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Memo - Case Study Example


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Case Analysis The different forms of business are sole proprietorship, Partnership, Corporation. In sole proprietorship business is owned by a single person. The benefits of sole proprietorship are that the owner is entitled to all the profits, he can make his own decisions and the financial information of his business can be kept a secret. The demerits are that the owner has to bear all the risk of the business and funding the business can be difficult. Partnership is a kind of business in which two or more people own and operate a business. The benefits of partnership are sharing of responsibility, greater financial resources, sharing of business risk. The potential demerits are personal conflicts, profit sharing and difficulty in shutdown. Corporation is a legal entity which is separate from its owners. The benefits are that corporations have to pay lower tax rates and have an indefinite period of existence. The demerits are that the company needs to reveal its annual reports and which may provide valuable information to its competitors, the value of the shares largely depend on the change in stock prices. For Nathan and Kenneth partnership will be the best form of business ownership, since both of them have worked in similar field of moving business, they have good deal of idea in this field and their work as a team shall be helpful in implementing their business idea. Nathan and Kenneth can install an ERP system for maintenance of their accounting information system. In the ERP software

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will make use of databases that will keep account of the transactions in the business (Hall 492). The lists of the accounts that will be required are as follows: Delivery Charges- The account type of delivery charges will be revenue account type. This will be the main source of revenue for the business. Vehicle Loans- The account type is long term liability. The company shall take loans for buying vehicles and equipments. Vehicles- The account type is fixed assets. The company needs to keep account of the vehicles i.e. the trucks because they are the primary assets of the company. Salaries- The account type is expenses. The company has to keep account of the salaries and payments to be made to its staff. Equipments- The account type is fixed assets. The company needs to keep account of the equipment for material handling and material delivery because they will be in constant use. Start up cost- This will be capital a/c. This is important because the company is set for the first time. Inventory- this is the current assets account. This is important because the company shall be requiring packing materials on a constant basis. Debtors- This is of asset account type. The client’s may not pay on the delivery date. The primary users for its financial statements will be the suppliers, creditors, customers and competitors. The suppliers make use of the financial statements to gauge its financial soundness; creditors use the financial reports to analyze the credit risk of the firm and the debt repayment capacity of the company. The competitors through the financial statements shall look for the strengths and weakness of the company and try to utilize then for their self improvement. The customers will look for facts such as how the company is funded and for how long it has been in the industry. All the suppliers, creditors, customers and competitors are external users of the financial statements. The major limitations that will be faced by the company


Memorandum Date: 4 February, 2013 To: From: Subject: Case Study Introduction This memo is solely prepared with the intension of providing a suitable business plan for Nathan and Kenneth that will help them in their venture of starting a moving business of their own…
Author : tonidietrich
Memo essay example
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