Question
Scenario: After a few weeks of studying the role of accounting information in a business, you convince yourself that it is now the time to
Scenario: After a few weeks of studying the role of accounting information in a business, you convince yourself that it is now the time to start on embarking a new small business. For this task, it is recommended to choose to start a simple trading or service business with a single product cost such as the Campus Fruit Juice Truck or other small businesses such as a coffee, doughnut or hot dog stand, soccer ball shop or a headphones shop, car wash, music studio/tuition, mini-golf hire, among others. Your assignment: to prepare business plan and the first quarter Cash Budget for this business, create transactions and prepare a column worksheet for each month for the first 2 months of the business operation, and develop financial statements and finally analysing your business liquidity and profitability. The following are the detailed requirements. 1. The Business Plan (15%) and Cash Budget (15%) Prepare your business plan report as outlined in this instruction - see details in the Business Plan section. Based on the Business Plan, develop a cash budget (see note # 4) for the first quarter of your operation. You will base your cash budget on your business plan, incorporating the financial plan that you have outlined in your Business Plan. 2. Create hypothetical sets of transactions for the first two months of your business operation (10 - 15 transactions (including adjustments) each month). Preparing column worksheet (for recording your transactions as per Ch 4) for the end of each month. (20%) 3. Preparing classified Income Statement (Statement of Profit or Loss) for each month and a Balance Sheet (Statement of Financial Position) at the end of each month. (15%) 4. After two months of operations, you want to know your business viability. Use your financial statements at the end of the second month to: a. Calculate your liquidity, profitability, operating capability, and financial flexibility ratios your type of business. (15%). b. Perform a horizontal analysis on both the income statement and balance sheet, place this in a table as an appendix to your report (using Excel is recommended). Based on your horizontal analysis, select one account from the income statement and one from the balance sheet that is of interest to you (e.g. it has increased or fallen sharply compared to previous years). Explain
why you have selected these accounts and discuss why they are significant (e.g. what may have caused them to increase or decrease compared to previous years) (approx. 100- 200 words) (10%) 5. Prepare a paragraph summary of your business viability - liquidity, profitability, operating capability, and financial flexibility, express your opinion/outlook/expectation about the business (200-300 words). (10%)
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