GB518_PaigeRyan

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Purdue University *

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518

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Accounting

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Jan 9, 2024

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7

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1 COOKIE CREATIONS: A BUSINESS CASE Cookie Creations: A Business Case Paige Ryan Purdue Global University
2 COOKIE CREATIONS: A BUSINESS CASE Abstract The adage is that when you do what you love, you never work a day in your life. Natalie Kobel has decided to take this to heart and open her cookie-making business. With the launch of a new business comes the evaluation of its financial feasibility. Launching a business means evaluating and determining the correct financial accounting structure. Analyzing the necessary account types, debt management, and other pitfalls will help to support Natalie's launch; as the business grows, choices such as expanding the product line and taking accounts on credit become part of the decision-making process. Often, business owners bring skillsets other than accounting to the table; this means that as their company grows, they add support from accountants. The structure of accounts and controls is necessary to ensure that the accounting is successful. As Natalie builds Cookie Creations, she seeks support to make these pivotal financial decisions; this paper evaluates Natalie's accounting structure and develops the best practices.
3 COOKIE CREATIONS: A BUSINESS CASE Cookie Creations: A Business Case CC1 – Initial Business Decisions To Incorporate or Not: Best Business Practices What form of business organization—proprietorship, partnership, or corporation— do you recommend that Natalie use for her business? Discuss the benefits and weaknesses of each form that Natalie might consider. Tracking the Money: How to Handle Accounting Will Natalie need accounting information? If yes, what information will she need and why? How often will she need this information? Explain your answer. Accounting for Accounts: What Line Items to Track Identify specific asset, liability, revenue, and expense accounts that Cookie Creations will likely use to record its business transactions. Explain your answer. Business Banking: What to Do Should Natalie open a separate bank account for the business? Why or why not? Asset Management: Keeping the Lines Clean Natalie expects she will have to use her car to drive to people’s homes and to pick up supplies, but she also needs to use her car for personal reasons. She recalls from her first-year accounting course something about keeping business and personal assets separate. She wonders what she should do for accounting purposes. What is the recommendation? Explain your answer. CC2 – Accounting Decisions Financial Statements: What to Look For What type of information does each financial statement provide? How to Read the Books: Analyzing Financial Statements
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4 COOKIE CREATIONS: A BUSINESS CASE What financial statements would Natalie need in order to evaluate whether Biscuits will have enough cash to meet its current liabilities? Explain what to look for. Tracking Statements: What Statements are Needed Long Term What financial statements would Natalie need in order to evaluate whether Biscuits will be able to survive over a long period of time? Explain what to look for. Is It Working: Statements for Analyzing Profitability What financial statement would Natalie need in order to evaluate Biscuits’ profitability? Explain what to look for. Debt: Where to Find It and What to Do Where can Natalie find out whether Biscuits has outstanding debt? How can Natalie determine whether Biscuits would be able to meet its interest and debt payments on any debts it has? Paying Off Investors: Do We Need Dividends? How could Natalie determine whether Biscuits pays a dividend? Explain your answer. Worth It? Ways to Determine Financial Feasibility In deciding whether to go ahead with this opportunity, are there other areas of concern that Natalie should be aware of? Explain your answer. CC5 – Inventory Decisions Inventory or Supplies? What to Classify When “Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?” Explain your answer. Perpetual or Periodic? Choosing the Best Inventory Systems “I’ve learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?” Explain you answer.
5 COOKIE CREATIONS: A BUSINESS CASE What to Count and When? Tracking Inventory “How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?” Explain your answer. CC7 – Internal Control Issues Accounting Controls: Locating Pitfalls in Management Identify the weaknesses in internal control that you see in the system that John is recommending. (Consider the principles of internal control identified in the chapter.) NOTE: Be specific and address ALL 8 issues presented. Curbing Controls: Best Practices for Protecting Finances Suggest any improvements to the Internal Controls if John is hired to do Natalie’s accounting? Only address the weaknesses identified. Explain your answer. CC8 – Credit Policy Determining Client Credit Viability “Curtis has provided me with a set of his most recent financial statements. What calculations should I do with the data from these statements, and how will the results help me decide if I should extend credit to Curtis?” In your answer, provide specific examples of ratios to use, and explain what they reveal. Extending Credit Alternatives “Curtis has provided me with a set of his most recent financial statements. What calculations should I do with the data from these statements, and how will the results help me decide if I should extend credit to Curtis?” In your answer, provide specific examples of ratios to use, and explain what they reveal. Credit Card Benefits and Drawbacks
6 COOKIE CREATIONS: A BUSINESS CASE “I am thinking seriously about permitting my customers to use credit cards. What are some of the advantages and disadvantages of letting my customers pay by credit card?” Explain your answer. Conclusion
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7 COOKIE CREATIONS: A BUSINESS CASE References Baber, W. R. (1985). A Framework for Making a Class of Internal Accounting Control Decisions. Journal of Accounting Research . (Wiley-Blackwell), 23(1), 360–369. Diamond, M. A. Stice, J. D. & Stice, E. K. (2000). Financial Accounting . (5th ed.) South-Western College Publishing. Kimmel, P. Weygandt, J. & Mitchell, J. (2022). Accounting Tools for Business Decision Making. (8th ed.) John Wiley & Sons, Inc Paul, S. K. (2019). Financial Accounting: Theory and Practice. (Revised edition.) Central Educational Enterprises. Stittle, J. Robert, W. (2008). Financial Accounting . SAGE Publications Ltd.