Student life does not generally afford a great deal of free time to pursue your
ID: 2646228 • Letter: S
Question
Student life does not generally afford a great deal of free time to pursue your personal interests; however, at one point, you may have considered turning a personal interest or hobby into an official enterprise. Today, you have finally decided to turn that hobby into a business but have realized that you need start-up capital from a lender or investor.
To obtain funding, you need to convince a lender / investor that your business is more than a hobby. You need to demonstrate that you have a firm grasp of your business, the accounting practices that impact your business, the controls needed to safeguard assets, and which accounting system will produce accurate and relevant financial information.
Write a six to eight (6-8) page business plan in which you:
Describe the type of business you have created including:
The product or service, and general staffing plan. Provide a rationale for your plan.
The form of your business and the benefits it offers your particular business,
A chart of accounts specific to your business, including a rationale as to the selection of each account. (Note: The chart of accounts is a blueprint of your business for the lender/investor. It should report the expected resources that you will consume in your business (assets), the sources of those resources (liabilities and equity), the sources of revenue, and expenditures that you expect to incur to earn those revenues. You may build a detailed chart that includes business units, divisions, product lines, etc.)
Based on the form of your business, analyze whether or not you will be required to use Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) accounting methods and how the IFRS / GAAP convergence will impact your business. Suggest how you will incorporate any changes into your books and records. (Note: You need to demonstrate to the lender/investor that you have recognized possible changes to GAAP that may impact the accounting and reporting of your accounting events.)
Prepare a pro forma balance sheet and income statement providing the assumptions made and support the valuations assigned.
Considering the value of assets (assigned per your balance sheet) used within your business, recommend two (2) specific internal controls that you will implement to protect your company’s assets and resources, justifying how each will provide assurances to management. (NOTE:
Explanation / Answer
I am planning to start a pre-school as my business venture. The logic or rationale behind this is that there is a dearth of good pre-schools in the colony in which i am planning to open it and all the students have to travel a distance for education.
Staffing requirement:
Assuming an initial intake of 80 students, the school will need 10 teachers (1:10 teacher to student ratio), 8 female attendents (to take the kids to toilet, feed their lunch etc.), 3 drivers, 2 sweepers and 1 security guard
Chart of accounts:
Assets:
3 school vans @5,000 each = 15,000
Computer and printer = 15,000
Land and building = 100,000
Water filter = 1,000
Toys and equpments: 5,000
Furniture = 4,000
Total assets = 140,000
Liabilities:
Equity infusion = 90,000
Loan from bank = 50,000
Total liabilities = 140,000
Revenue:
Annual fees per student = 6,000
Initial number of students = 80
Total fees = 6,000*80 = 480,000
Expenditure:
Salaries of teachers (10*1,500) = 15,000
Salaries of drivers (3*800) = 2,400
Salaries of attendents (8*800) = 6,400
salaries of sweepers (2*700) = 1,400
salary of security guard = 700
Depreciation = 14,000 (10% of total assets)
Painting of building and classrooms = 10,000