the “Sales Returns and Allowances” along with the PST and GST Payable accounts (if applicable) would be debited and the Accounts Receivable of the customer would be credited. However, not all businesses have a “Sales Returns and Allowances” accounts in their books if they are simply a small business. In this case, the Sales account is debited instead. When the customer pays cash for merchandise that has to be returned, the Bank account is credited instead of the Accounts Receivable because no credit invoices are issued.
Reflection
For businesses and consumers alike, offering refunds on merchandise is a good idea because it allows consumers to have a peace of mind when purchasing goods knowing that they could have a second chance to return it if they aren’t satisfied with it later. Generally, indecisive customers are more inclined to purchase goods this way and this also helps businesses in selling their goods quickly. However, the disadvantage to offering refunds is that customers might take advantage of the system and return goods often, raising the proportion of their returned sales as compared to their actual net sales. While parents are shocked that the Baby Einstein DVDs did not work as expected, I think there are other options for parents, such as spending quality time with their child instead of passively allowing them to watch baby television.
Summary
In response to a legal challenge about the educational value of the videos, a subsidiary of Walt Disney Co. is offering refunds to those who purchased Baby Einstein videos in the last five years. More than a decade ago, Baby Einstein DVDs appeared on the market scene as an educational tool that assisted babies up to the age of two in developing cognitive skills. In May 2006, the Boston-based advocacy group known as The Campaign for a Commercial-Free Childhood had a dispute with the U.S. Federal Trade Commission regarding the videos tricking consumers into believing that babies could learn words through them even though there was no evidence of scientific research. Eventually, they approached a group of Boston lawyers with their complaints and threatened a class-action lawsuit against Disney.
Connection
In the accounting books, when refunds are allowed, businesses use special “returns and allowances” accounts to record these transactions. For example, in this case, if the customer paid by credit, a credit invoice would be issued by Disney to the customer. In the journal, the “Sales Returns and Allowances” along with the PST and GST Payable accounts (if applicable) would be debited and the Accounts Receivable of the customer would be credited. However, not all businesses have a “Sales Returns and Allowances” accounts in their books if they are simply a small business. In this case, the Sales account is debited instead. When the customer pays cash for merchandise that has to be returned, the Bank account is credited instead of the Accounts Receivable because no credit invoices are issued.
Reflection
For businesses and consumers alike, offering refunds on merchandise is a good idea because it allows consumers to have a peace of mind when purchasing goods knowing that they could have a second chance to return it if they aren’t satisfied with it later. Generally, indecisive customers are more inclined to purchase goods this way and this also helps businesses in selling their goods quickly. However, the disadvantage to offering refunds is that customers might take advantage of the system and return goods often, raising the proportion of their returned sales as compared to their actual net sales. While parents are shocked that the Baby Einstein DVDs did not work as expected, I think there are other options for parents, such as spending quality time with their child instead of passively allowing them to watch baby television.
Tuesday, October 13, 2009
Employee Theft and its Impact on Retailers
http://www.mdd.net/us/news/forensic_insight_january_2009_employee_theft_and_its_impact_on_retailers.php?p
Summary
Even though the end of the economic downturn is imminent, the scars it has created have not completely healed yet, and many have turned to illegal acts such as shoplifting to escape their difficult financial situation. In particular, retail losses due to shrink has reached $40.5 billion in 2006, of which 47% was caused by employee theft, according to the National Retail Security Survey. Although the loss of expensive items in the inventory are likely recorded, it may take a business a long period of time to detect the losses of an inexpensive item. Retail shrinkage can be caused by inventory losses from employee theft, shoplifting, organized retail crime, administrative error, and vendor fraud.
Connection
In Chapter 11, we learned that a physical inventory is taken to determine the value of the inventory currently in stock. Subtracting that amount from the beginning inventory and the cost of merchandise purchased gives the cost of goods sold. However, when shrinkage occurs, the physical inventory count and the count recorded in the company’s financial records would show a discrepancy. As a result, the merchandise is no longer on hand but stolen, lost, or broken and would be categorized as “cost of goods sold”, even though the sales revenue would not increase, resulting in a lower gross profit. Had the merchandise not been stolen, the amount of the gross profit would be higher due to the increase of sales, since the amount of ending inventory is the same in both cases.
Reflection
Although a child stealing a chocolate bar may not seem like a huge, small discrepancies could add up and employee theft and shoplifting should be prevented. Often we overlook how easy it is for employee theft to occur since they are in charge of processing the transaction and it is convenient to purposely undercharge a customer by not scanning an item. As well, many consumers may accidentally shoplift by forgetting to put small items from the bottom of their cart onto the conveyor belts. Unlike in other places where the consumer pays for the breakage, here the business is responsible for covering the cost of replacing the item. Unless security is added to reduce inventory losses, the reality of retail shrinkage would remain a burden for many businesses.
Summary
Even though the end of the economic downturn is imminent, the scars it has created have not completely healed yet, and many have turned to illegal acts such as shoplifting to escape their difficult financial situation. In particular, retail losses due to shrink has reached $40.5 billion in 2006, of which 47% was caused by employee theft, according to the National Retail Security Survey. Although the loss of expensive items in the inventory are likely recorded, it may take a business a long period of time to detect the losses of an inexpensive item. Retail shrinkage can be caused by inventory losses from employee theft, shoplifting, organized retail crime, administrative error, and vendor fraud.
