Commercial Poultry Keeping - Research Paper Example

? Commercial Poultry Keeping Insert Introduction Due to the global increase in population that has resulted in a subsequent increasein food demand, birds have proved to be the most readily available source of protein since almost 90% of all households in Africa keep at least a particular type of bird. It is also preferred to other protein sources since it provides white meat, which is less in cholesterol. Birds are the most popular stock kept in the world approximately 15.9 billion by 2009 since it is kept by most people in the household e.g. women, children, old men. In Kenya, they are around 30million where 25million are indigenous and 5million are exotic, in which 3.5million are layers and 1.5million are broilers. This therefore creates a gap of deficiency in poultry meat and eggs which to entrepreneurs, is a big opportunity gap to be filled up by meeting the the customers’ or market demand to provide these products in required quantity. Having carried out a thorough research about this opportunity after a long period of time and studied the trends in the market supply and demand for poultry products, I found it profitable to start up a commercial poultry farm situated in the capital city of Kenya, Nairobi. The company, ‘’KUKU COMPANY LIMITED’’ was started to keep broilers to provide the city’s population with sufficient and healthy value added poultry meat sold in a very health friendly, modern and classic butcheries. Company Location The company's production unit is located in the Kibera slums, Nairobi, the capital city of Kenya. Kenya is one of the countries forming the East African Community neighboring Tanzania, Uganda, Rwanda, Burundi, Sudan and Somalia. The dense population of this city provides a large customer base for the company products and therefore, a ready market for the same. The city is occupied by all different kinds of dwellers cutting across all social classes who largely consume poultry meat very often. The company has set out several selling outlet shops across the city in most of the busiest business centers to easily reach its customers. These shops also act as the distribution points for the the retailers across the city. Staffing Plan The company has been under the management of the founders who double as the owners as well as the managers. The company established a competitive edge through the expertise of its founders where James brought with him the existing relationship with the best suppliers of chicks and feeds in the city, Jacob brought with him his Agricultural knowledge of poultry production, Abel, an IT expert and a market strategist added his management information knowledge as well as knowledge about the market forecasting and capturing to beat other market commpeetiitoors coupled with my good understanding of food service management, sales record in business to business sales, and financial acumen, well have an edge over the town's other butcher shops and grocery stores within our niche market. We also have two laborers who help us with small manual duties as they come by in the production unit. In addition, we have a salesperson and a cashier at each of our five sales outlets across the city. Form and Benefits of the business This business is partnering based among James, Jacob, Abel and I who have been friends since childhood and decided to come together as entrepreneurs and help in solving food supply shortages to this Kenya. The benefits of this form of business are that it is very instrumental when raising capital, providing labor and in management from the same owner have acted has the managers since it was begun. A Chart of accounts Asset Accounts No Account title To increase Description/explanation of the account 101 Cash Debit The account balance as shown in the company records from customers but not yet deposited 102 Jim Hotels (accounts receivables) Debit Amounts owed to the company for products sold but not yet paid for 104 Feeds (supplies) Debit Cost of supplies that have not yet been used. 105 Land Debit Cost quire and prepare land for use by the company. 106 Buildings Debit Cost to purchase or construct buildings for use by the company. 107 Depreciation on buildings Credit The depreciation expense since the acquiring of the building 108 Equipment Debit Cost used to acquire and prepare the equipment for use by the company 109 Depreciation on equipment Credit The depreciation expense since the acquiring of the equipment Liability accounts No Account title To increase Description/Explanation of account 201 Bank loan Credit Part of the loan taken from the bank and has not been settled 202 Kenchick Suppliers (accounts payables) Credit Amount owed to suppliers who provided goods and services to the company but did not require immediate payment in cash 203 Wages Credit Amount owed to employees for hours worked but not yet paid 204 Interest Credit The amount owed to the principle borrowed from the bank Owners’ Equity Account No Account Title To increase Description/Explanation 205 Capital Credit The amount that the joint owners contributed to the business 206 Drawings Debit An amount that was withdrawn by the owners for personal use Since this is a public business, it will be required to use the Generally Accepted Accounting Principles to maintain consistency in the financial statements and to avoid the statements being wary. However, since this is not an international business, there will be no need do to use the International Financial Reporting Standards since the IFRS is a global language for business affairs that enable company accounts to be comparable and and understandable across the international boundaries. The convergence of IFRS/GAAP (Bruce, 2011)impact businesses in a way that the accounting systeboard, henceniform across the board hence making it easy to compare, understand, reliable and relevant as per the internal or external users. To take up the IFRS, certain changes will be incorporated such as; there must be a statement of financial position of the company, a statement of comprehensive income which includes separate statements including an income statement and separately a statement of comprehensive income, which reconciles Profit or Loss on the income statement to total comprehensive income, the statements that show changes in Equity, statements of cash flow and notes that include a summary of the significant policies of accounting (Tiffin, 2010). Pro Forma Balance Sheet Kuku Company Ltd (All Numbers In $000) For 2013 To 2016 ASSETS 2013 2014 2015 Current Assets Cash Net accounts recievables Inventory Temporary investmmennt Prepaid expense 65 660 440 50 20 70 750 500 70 20 75 800 550 90 20 Total Current Asset 1235 1410 1535 Fixed Assets Long term investment Land Building Equipment Net furniture and fixtures 50 300 900 600 75 55 300 955 640 80 65 345 960 655 95 Total Fixed Assets 1925 2030 2120 Total Asset 3160 3440 3655 LIABILITIES Current Liabilities Accounts payable Short-term notes Accruals and other payables 350 25 20 352 25 20 355 27 22 Total current liabilities 395 397 404 Long-term liabilities 900 955 990 Total long-term liabilities 1245 1443 1591 SHAREHOLDERS’ EQUITY Capital stock Retained earnings 540 980 560 1040 580 1080 Total shareholders’ equity 1520 1600 1660 Total shareholders and equity 3160 3440 3655 Pro Forma Income Statement Kuku Company Ltd For 2013 To 2015 (All Numbers In $000) Revenue Gross sales Less sales returns Net sales 2013 1000 200 800 2014 1250 240 1010 2015 1440 280 1160 Cost of sales Total Inventory Plus meat processed Total meat available for sale Less ending inventory Total cost of meat sold 300 140 440 340 100 340 160 500 380 120 380 170 550 400 150 Gross profit (loss) 700 890 1010 Operating expenses Salaries and wages Commissions Advertising Depreciation Administrative Other 40 12 8 7 15 5 42 13 9 10 17 6 45 25 11 12 20 8 Total operating expense 87 97 131 Net income before tax 613 793 879 Tax on income (5%) 30.65 39.65 43.95 Net income after taxes 582.35 753.35 835.05 The assumptions made when making this pro forma income statement was that the business trend will continue and the business will continue expanding in the market attracting a larger market base. Internal Controls First, ensure that any business transaction is documented with immediate effect as this will do away with loop holes which might arise due to manipulation of the books of account later or the physical assets disappearing due to lack of proper immediate recording (Strathmore University, 2009). This should be accompanied by related duties being separated. Assigning specific responsibilities to specific employees is another way of ensuring that one is held accountable for any loss of assets from their area of duties. For instance, Kuku company has a sales person whose work is only to make sales to the customer and pass the goods on to the cashier who then bills the goods, takes the cash and issues receipt for the goods sold in cash. The sales person documents the number of sales made per day in quantity and equivalent price per kilogram and the cashier also records their sales per day in terms of quantity sold and amount received. These two records should tally by the end of the day. Therefore, to implement the control system of separation of duties, the company has assigned separate people to perform related tasks and the person in charge of the assets is not the same person who keeps their records. There may arise challenges like the different employees colluding to work together so that they appear separate yet stealing from the company. Such challenges will be solved by ensuring that there is frequent checks of the records by management and the employees rotated frequently to different work stations and not allowed to work with specific colleagues for a long time. Impacts of Regulatory Environment The Sarbanes-Oxley Act (SOX) of 2002 has a mandate that requires senior management to ensure accuracy of the financial statements as well as to make sure that management and auditors establish internal controls and reporting methods on the adequacy of such controls (Ministry of Finance China, 2010). It is expensive to establish and maintain the adequately required internal controls and hence this regulation will impact on the company negatively. However, according to the requirement of this regulation that enterprises carry out an internal control assessment and provide results thereon is followed to the latter by the Kuku company as we even engage in auditing issues and provide results thereon. This is similar to the PRC regulation which also require firms to conduct internal control assessment and provide results thereon. It is required that the largest US domestic firms comply with the SOX regulations first then followed by smaller ones and the foreign firms. Kuku being a foreign firm, will not be so much tight to the conformity to the regulation but to the extent that it will be able to adopt. References Bruce, M. (2011). Wiley Interpretation and Application of International Financial Reporting Standards. UK: E-book. Ministry of Finance China. (2010). China Boardroom Update. Journal on Internal Control Regulatory Developments , 1-2. Strathmore University. (2009). Financial Accounting I Study Pack. Nairobi: Strathmore University Press. Tiffin, R. (2010). The complete guide to International Financial Reporting Standards. UK: Thorogood Publishers. Read More