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Based on the provided incomplete and repetitive data, the core assignment involves selecting a business, creating a business report with company details including the owner, type of business, logo, investment, services, pricing, location, advertising strategy, employee salaries, and asset financing. Subsequently, you need to record the transactions for three months (January, February, March), and then prepare the relevant accounting documents such as journal entries, ledgers, trial balance, adjusting entries, financial statements (income statement, balance sheet, statement of retained earnings), closing entries, and post-closing trial balance in Excel.
Paper For Above instruction
Starting a new airline business, "Flight World," necessitates comprehensive planning and detailed financial recording. This paper articulates the foundational steps for establishing the business, outlines initially intended transactions over three months, and demonstrates how these are reflected in the financial statements prepared through the accounting cycle.
Introduction of Flight World
Flight World is a small airline operating in Saudi Arabia, providing scheduled flights among Jeddah, Dammam, and Riyadh. This company is founded by five shareholders: Hala Albakri, Renad Alghamdi, Sarah Alrefaei, Khadeejha Bakhashwain, and Thikra Alhazmi. The company operates with two aircrafts, emphasizing personalized passenger service, and aims to establish a competitive niche by offering flexible pricing and strategic routing. The business investment totals $15 million, with funding sourced from shareholders and a bank loan.
Logo Creation and Significance
The flight company’s logo integrates the brand name "Flight World" written in English and Arabic. It features a stylized small world map accompanied by half wings, symbolizing global connectivity and flight. This design emphasizes the company's mission to serve as a bridge connecting diverse destinations, making travel accessible like wings opening for flight.
Shareholders’ Investment Contribution
| Shareholder | Investment Amount (USD) |
|---------------|------------------------|
| Hala Albakri | 3,000,000 |
| Renad Alghamdi | 3,000,000 |
| Sarah Alrefaei | 2,000,000 |
| Khadeejha Bakhashwain | 2,500,000 |
| Thikra Alhazmi | 2,500,000 |
| Bank Albilad Investment (Shares) | 2,000,000 |
| Total | 15,000,000 |
Service Offerings and Pricing
| Service Route | Price (USD) |
|----------------|-----------|
| Dammam to Riyadh | 70 |
| Riyadh to Dammam | 60 |
| Jeddah to Riyadh | 70 |
| Riyadh to Jeddah | 70 |
| Class Pricing | |
| Economy | 70 |
| Premium Economy | 78 |
| Business | 80 |
| First | 95 |
Location and Facility Costs
The company’s main hub will be situated in Jeddah, selected due to high demand. The property will be a privately owned building costing $4 million, eliminating rent expenses and facilitating direct management control.
Advertising Strategies and Budget
Advertising will be pivotal in establishing Flight World’s market presence. Budget allocations include:
- TV commercials featuring influencers such as Sarah Dundarawy: $60,000/year
- Social media advertising: $50,000/year
- Street banners and digital screens: $20,000/year
Total annual advertising expenditure: $130,000.
Employee Salaries and Management
The workforce will include the following monthly salaries:
- 2 Pilots: $30,000 each
- 2 Managers: $20,000 each
- 2 Receptionists: $10,000 each
- 3 Check-in staff: $10,000 each
- 7 Cleaners: $8,000 each
- 7 Porters: $8,000 each
- 8 Security Guards: $8,000 each
Total monthly payroll: $326,000.
Asset Financing and Business Capital
Assets include two aircrafts financed through a 5-year loan at 3% interest, paid in five installments, and property owned outright. The aircraft are valued at $101 million each, while other assets like furniture, computers, and supplies are owned outright or financed with minimal interest. The company seeks an $80 million bank loan at 7% interest over five years for operational funding.
Dividends
Per shareholder agreements, dividends are to be distributed quarterly, with each shareholder receiving a fixed cash dividend amounting to a modest sum, not specified in percentage terms, to ensure reinvestment in growth during the initial year.
Transaction Recording for Three Months
Throughout January, February, and March, at least ten transactions will be recorded monthly, including share issuance, asset purchases, loan agreements, employee hiring, advertising expenses, service revenue, and operational expenditures. These transactions exemplify the flow of business activities and are crucial for accurate accounting records.
Accounting Cycle Implementation
From the recorded transactions, journal entries are prepared. These entries are posted into ledgers, culminating in the creation of a trial balance at March’s end. Adjusting entries such as accrued expenses or revenue deferrals are then recorded, followed by the worksheet completion, ultimately leading to the preparation of financial statements: income statement, balance sheet, and statement of retained earnings. The cycle concludes with closing entries and a post-closing trial balance, reflecting the company’s financial position accurately.
This comprehensive process provides insights into financial management, illustrating revenues, expenses, assets, liabilities, and equity. It exemplifies best practices in accounting, ensuring transparency, accuracy, and compliance with accounting standards.
References
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