Connection
In Chapter 11, we learned that a physical inventory is taken to determine the value of the inventory currently in stock. Subtracting that amount from the beginning inventory and the cost of merchandise purchased gives the cost of goods sold. However, when shrinkage occurs, the physical inventory count and the count recorded in the company’s financial records would show a discrepancy. As a result, the merchandise is no longer on hand but stolen, lost, or broken and would be categorized as “cost of goods sold”, even though the sales revenue would not increase, resulting in a lower gross profit. Had the merchandise not been stolen, the amount of the gross profit would be higher due to the increase of sales, since the amount of ending inventory is the same in both cases.
Reflection
Although a child stealing a chocolate bar may not seem like a huge, small discrepancies could add up and employee theft and shoplifting should be prevented. Often we overlook how easy it is for employee theft to occur since they are in charge of processing the transaction and it is convenient to purposely undercharge a customer by not scanning an item. As well, many consumers may accidentally shoplift by forgetting to put small items from the bottom of their cart onto the conveyor belts. Unlike in other places where the consumer pays for the breakage, here the business is responsible for covering the cost of replacing the item. Unless security is added to reduce inventory losses, the reality of retail shrinkage would remain a burden for many businesses.
Wednesday, September 16, 2009
U.S. credit card defaults up, signal consumer stress
Summary
It is hard to deny that credit cards are becoming more and more widely used, offering finances for buying anything from groceries to a new television set. However, this article reveals that even though consumers may be experiencing the ends of the recession, US credit card defaults are still constantly rising. In fact, the credit card debts from Bank of America Corp and Citigroup Inc. customers are at is peak since the beginning of the recession. Expecting a V-shaped recovery in the economy, customers become too confident in the state of the improving economy, leading to charge-off rates as high as 14.54% for the Bank of America. As a result of the rise in credit card losses, credit card companies have closed millions of accounts and cut down on lending limits and rewards.
Connection
In Accounting 11, we learned that buying and selling on credit is a convenient way to do business. By delaying payment for a short period of 30 days, purchasers are given the time to examine the goods or return them before paying for them. For example, when a company purchases supplies on credit, an account called the Accounts Payable is created under the name of the credit, the person or business the company owed money to. When credit card debts are paid on time, the process is smooth and convenient. However, when a company never receives the money owed to them, they have no choice but to write-off the account, making it no longer an asset value and assuming that the money most likely would not be returned, which results in a loss to the company.
Reflection
In recent years, I have noticed that more and more people are using credit cards instead of cash as a form of payment due to its convenience. Programs such as “do not pay until” a certain date are introduced, allowing us to walk away without paying a cent for our purchase. As if the idea of a credit card wasn’t luring enough, rewards attached to various cards spark customers’ interests. To encourage consumers to pay for their credit card bills early or on time, credit card companies are introducing interest rates for those who pay for the bill at a later date than scheduled. Similar to how businesses would sell to reliable companies with a stable financial position, I think it would be wise for credit card companies to review the consumer’s financial position as well, to ensure that the consumer has the ability to pay back the company and thus reducing the number of credit card defaults.
http://www.vancouversun.com/business/fp/credit+card+defaults+signal+consumer+stress/1996730/story.html
It is hard to deny that credit cards are becoming more and more widely used, offering finances for buying anything from groceries to a new television set. However, this article reveals that even though consumers may be experiencing the ends of the recession, US credit card defaults are still constantly rising. In fact, the credit card debts from Bank of America Corp and Citigroup Inc. customers are at is peak since the beginning of the recession. Expecting a V-shaped recovery in the economy, customers become too confident in the state of the improving economy, leading to charge-off rates as high as 14.54% for the Bank of America. As a result of the rise in credit card losses, credit card companies have closed millions of accounts and cut down on lending limits and rewards.
Connection
In Accounting 11, we learned that buying and selling on credit is a convenient way to do business. By delaying payment for a short period of 30 days, purchasers are given the time to examine the goods or return them before paying for them. For example, when a company purchases supplies on credit, an account called the Accounts Payable is created under the name of the credit, the person or business the company owed money to. When credit card debts are paid on time, the process is smooth and convenient. However, when a company never receives the money owed to them, they have no choice but to write-off the account, making it no longer an asset value and assuming that the money most likely would not be returned, which results in a loss to the company.
Reflection
In recent years, I have noticed that more and more people are using credit cards instead of cash as a form of payment due to its convenience. Programs such as “do not pay until” a certain date are introduced, allowing us to walk away without paying a cent for our purchase. As if the idea of a credit card wasn’t luring enough, rewards attached to various cards spark customers’ interests. To encourage consumers to pay for their credit card bills early or on time, credit card companies are introducing interest rates for those who pay for the bill at a later date than scheduled. Similar to how businesses would sell to reliable companies with a stable financial position, I think it would be wise for credit card companies to review the consumer’s financial position as well, to ensure that the consumer has the ability to pay back the company and thus reducing the number of credit card defaults.
http://www.vancouversun.com/business/fp/credit+card+defaults+signal+consumer+stress/1996730/story.html
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