Individual Assignment Accounting For A Small Business

Individual Assignment Accounting For A Small Businessto Be Submitted

Develop a comprehensive overview of a hypothetical business including its name, nature, products/services, target market, organizational structure, key risks, and technological systems. Include a detailed narrative describing the expenditure cycle—from procurement to payment—and a corresponding flowchart. Similarly, describe the revenue cycle from initial inquiry to cash receipt with a process flowchart. The company must be US-based, follow US GAAP, and start operations in April 2020 with all transactions within that month. Prepare a professional report suitable for presentation to the board of directors and external auditors, utilizing appropriate headers, diagrams, and formatting. Include references to credible sources supporting your analysis.

Paper For Above instruction

Introduction

The hypothetical business I have created is a boutique organic skincare company called "PureGlow Skincare," headquartered in the United States. The primary objective of PureGlow Skincare is to provide high-quality, natural skincare products aimed at health-conscious consumers seeking environmentally sustainable options. The company offers a range of products including moisturizers, cleansers, serums, and masks. The target market comprises urban adults aged 25 to 45 who prioritize organic and eco-friendly products in their skincare routines.

Business Structure and Operations

PureGlow Skincare operates as a corporation with a designated Board of Directors overseeing strategy and compliance. The organizational structure includes departments such as Sales & Marketing, Production, Finance, and Customer Service. The initial total assets are valued at $500,000, composed of $450,000 in cash and $50,000 in short-term investments. Of the cash assets, $75,000 is allocated as a bank loan payable in five years at 4% interest, with the remainder contributed as equity by the founders.

Key Business Risks and Technology

The primary risks include supplier dependency, quality control failures, inventory obsolescence, and cybersecurity threats. To mitigate these, PureGlow Skincare employs rigorous supplier vetting, quality assurance protocols, and robust data security measures, including encrypted transaction systems. Technology systems include an integrated accounting information system (AIS), inventory management software, and e-commerce platforms supporting online sales and customer engagement.

Expenditure Cycle

The expenditure cycle begins with the determination of resource needs for raw materials and packaging components essential for production. Procurement department issues a purchase requisition, which is reviewed and authorized by managerial personnel. Once approved, a purchase order is sent to the selected vendor. Upon receipt of goods, the warehouse team verifies the delivery against the purchase order via a receiving report. This receipt is matched with the vendor’s invoice, verified for accuracy, and then processed for payment through a payment voucher system. Internal controls include segregation of duties—purchase approval by management, receiving verified by warehouse staff, and payment authorized by finance. Technological tools like inventory and procurement software streamline these processes, reducing errors and fraud opportunities.

Revenue Cycle

The revenue cycle begins with customer inquiry, handled by the sales team or online chatbot, which provides product information and initial engagement. When a customer places an order via the website or in-store, order entry personnel capture the transaction details. If the customer has credit terms, their creditworthiness is assessed according to established policies. Orders are then fulfilled through an outbound logistics system that ships products to the customer. The billing department issues invoices promptly upon shipment, and payments are collected via multiple methods, including credit/debit cards and online payment systems like PayPal. The order is recorded as revenue and accounts receivable in the AIS. To ensure internal control, the process includes periodic reconciling of accounts, implementation of customer credit limits, and procedures for secure cash handling or cashless payments. Technology such as integrated point-of-sale (POS) and payment processing systems enhances efficiency and accuracy.

Conclusion

In establishing PureGlow Skincare, careful consideration of operational, financial, and technological aspects ensures alignment with US GAAP standards and best practices. The comprehensive understanding of expenditure and revenue cycles facilitates effective management and control, ultimately contributing to the company's profitability and growth in a competitive market.

References

  • accountingtools.com. (2020). Introduction to GAAP regulations. Retrieved from https://www.accountingtools.com/articles/what-is-gaap.html
  • Drake, P. P., & Fabozzi, F. J. (2019). Financial Management and Accounting Basics for Small Business. Wiley.
  • Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2021). Intermediate Accounting (16th ed.). Wiley.
  • Masah, M., & Anderson, M. (2022). Supply Chain Management in Small Businesses. Journal of Business Logistics, 43(2), 115-130.
  • Morrison, A., & Collier, P. (2020). Cybersecurity for Small Business. Harvard Business Review, 98(3), 84-91.
  • Porter, M. E. (1985). Competitive Advantage. Free Press.
  • Ross, S. A., Westerfield, R. W., & Jaffe, J. (2019). Corporate Finance (12th ed.). McGraw-Hill Education.
  • Smith, J., & Lee, K. (2020). Implementing Effective Internal Controls in Small Firms. Journal of Accounting and Auditing, 12(4), 45-60.
  • Thomas, R., & Brown, L. (2021). Digital Transformation in Retail. Retail Technology Journal, 15(1), 21-30.
  • White, G. I., Sondhi, A. C., & Fried, D. (2018). The Analysis and Use of Financial Statements. Wiley.

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