Managerial Accounting- Group Project

You would like to start a trading business in 2024 and you plan to invest $300,000 as capital and to borrow from bank for any additional amount that is necessary for the start-up and operation of the business. Before you start, you find that it is important to do some research about the business and youneed to preparesomebudgets so as to see if the business is profitable and also whether there will be sufficient cash to maintain the operations.

The following reports arerequired:

Part A(5%)

A Proposal (not more than 1,000 words) to describe

(a) the nature of your business,

(b) the reason(s) for choosing this business,

(c) theoperationsof your business and

(d) the assumptions that you are going to make for your business (in addition to the BASIC ASSUMPTIONS set below).

Part B(10%)

The Final Report which includes:

1. Sales Budget for each of the12 months and the yearly total of 2024.
2. Purchases Budget for each of the12 months and the yearly total of 2024.
3. Selling and Administrative Budget for each of the12 months and yearly total of 2024.
4. Ending Inventory Budget as at 31 December 2024.
5. Cash Budget for each of the 12 months and yearly total of 2024.
6. BudgetedIncome Statement for Year 2024.
7. Budgeted Statement of Financial Positionas at 31 December 2024.
8. A conclusion (not more than 600 words) to see whether you still want to do the business after careful consideration of the budget figures. Explanations are required to support your decision made.

Basic Assumptions:

1. You will start your business from scratch and your business will be located in Hong Kong.
2. Your company is selling TWOproducts ofANY KIND.
3. Yourcompany will buy goods on credit and will pay 30% in the month of purchase and 70% in the month following the purchase.
4. 60% of your sales will be cashsalesand 40% on credit. These credit sales are mainly provided for company customers who will settle their monthly bills in the first week of the following month.
5. Your business will have to pay 2 months' rent to the landlordas depositwhen signing the rental contract and the monthly rentwill be settledon the 1^st day of each month.

In compiling the above budgets, you have to:

1. Collect data about the selling price and cost of the products that you are going to sell;
2. Collect data about the different selling and administrative expenses necessary for your business;
3. Forecast the sales and purchasesfor the first year of your business;
4. Provide anyotherassumptions that you consider necessary.