Private Fitness Llc

In: Business and Management

Submitted By stratoshpere2
Words 1074
Pages 5
Case 15-1: Private Fitness LLC*
Private Fitness LLC is a springboard case that can be used as the basis of a discussion of management's need for information. It serves the same purpose for Part 2 of the book that the Kim Fuller case did for Part 1.
Approach
This case uses a small business as its setting so that students can visualize the business's activities, and so questions of generally accepted accounting principles will be essentially irrelevant. In fact, a shift the student needs to make as he/she begins Part 2 of the book is to think of accounting primarily in terms of its usefulness to a company's management, rather than in terms of reporting to shareholders and other outside parties. Because of the differing focus of Part 1 of the book, particularly the later chapters, some students will forget that they are dealing here with information for an apparently unsophisticated manager to help her run a small business, and not data for a NYSE company.

This case is compelling both because students understand the business—fitness-training—and because there is a real problem to discuss. A trusted employee was both stealing cash and, by not recording all sales, diverting some revenues to herself.

Discussion of this simple case helps students think about both the records needed to run the business and the challenges managers face in making sure the information put into the records is recorded accurately (i.e., the challenges faced in maintaining an effective internal control system). The case illustrates a common problem faced in many small businesses—lack of overlapping controls, or in this case, what auditors call “separation of duties.”

Discussion

To run this simple privately-held business, Rosemary does not have to be concerned with generally accepted accounting principles. She does need to keep records that will allow the easy preparation of a tax…...

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