Atul left university with a first class degree in chemistry. He had been particularly interested in plastics, and continued to study in his spare time after he started his career as an industrial chemist. He discovered a new way of laminating cloth, which produced a very durable, heat-resistant and fireproof result. He registered the patent for his method and decided to leave work and set up a manufacturing business to exploit the technology he had discovered. Atul's father, a businessman himself, advanced an interest-free loan of £15 000 to help get the business started. Atul was able to set up in a small unit on an industrial estate with the help of a low rental deal provided by the local authority.

Five years after setting up, Atul is still in business, trading as Belle Vue Laminates. He employs seven people full-time in the factory - six machine operatives and a production progress chaser. In the office there are a secretary, an invoicing clerk and a part-time bookkeeper. He has built up the sales order book himself and prospects are looking reasonably bright. However, Atul recently attended a seminar for young business people entitled 'Expanding your business'. He has felt for several months now that his business is in danger of stagnating and that he needs to increase the volume of sales. So far, Atul has done virtually all of the sales development work himself, although his father has helped by introducing him to some of his business contacts. He enjoys selling, and feels that he could increase sales volumes substantially if he spent more time out of the office. A recent article in the business press on export opportunities in Europe has encouraged him to think about potential markets overseas.

Atul has arranged a meeting with a small business development adviser to discuss an idea he has had to facilitate expansion of the business. He would like to explore the idea of employing a graduate in business studies with the intention of delegating quite a lot of the responsibility for day-to-day running of the factory and administration to the new employee. Atul estimates that he currently spends about three days per week running the factory and dealing with administrative queries, but problems keep building up and there have been some customer complaints about quality in recent months. (The rest of his working week is spent on the road visiting customers and seeking out new selling opportunities.) Atul's plan is that the new employee should spend, on average, three days per week supervising all aspects of production (including the implementation of proper quality control systems) and a further two days in improving the business administration. AtuI realises that he will have to be prepared to pay a reasonably good salary to be able to employ a person with sufficient initiative to run the factory effectively in his absence, and he is prepared to pay up to £25 000 per year for the right person. However, he feels confident that he can increase sales substantially if his time is freed up to explore new selling opportunities.

AtuI currently still has the £15 000 loan from his father, and has negotiated a flexible overdraft facility of up to £10 000 with the bank manager.

Atul's accountant, Shona, prepares his accounts annually up to his year-end of 30 September. It is now 15 October and AtuI is due to meet the business adviser on 31 October. He asks Shona to quickly prepare a draft manufacturing account, profit and loss account and balance sheet from the list of balances and notes on adjustments given below.