MAA103 Study Guide - International Accounting Standards Board, Cash Flow Statement, Financial Statement

77 views22 pages

aquamarinescorpion389

30 Jul 2015

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Business an enterprise that provides products or services desired by customers. Private enterprise - refers to an economic system in which individuals, rather than government, own and operate businesses e. g. services, merchandising and manufacturing businesses. Different forms of business/ownership structures: sole proprietorship/sole trader a business owned by one person who is the sole investor of capital into the business. Joint ownership all assets are jointly owned by partners: company/corporation is a separate legal entity that is independent of its owners and is run by a board of directors. Guarantee if company is liquated, they must provide shareholders with compensation. Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. Provides vital information about a business to internal users. Internal users include employees, departmental supervisors, divisional/regiaonal mangers, top management. Management accountant provides information to business allowing them to plan, operate and evaluate.

Related Questions

Entrepreneurship

1. Discuss what steps Craig took to develop and grow his business. (7 marks)

2. Illustrate the role Craig played in contributing towards the economy (8 marks)

clearrisk | craig rowe

Business is risky, but that is Craig Roweâs business - risk management to be precise. Craig,

the President of ClearRisk Inc., becomes animated and energized as he explains his line of

work. âRisk,â he says, âis not negative. It is when there is opportunity for a downside or an

upside.â Risk management is about formalizing the decision making process. People are

constantly assessing risks, whether it is instinctively in crossing the street or deliberately in

weighing the pros and cons of buying a car. âBusiness people,â he says, âengage in the same

process whether in deciding where to build a head office or whether to buy another company.â

the entrepreneur

Craig spent almost 20 years in the insurance industry, where he started right out of high

school. Over the years, he attained various insurance designations and completed many

business courses and ample on-the-job training. Craig is naturally entrepreneurial and also

operated his own consulting company and became involved in several insurance industry

associations. This allowed him to develop a large network of connections.

Craig found himself thinking and talking more and more about risk management. He realized

that if businesses did some basic things to manage risk they would save money. In 2001 he

wrote a book on the topic and later adapted the ideas in to a workshop which he presented

throughout Canada and the United States. Insurance industry professionals and other business

people noticed Craig and saw the logic in his message. Soon he was being invited to speak to

various associations and was asked to assist in writing material on risk management. When

dealing with clients of his consulting business, he noticed the same set of steps and questions

could be applied to different realities in different types of companies. He was sure that there

was something that could be packaged and sold to assist these companies.

He went in search of risk management software. He found some, but none applicable to small

and mid-sized companies and organizations. So he decided to build it. He teamed with David

dâEntremont who had the background provide technical expertise. Together they founded

ClearRisk. They developed a business plan which became their roadmap, even though it was

constantly being adapted to take into account new realities, circumstances and goals. Craig estimates they are on version 30 by now!

Craig decided to leave his job and pursue ClearRisk full-time. It was not an easy decision to

make as Craig had a young family at the time. He had to engage in his own risk management

process and weigh his options. He had almost 20 years of solid insurance industry experience.

He had an extensive network of contacts. He had entrepreneurial experience through his

consulting business. He knew the market. He knew what his customers needed and he knew

that he could develop a product to meet that need. He found a solid business partner to

complement his skills. So the timing was right and after 10 years of thinking, dreaming and

percolating ideas, Craig made the leap in 2006.

Craig says that the biggest challenge facing ClearRisk and any business, whether it is in

starting, sustaining or growing the business, is cash. ClearRisk needed capital to develop its

product. For any business to have credibility with lenders and investors, that initial money has

to come from the business owner. Craig and David secured an operating line of credit from the

bank based on personal guarantees.

Step 2 was to seek more financing to start implementing the business. Craig says that it is

important to look for money before you need it because you are building relationships and

confidence and convincing people that you are creditworthy. A business plan is a necessity but

âeveryone invests in people.â This applies to accessing financing from Business Development

Bank of Canada (BDC), Atlantic Canada Opportunities Agency (ACOA), or any government

organization, as well as private lenders and investors. It is necessary to raise private money to

leverage government money.

Another important factor in developing ClearRisk was being accepted by Memorial Universityâs

Genesis Centre, a facility which provides business and technical support to new and emerging

technology businesses. This added to their credibility and attracted the attention of angel

investors. Angel investors are business people with financial resources available to invest in

new promising businesses.

