BUSINESS PLAN AND ACCOUNTING 9
BusinessPlan And Accounting
Asa student, I have some free time during the afternoons that I do nothave classes and weekends, as well as public holidays. Since my highschool days, I used most of this time to talk to other students andengage in group discussions on how to improve our grades. This wasand is still my hobby that has resulted to several recognitions byalmost all principals in the schools I visit. As a hobby, I offereducational guidance to high school students by talking and teachingthem about how to study. This involves some hours of real talk andtraining them on the best inspirational and motivational books toread and how to translate them to academics.
Thisis a service that has earned be money as gifts of appreciation fromthe principals of the schools I visit and give talks to. Currently,school principals invite me to give talks to students on a regularbasis and the invitations are now becoming a concern. Despitespending hours with students of all the schools I am invited, I havenever requested for any payment for me to give talks to students.After consulting a relative who is a business consultant, heexplained to be the dynamics involved in converting the hobby into abusiness. He affirmed that I have a credible service with aconsistent and anticipated demand.
Therefore,I decided to convert it into a business with effect from thebeginning of this semester. The business will sell a service and agood. The service will be the consultancy service that will beoffered through the talks to students. A standard package will be twohours of academic inspirational talk to students in every school wevisit. An additional service will involve one on one talk toindividual students and helping them plan their academics. Thebusiness will sell goods in the form of inspirational books. I havealready consulted with some publishers and local distributors, andthey have agreed to provide me with books at wholesale price.Moreover, some significant suppliers are willing to offer the bookson credit terms after we have established a good businessrelationship of six months.
Asa business, I have to involve the best possible form of planning andorganization so that it will appeal to new clients and excite theexisting clients. The planning will involve introducing a number ofresources that require capital investment into the business. One ofthe main resources will be invested in logistics and inventory. Thisis because I plan to travel with the business regularly to give talksand to sell books inspirational books to students. Consequently, thebusiness will require a few staff to start with. However, only onemember of staff will require to be working on a full time basis. Theother members of staff will not be full time, since they will be indemand when there will be talks.
Therationale for this plan is because the business needs to beprofessional despite the limitation of resources and time availableto develop a fully functional human resource. However, theremuneration of the staff will be based on their time spent in thebusiness. Therefore, the best people to hire for the business will bemy fellow students at the college and university students. However,the full time staff will be based in the office and will have goodqualifications in customer relations and have good experience inmarketing or business development. The office will be located nearthe college, and we have identified a location awaiting rentingtransactions.
TheBusiness Form and Benefits
Thebusiness will focus on offering the service of talks and selling ofinspirational books to students to all the schools that we visit areinvited to talk to. My primary clients are High schools andelementary schools within the district, but can extend to all schoolswithin the state. My secondary clients will be parents and churcheswho want their students talked to and guided in terms of academics.One of the benefits that the business will offer is financial gainsfrom the activities that I earlier did as a hobby. Secondly, thebusiness will provide gratification since it involves the activitiesthat I love doing and enjoy engaging in.
Thebusiness will also benefit students at lower levels of educationsince it will provide a platform for longer engagements with us anddeeper training. Earlier, I did not engage in detailed talks becauseof time and concern that it was a free service. However, with theanticipation of earnings, I will be motivated to engage a largenumber of speakers and academic experts who will give more benefit tothe clients. Finally, the business will provide an opportunity for mycolleagues at the college to earn by helping students in the lowerlevels of education.
he following is a set of accounts that the business will haveas a result of the business start up.
Cans in Hand
Cash at Bank
Owner’sequity account is the money that I have already set aside to startthe business. This money from the gifts I am regularly given byprincipals whenever I give talks to students.
Loanaccount will be the business liability that is payable to investorswho will have invested in the business for interests as a return oftheir investment.
Motorvehicle account exists because the business will have to buy a carthat will facilitate movements to various schools and carry ourinventory of books to sell. The motor vehicle will be financedthrough debt financing from the investors.
Accountsreceivable will be the names of schools that we will have invoicedfor the talk service.
Cashaccount is the cash balance at the office till. This is because bookswill be sold to students on cash basis.
Thebank account will be the cash balances in the bank account, which hasalready been opened.
Useof Accounting Principles
Thebusiness will adhere to international business standards in all itsoperations and financial transactions. First, the business willadhere to Generally Accepted Accounting Principles (GAAP) inrecognizing revenue and allocating expenditure. Most significantadherence is to recognize revenue when it has been earned as per theaccrual concept (Chew& Parkinson, 2013).This will help the business to record revenue and recognize accountsreceivables as assets whenever we provide the educational service toschools and they do not pay in cash (Mukherjee,2003).Therefore, with every invoice issued, an account will be recorded torecognize the transaction in full. This will also help the businessto apply the matching concept and use one year as the accountingperiod of reporting.
Thebusiness will also recognize the changes in the internationalaccounting standards and international reporting standards. Anychanges such as shift from GAAPs to IFRS in the internationalstandards will be incorporated into the business accounting practice(Mukherjee,2003).For instance, in the case were GAAPs will lead to a potentialmisstatement of facts in the financial statements, the business willadopt different standards under the AICPA provision provided in itsCode of Professional Ethics.
asat 31 December 2014
Fixtures& fittings 1,500
Cashat bank 4,000
NetCurrent Assets 9,500
Capital(Owner’s Equity) 6,500
Add:Net Profit 9,500
Forthe Period ended 31 December 2014
$ $ $
SchoolTalk Turnover 18,500
Less:Cost of sales
Less:Closing stock (2,000) (3,500)
InternalControls and regulatory environment
Tosafeguard the assets of the business, the business will implementimportant internal controls that will protect the use and value ofthe assets. Of all the assets, the stock and cash at bank will be ourmain assets. To safeguard the inventory, the business will implementa stock management plan where the books supplied in will be monitoredas they are sold (Wood,2008).The monitoring will be done through the use of index umbers that willbe unique for each book. Once a book is sold, the index number willbe used to track the book and even identify the date and the schoolwhere it was sold.
Tosafeguard the cash at the bank, the business will prepare bankreconciliation statement on a regular basis in order to detect anyanomalies that may exist in the account(Kimmelet al, 2011).Thiswill also help the business to identify errors committed by the staffat the office or by the bank. With a consistent reconciliation, thecontrol will assure the management of the business of correctness andaccuracy of the cash at bank.
Theimpact of the regulatory environment on the business will besignificant for a professional management of the operations and assetmanagement. Despite being a small business, the business will adhereto the Sarbanes–OxleyAct of 2002 in the auditing of the books of account (Kimmelet al, 2011).As per the Sarbanes–Oxley Act of 2002, we will hire an independentauditor to audit our books and verify that the financial statementsare true and fair before we present them to investors.
However,there will be challenges in the implementation of the two controlsexplained above. The main challenge will be the small internalbusiness environment that the business will be operating on. This isbecause the business will have a small number of stock of books tomanage and little cash at bank. Another challenge is that there willbe no rotation of jobs since the full time staff will be responsiblefor all the record keeping. This presents a risk of loss of assetswithout any detection.
Chew,L., & Parkinson, A. (2013). MakingSense of Accounting for Business.Harlow: Pearson Kimmel, P. D., Weygandt, J. Kieso, E. (2011).FinancialAccounting, 6th Edition.New York: Wiley& Sons
Mukherjee,M. (2003). FinancialAccounting.Boston: McGraw Hill Higher Education
Wood,F. (2008). FrankWood`s Business Accounting 1. NewYork: Financial Times/Prentice Hall.