In: Accounting
1.Select a business from the list below:
-Florist
-Baking and food supplier
-Grocery shop
-Bookshop
-Boutique
-Restaurant
-Electrical shop
-Computer shop
2. Elaborate the business profile in the introduction of the paper. It must includes: form of business, when it started, amount of capital, and any other related information.
3.Prepare a written report about the financial transactions of the firm for one month period
Your accounting cycle should include the following items, as appropriate:
-15 transactions (sales, purchases, other expenses, other revenues and capital) for the 1st month in the form of source documents. Be creative in creating the transactions.
-Record the transactions in the book of original entry and transfer the transactions to ledger.
-At the end of the period, make an assumption of the number of stocks left and prepare the trial balance, the statement of comprehensive income and the statement of financial position.
-Conclude your paper with explanation on financial position of the company and make recommendations (any 2 recommendations) on how to improve the situations.
JavaNet Internet Cafe
Start-up Summary
JavaNet's start-up costs will cover coffee making equipment, site
renovation and modification,
capital to cover losses in the first year, and the communications
equipment necessary to get its
customers online.
The communications equipment necessary to provide JavaNet's
customers with a high-speed
connection to the Internet and the services it has to offer make up
a large portion of the startup costs. These costs will include the
computer terminals and all costs associated with their setup. Costs
will also be designated for the purchase of two laser printers and
a scanner.
In addition, costs will be allocated for the purchase of coffee
making equipment. One espresso
machine, an automatic coffee grinder, and minor additional
equipment will be purchased from
Allann Brothers.
The site at 10th and Oak will require funds for renovation and
modification. A single estimated
figure will be allocated for this purpose. The
renovation/modification cost estimate will include
the costs associated with preparing the site for opening
business.
Start-up Expense Details:
• 11 computers = $22,000
• two printers = $1,000
• one scanner = $500
• software = $810
• one espresso machine = $10,700
• one automatic espresso grinder = $795
• other fixtures and remodeling:
o two coffee/food preparation counters = $1,000
o one information display counter = $1,000
o one drinking/eating counter = $500
o sixteen stools = $1,600
o six computer desks w/chairs = $2,400
o stationery goods = $500
o two telephones = $200
o decoration expense = $13,000
JavaNet Internet Cafe
Company Locations and Facilities
A site has been chosen at 10th and Oak in downtown Eugene. This
site was chosen for various
reasons, including:
• Proximity to the downtown business community.
• Proximity to trendy, upscale restaurants such as West
Brothers.
• Proximity to LTD's Eugene Station. Parking availability.
• Low cost rent - $.85 per square foot for 1700 square feet.
• High visibility.
All of these qualities are consistent with JavaNet's goal of
providing a central hub of
communication and socialization for the Eugene community.
Services
JavaNet will provide full access to email, WWW, FTP, Usenet and
other Internet applications
such as Telnet and Gopher. Printing, scanning, and introductory
courses to the Internet will also
be available to the customer. JavaNet will also provide customers
with a unique and innovative
environment for enjoying great coffee, specialty beverages, and
bakery items.
Competitive Comparison
JavaNet will be the first Internet cafe in Eugene. JavaNet will
differentiate itself from the
strictly-coffee cafes in Eugene by providing its customers with
Internet and computing services.
Service Description
JavaNet will provide its customers with full access to the Internet
and common computer
software and hardware. Some of the Internet and computing services
available to JavaNet
customers are listed below:
• Access to external POP3 email accounts.
• Customers can sign up for a JavaNet email account. This account
will be managed by
JavaNet servers and accessible from computer systems outside the
JavaNet network.
• FTP, Telnet, Gopher, and other popular Internet utilities will be
available.
• Access to Netscape or Internet Explorer browser.
• Access to laser and color printing.
• Access to popular software applications like Adobe PhotoShop and
Microsoft Word.
JavaNet will also provide its customers with access to introductory
Internet and email classes.
These classes will be held in the afternoon and late in the
evening. By providing these classes,
JavaNet will build a client base familiar with its services. The
computers, Internet access, and
classes wouldn't mean half as much if taken out of the environment
JavaNet will provide. Good
coffee, specialty drinks, bakery goods, and a comfortable
environment will provide JavaNet
customers with a home away from home. A place to enjoy the benefits
of computing in a
comfortable and well-kept environment.
JavaNet Internet Cafe
Financial Plan
The following sections lay out the details of our financial plan
for the next three years.
7.1 Start-up Funding
This business plan is prepared to obtain financing in the amount of
$24,000. The supplemental
financing is required to begin work on site preparation and
modifications, equipment purchases,
and to cover expenses in the first year of operations.