Technological businesses are expensive to grow and ClearRiskâs growth has been made

possible by private investors and organizations such as Growth Works (a venture capital

company). Ownership of the company is now shared with these investors and ClearRisk is a

corporation with multiple shareholders. One of the tradeoffs in taking money from investors is

that ownership becomes shared. Craig says, âYou can have a big piece of something small or

a small piece of something big.â He chose the latter.

Craigâs idea has grown immensely. He keeps the numbers to himself, but says sales have

grown exponentially. His primary market is North America and the ClearRisk software has been

launched in French and Spanish. Customers do not pay an upfront fee; instead, they pay an

annual fee for the software and support. ClearRisk is constantly improving its products. The

team is always enhancing features and improving functionality. Currently, they offer three

programs to consumers: ClearRiskâ¢ Manager, which enables an organization to build and

implement a risk management plan; ClearRiskâ¢ Tracker, which facilitates tracking insurance

claims; and ClearRiskâ¢ Trainer, an online instructional program which increases awareness of

risk and its management. The latter two products are offered in partnership with other

organizations.

ClearRiskâs web-based business is global; however, Craig is cautious about expanding beyond

North America. The insurance industries in the USA and Canada are relatively interconnected

and homogeneous. It would be very difficult to provide support to countries with different

regulations and different languages. ClearRisk offers a web-based software service so they

use web-based marketing, rarely using traditional media. They access all forms of social media

such as Facebook, Twitter, MySpace, and blogs and find the approach cost effective and high

impact. Social media facilitates the use of in-bound marketing.

In addition to web-based marketing, ClearRisk is now getting calls from referrals. Clients are

spreading the word to other businesses seeking a similar product. The demand for ClearRiskâs

product is expanding but Craig resists growing the team too quickly. Craig prefers a small team

and likes the dynamics of small groups. However, more sales people are needed and they will co-op

and computer science students to his company. He likes to hire young people. It is

rewarding to see them take shape and become leaders.

Craig speaks favorably about starting a new business in Newfoundland and Labrador. He

says that the provincial climate is positive. In addition to the practical and financial support

available, the provincial government has done a lot to assist business in recent years, including

reducing taxes and red tape and increasing funding.

When Craig reflects on the path his career has taken, he gives special acknowledgement to

Paul Johnson of Johnson Insurance as a business icon and an inspiration. Mr. Johnson

inherited his fatherâs small insurance office and built it into an innovative, billion-dollar

Company. Not only was Mr. Johnson a great businessman, he was a community-minded

Philanthropist. This is evident today throughout the capital city in the parks, trail ways, and the

Johnson Geo on Signal Hill. Mr. Johnson has influenced Craigâs professional and

Community life. In addition to Craigâs entrepreneurial success he is firmly rooted in his

Community; he currently serves as Chair of the YM/YWCA.

Craig has advice for young people who dream of starting their own businesses. He says to be

Informed, to go in with open eyes and to seek honest opinions from knowledgeable people. He

advises that an entrepreneur should realize that âthe odds are against you, but you need the

tenacity and perseverance to stick with it. It is important to understand your industry, to

understand the need for your product or service and ultimately to understand the risks before

you make the leap.â In business, managing risk is everyoneâs business!

1. Discuss what steps Craig took to develop and grow his business.

2. Illustrate the role Craig played in contributing towards the economy

browntoad1

small business management class:

Please answer the three question from the article below:

Q1)In setting up an accounting system, which one of theaccounting functions is best illustrated in the article? Explainhow you know. ?

Q2)Which one of the five common financial statements is bestillustrated in the article? Provide facts to support youranswer?

Q3)Which one of the uses of financial accounting is bestillustrated in the article? Explain how you know. ?

The article:

HUGH MCHUGH, owner of Overhill Flowers Inc. in the Philadelphianeighborhood of Overbrook, made a declaration a few years ago. "Nomore house accounts," he told his staff.

These accounts offering credit were a business staple for theflorist for years, covering about 85% of his business. Hospitals,corporations and other customers would order flowers, and he'd billthem at the end of the month, dutifully printing out statements,mailing them, processing the checks. Sixty days would often elapsebetween the time flowers were delivered and when the bill was paid.Customers often paid late, and about 2% didn't pay at all. "That'sa significant blow to a small business with profit margins of 12%,"he says.

