When Stan took the big leap from being an employee to a Subway owner, the thing that terrified him most was not the part about managing people—that was one of his strengths as a marketing manager. Why, at Xellent Media, 40 sales reps reported to him! No, Stan was terrified of having to manage the accounts. Subway restaurant owners have so many accounts to deal with: food costs, payroll, rent, utilities, supplies, advertising, promotion, and, biggest of all, cash. It’s critical for them to keep debits and credits straight. If not, both they and Subway could lose a lot of money, quickly.

Even though Stan got some intense training in accounting and bookkeeping at Subway University, he still felt shaky about doing his own books. When he confided his fears to Mariah Washington, his field consultant, she suggested he hire an accountant. “You need to play to your strengths,” said Mariah, and she told Stan, “More and more owners are using accountants, and almost all owners of multiple franchises do. In fact, some accountants actually specialize in handling Subway accounts for these multirestaurant owners.”

Even though Stan decided to hire his cousin, Lila, to do his accounting, he still needs to feed her the right data so she can calculate his T accounts. Like many small business owners, Stan enters data into an accounting software program such as QuickBooks or Peachtree, which he then uploads to his accountant, who edits it and reviews it for accuracy. Several times in the beginning Stan mistakenly debited both cash and supplies when he paid for orders of paper cups, bread dough, and other supplies.

Lila urged Stan to review the rules for recording debits and credits. She even told him to practice for a while using a paper ledger. “On the computer debits and credits are not as visible as they are with your paper system. Since you only enter the payables, the computer does the other side of the balance sheet. So you have to bone up on debits and credits to ensure that your Peachtree data are correct.”

Discussion Questions 

1. Why is the cash account so important in Stan’s business?

2. Why do you think that most owners of the larger shops use accountants to do their books instead of doing the accounting themselves?

3. Is the difference between debits and credits important to Subway restaurant owners who don’t do their own books?