Additional financing has already been secured as follows:
1. $24,000 from the Oregon Economic Development Fund
2. $19,000 of personal savings from owner Cale Bruckner
3. $36,000 from three investors
4. and $9,290 in the form of short-term loans
Table: Start-up Funding
Start-up Funding
Start-up Expenses to Fund $62,290
Start-up Assets to Fund $26,000
Total Funding Required $88,290
Assets
Non-cash Assets from Start-up $2,000
Cash Requirements from Start-up $24,000
Additional Cash Raised $0
Cash Balance on Starting Date $24,000
Total Assets $26,000
Liabilities and Capital
Liabilities
Current Borrowing $9,290
Long-term Liabilities $24,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $33,290
Capital
Planned Investment
Cale Bruckner $19,000
Luke Walsh $12,000
Doug Wilson $12,000
John Underwood $12,000
Additional Investment Requirement $0
Total Planned Investment $55,000
Loss at Start-up (Start-up Expenses) ($62,290)
Total Capital ($7,290)
Total Capital and Liabilities $26,000
Total Funding $88,290
JavaNet Internet Cafe
Page 22
7.5 Projected Profit and Loss
Payroll Expense: The founder of JavaNet, Cale Bruckner, will
receive a salary of $24,000 in year
one, $26,400 in year two, and $29,040 in year three. JavaNet
intends to hire six part-time
employees by the end of year one at $5.75/hour and a full-time
technician at $10.00/hour.
Rent Expense: JavaNet is leasing a 1700 square foot facility at
$.85/sq. foot. The lease
agreement JavaNet signed specifies that we pay $2,000/month for a
total of 36 months. At the
end of the third year, the lease is open for negotiations and
JavaNet may or may not re-sign
the lease depending on the demands of the lessor.
Utilities Expense: As stated in the contract, the lessor is
responsible for the payment of utilities
including gas, garbage disposal, and real estate taxes. The only
utilities expense that JavaNet
must pay is the phone bill generated by fifteen phone lines;
thirteen will be dedicated to
modems and two for business purposes. The basic monthly service
charge for each line
provided by US West is $17.29. The 13 lines used to connect the
modems will make local calls
to the network provided by Bellevue resulting in a monthly charge
of $224.77. The two
additional lines used for business communication will cost
$34.58/month plus long distance
fees. JavaNet assumes that it will not make more than $40.00/month
in long distance calls.
Therefore, the total cost associated with the two business lines is
estimated at $74.58/month
and the total phone expense at $299.35/month. In addition, there
will be an additional utility
expense of $800 for estimated EWEB bills.
Marketing Expense: JavaNet will allocate $33,750 for promotional
expenses over the first year.
These dollars will be used for advertising in local newspapers in
order to build consumer
awareness. For additional information, please refer to section 5.0
of the business plan.
Insurance Expense: JavaNet has allocated $1,440 for insurance for
the first year. As revenue
increases in the second and third year of business, JavaNet intends
to invest more money for
additional insurance coverage.
Depreciation: In depreciating our capital equipment, JavaNet used
the Modified Accelerated
Cost Recovery Method. We depreciated our computers over a five-year
time period and our
fixtures over seven years.
Taxes: JavaNet is an LLC and, as an entity, it is not taxed.
However, there is a 15% payroll
burden.
Detailed Profit and Loss data is presented in the table
below.
JavaNet Internet Cafe
Page 24
Table: Profit and Loss
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $248,868 $303,544 $313,610
Direct Cost of Sales $62,217 $75,886 $78,403
Other Costs of Sales $0 $0 $0
Total Cost of Sales $62,217 $75,886 $78,403
Gross Margin $186,651 $227,658 $235,208
Gross Margin % 75.00% 75.00% 75.00%
Expenses
Payroll $93,291 $121,824 $129,254
Marketing/Promotion $33,750 $40,000 $43,000
Depreciation $0 $0 $0
Rent $24,000 $24,000 $24,000
Utilities $9,120 $9,120 $9,120
Insurance $6,000 $6,000 $6,000
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $166,161 $200,944 $211,374
Profit Before Interest and Taxes $20,490 $26,714 $23,834
EBITDA $20,490 $26,714 $23,834
Interest Expense $2,325 $1,470 $1,100
Taxes Incurred $5,450 $7,573 $6,820
Net Profit $12,716 $17,671 $15,913
Net Profit/Sales 5.11% 5.82% 5.07%
JavaNet Internet Cafe
Page 27
7.7 Projected Balance Sheet
Our projected balance sheet is presented in the table below.
Table: Balance Sheet
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $28,817 $43,327 $55,625
Inventory $6,980 $7,713 $6,750
Other Current Assets $0 $0 $0
Total Current Assets $35,797 $51,040 $62,375
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $35,797 $51,040 $62,375
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $13,972 $13,544 $13,765
Current Borrowing $2,000 $5,000 $5,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $15,972 $18,544 $18,765
Long-term Liabilities $14,400 $9,400 $4,600
Total Liabilities $30,372 $27,944 $23,365
Paid-in Capital $55,000 $55,000 $55,000
Retained Earnings ($62,290) ($49,574) ($31,904)
Earnings $12,716 $17,671 $15,913
Total Capital $5,426 $23,096 $39,010
Total Liabilities and Capital $35,797 $51,040 $62,375
Net Worth $5,426 $23,096 $39,010.