Now, if anyone asks to open a house account, he requests acredit- card number, so he can collect immediately; for thosealready with house accounts, he got their approval to switch themto credit-card accounts. The simple change has not only ensuredthat he'll be paid, but it also has smoothed out the bumps of cashflow, as well, so that now in January, he isn't nervous aboutmaking payroll while he awaits payment for holiday bouquets.

Collecting debts efficiently, Mr. McHugh realized, is one of thebest ways for small businesses to manage the ebb and flow of cashand hang on to precious capital. It's not unusual for businesses toborrow, often at high interest rates, or sell chunks of equity thatthey'd rather keep, because they've managed collections poorly. Butmost entrepreneurs would rather focus on their product, theirservice, their marketing, their lease, their health insurance --anything -- before dealing with the gritty work of collections.

"One thing business owners always tell me is that they neverthought about this when they started their own business," saysMichelle Dunn, who owned her own collections agency, M.A.D.Collections, for years, and has written several books on thetopic.

The time for an entrepreneur to think about collecting fromcustomers is when he or she is writing the business plan, says Ms.Dunn of Plymouth, N.H. She advises businesses to establish a"credit policy" mandating that before they hand over a product to acustomer who says "bill me," they will run a credit check on thebuyer. She also advises small businesses to join Equifax or someother credit bureau to be able to pull credit reports for anyoneapplying for credit, and also to report late payers.

Small start-ups, she says, are often so happy to have customersthat they are slow to take action for nonpayment. That's a mistake,she says. It's best to promptly make a phone call, and follow upwith a letter, so the nonpayer understands that it's a seriousmatter. Any payment at all on the account -- even $5 -- isworthwhile, she says, because it establishes a legal recordacknowledging the debt. "Once you get any kind of payment towardtheir balance, they have to pay the rest if you wind up in court,"she says.

Her years spent tracking debtors have honed unusual instincts.She has found, for instance, that when she would call a young manabout a debt and a woman answered the phone, she'd ask for thecreditor by just his first name. "So many times it would be themother of the guy," Ms. Dunn says, "and just think it was a girlcalling. I'd say, 'Do you have his work number or his cell number?'and she'd give it to me," she says.

She also advises anyone who deals with college kids to not giveup on the slow payers. "It's not pay, not pay for years," she says."Then they are about to get married and need a loan. Suddenly,they'll pay to clear the debt." It also helps to remind nonpayersthat the unpaid debt shows up on their credit report, making itdifficult for them to obtain additional credit.

Entrepreneurs who take a laissez-faire attitude on collectionstend to have sad tales to share -- particularly solo operators,such as consultants. David Leopold of Cincinnati puts networkstogether for small business, making money by brokering thoserelationships. When a client was late paying him, he was stuck andstill had to pay his own vendors. "I had to borrow money at a veryhigh interest rate," he says. "That hurt." Another time he took aclient to court for nonpayment of $1,500, but because the clientwas "a friend," he had no written contract. The judge threw out hiscase. "To a small-business proprietor, that check is our paycheck,"he says.

Even with a contract, collections can require great stamina. Aclient owed Julie Phillippi, a Cincinnati marketing consultant,more than $3,000 for months. She could have turned it over to acollections agency or written it off, but the principle mattered toher. "I did good work for him," she says.

After months, she took her contract to small-claims court, andfollowing many delays, won a judgment against him. He ignored it.She put a lien on his house. She tried to garnish his wages. Shefinally took a step called a "personal body attachment," in which acouple of bailiffs were going to arrest him for contempt of court.At that point he paid, in cash. One bright spot amid the six monthsof aggravation: The lawyer representing her adversary was soimpressed by her resolve that he hired her for a marketingproject.

The nasty episode made her review how she handles collections.Now she invoices twice a month, rather than once. "It's a pain, butI get money in the door more often," she says. And she has begun totack on a 10% interest payment for bills more than 30 days late,which she highlights with a marker. That has speeded up payment,too.

Big corporate customers are a different sort of challenge, saysBrenda Cusick, a founder of ClickWare Inc., a Moorpark, Calif.,database company. She makes it a point to become chummy with theaccounts-payable clerks who work for her big clients, calling tocheck on an invoice, but always chatting about the clerk's childrenor recent vacation -- details that she meticulously tracks in herown database. Those relationships tend to speed an invoice througha big corporation's otherwise slow bureaucracy, and have helpedClickWare and its sister company grow to about $3 million inrevenue without outside investors, she says, even as the foundershave poured money into developing new software products.

