You Are An Entrepreneur! Student Life Does Not Generally Aff

You Are An Entrepreneur! Student life does not generally aff

You are an aspiring entrepreneur who has decided to turn a personal hobby into a formal business enterprise. To secure start-up funding from a lender or investor, you must develop a comprehensive business plan that convincingly demonstrates your understanding of your business, accounting practices, asset safeguards, and suitable accounting systems that will produce accurate and relevant financial information.

Your task is to prepare a six to eight (6-8) page business plan that covers several key components. First, describe the type of business you have created, including the product or service offered and your staffing plan, along with a rationale for these choices. Next, specify the legal form of your business and explain the benefits it provides in your context. You should also develop a chart of accounts tailored to your business, detailing the expected resources consumed (assets), sources of resources (liabilities and equity), revenue streams, and expenditures. Justify the selection of each account as it aligns with your business operations.

Following this, analyze whether your business is required to adhere to Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) and discuss how convergence between these standards might influence your accounting practices. Propose how you will incorporate any necessary compliance changes into your financial records.

Then, prepare a pro forma balance sheet and income statement, clearly stating the assumptions and justifying the valuations used. This demonstrates your financial projections and understanding of your business's fiscal status.

Considering your assets, recommend two specific internal controls to safeguard your resources. Justify how these controls will offer management assurance regarding asset protection and data security.

Describe how you will implement each internal control within your business environment, addressing potential challenges or resistance and strategies to overcome them.

Lastly, evaluate the regulatory environment's impact on your business, particularly regarding the Sarbanes-Oxley Act and other pertinent regulations. Explain how you plan to ensure compliance and discuss the influence these regulations may have on your decision-making processes.

The complete business plan should draw upon at least four credible academic sources, excluding Wikipedia and non-scholarly internet resources. All citations and references must adhere to APA or your institution's formatting standards. Remember to include a cover page with the assignment's title, your name, your professor’s name, the course title, and the submission date. The cover page and references do not count toward the 6-8 page length.

Paper For Above instruction

Starting a business based on a personal hobby requires meticulous planning, especially when seeking funding from investors or lenders. This paper delineates a comprehensive business plan for such an enterprise, emphasizing crucial accounting practices, controls, regulatory compliance, and financial projections.

Business Description and Rationale

The proposed business involves a specialty craft shop focused on handcrafted jewelry. The core product line includes necklaces, bracelets, and earrings made from ethically sourced materials. The staffing plan comprises the owner, one part-time sales associate, and an outsourced accounting professional. This staffing configuration balances operational needs with budget constraints, ensuring quality customer service and accurate financial management. The product selection caters to a niche market valuing sustainability and artisan craftsmanship, which supports a premium pricing strategy and brand loyalty.

Legal Form and Benefits

The business will operate as a Limited Liability Company (LLC). An LLC provides flexibility in management and pass-through taxation, which benefits small business operations by avoiding double taxation. It also offers liability protection, safeguarding personal assets against business liabilities, crucial for a start-up handling raw materials and customer transactions.

Chart of Accounts

The chart of accounts is tailored to reflect the specific resource consumption, sources of funding, and revenue streams. Asset accounts include Cash, Accounts Receivable, Inventory (raw materials and finished goods), Prepaid Expenses, and Equipment. Liability accounts encompass Accounts Payable, Loans Payable, and Other Payables. Equity accounts feature Owner’s Capital and Retained Earnings. Revenue is categorized under Product Sales, while expenditures include Cost of Goods Sold, Marketing Expenses, Payroll, Rent, and Utilities. The rationale for each account aligns with capturing detailed financial data to support effective decision-making and reporting.

GAAP and IFRS Considerations

As a small business operating in the United States, adherence to GAAP is mandatory, although IFRS principles influence international aspects or potential future expansion. The convergence of GAAP and IFRS aims to harmonize accounting standards, impacting revenue recognition, lease accounting, and asset valuation. To incorporate these changes, the business will adopt flexible accounting software capable of handling both standards and update policies as standards evolve.

Financial Projections

The pro forma balance sheet and income statement are constructed based on projected sales, expenses, and asset valuations. Assumptions include projected monthly sales increases as brand awareness grows, a gross profit margin of 60%, and operating expenses structured around market averages for retail craft businesses. The balance sheet estimates assets based on initial investments and depreciation schedules, while liabilities reflect startup loans. These projections demonstrate the enterprise’s financial viability and readiness to attract investment.

Internal Controls for Asset Protection

To protect assets, the business will implement segregation of duties, ensuring that no single employee has control over all aspects of financial transactions. Additionally, regular inventory audits will detect discrepancies early, preventing theft or loss. These controls bolster confidence that assets are safeguarded and accurate financial reporting is maintained.

Implementation of Internal Controls

Implementing segregation of duties involves assigning specific roles—such as transaction recording, approval, and reconciliation—to different staff members. Training and clear policies will address potential resistance from employees accustomed to less oversight. Inventory audits will be scheduled monthly, with external auditors periodically verifying stock to prevent internal collusion. Overcoming resistance involves transparent communication about the importance of controls and aligning incentives with compliance goals.

Regulatory Environment and Compliance

The Sarbanes-Oxley Act mainly targets publicly traded companies, but its principles—such as internal control requirements—are relevant to small businesses in establishing strong financial governance. The business will adopt internal control frameworks aligned with Sarbanes-Oxley standards by documenting procedures and conducting regular audits. Compliance enhances credibility and reduces legal risks, ultimately impacting strategic decisions and operational policies.

Conclusion

Developing a comprehensive business plan as outlined not only positions the start-up as a credible and viable enterprise but also ensures compliance with relevant accounting standards and regulations. Proper internal controls, financial projections, and regulatory adherence collectively support the goal of securing funding and fostering sustainable growth.

References

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• International Accounting Standards Board (IASB). (2020). IFRS Standards. Retrieved from https://www.ifrs.org
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