Her rapport with the accounts clerks came in quite handyrecently. Ms. Cusick got word from a very big corporate client thatit was undergoing a financial audit. The auditor concluded that thebig corporation was indeed paying Ms. Cusick promptly -- but itwasn't taking a 2% discount to which it was entitled for earlypayment. Many companies offer such a discount, but typically theonus is on the customer to subtract the discount from the payment.For Ms. Cusick's client, the 2% over many months piled up to morethan $10,000. The company wanted it back from ClickWare.

Panicked, Ms. Cusick called the accounts-payable clerk at thebig company. "Don't do anything yet," the clerk advised. Soon Ms.Cusick got a second notice demanding reimbursement. "Sit tight,"the accounts-payable clerk told her, adding that other vendors gotthe notice and were resisting. Ms. Cusick did nothing, and nofurther correspondence arrived. "I made two friendly phone callsand saved thousands of dollars," she says.

Similarly, Ms. Dunn of M.A.D. Collections says her bestcollection "trick" is simply being nice and straightforward. Sherecognizes that many debtors have been beset by medical crises orother tragedies. In those cases, she'd often intercede on theirbehalf, making a case to settle the debt for a smaller lump sum,say, when an income-tax refund arrived. "Some people have actuallysent me thank-you letters for being so nice," she says, telling herthat they paid her before other creditors because she took the timeto listen to them. "I've saved those letters," she says

Title: Business Structure, Liability, and Partnership Agreement

Develop a hypothetical business you would consider starting with a friend or relative.

Imagine that the friend or relative has sufficient funds to start the business and that you will be doing most of the work (for example, if you were starting a mobile car wash business, you would be procuring the customers and washing the cars).

Imagine also that you will be performing all the bookkeeping functions for the business.

In a written report, prepare the following:

A report to your partner, containing a detailed description of the differences regarding liability with respect to a sole proprietorship, a general partnership, a limited partnership, and a corporation.

A completed partnership agreement, including the following elements ready for signatures using the partnership agreement included.

Example of Partnership Agreement

Detailed description of the business

Names of the partners

Address of the partnership and the partners

Roles of each of the partners as limited partners, being as complete and detailed as possible (you can also be as imaginative as you need to be with titles and responsibilities )

List of assets provided by each partner

Division of income

Division of partnership liabilities (debts)

Method by which the partnership may be dissolved, including what happens in the event of filing for bankruptcy

(NAME), and (NAME), the below signed hereby enter into this Partnership Agreement on behalf of themselves, their heirs, successors and assigns, and set forth following terms and conditions as constituting the Partnership Agreement in its entirety:

1. The partnership shall go by the following name: (NAME).
2. The partnership's principle place of business shall be (DESCRIBE).

3. The first day that the partnership shall begin business is: (DATE) and it will continue until the partners agree to terminate it or until forced to cease its operations by law.

4. The partnership's operations shall be primarily in the following field or area: (DESCRIBE)

5. The partnership shall be capitalized as follows: For each $ (AMOUNT) (dollars) each partner shall receive (#) shares with contribution being made as follows:

Partner A contributes $(AMOUNT) and shall receive (#) shares, the same being (#) % of the total shares available. Partner B contributes $(AMOUNT) and shall receive (#) shares, the same being (#) % of the total shares available. 6. Losses and gains on contributed capital and other property shall be assigned as follows: (DESCRIBE)

The IRS's general allocation rule shall apply, and gains and losses shall be allocated according to the % of total capital contributed by each partner as set out in paragraph 5 above.

7. Profits and losses shall be allocated according to the same percentage allocation set forth in paragraph #6 above. 8. Salary, if any, for the services rendered shall be determined by unanimous approval of the partners.

Project Partnership Agreement

PARTNERSHIP AGREEMENT

10. Each partner shall maintain both an individual drawing account and an individual capital account. Into the capital account shall be placed that partner's initial capitalization and any increases thereto. The drawing accounts shall be used for withdrawal of amounts, the size of which is limited to $(AMOUNT) on any one day.

11. Adequate accounting records shall be made and maintained. Any partner or his/her agent may review any and all accounting or other records at anytime.

12. The partners designate the following as the Partnership's business and checking accounts into which all the funds of the Partnership shall be placed and maintained: (DESCRIBE)

13. Accounting records and books shall be kept on a (select one) 1. cash basis 2. accrual basis and the fiscal year shall begin on the (#) day of (MONTH) and shall end (#) day of (MONTH).

14. At the close of the fiscal year, there shall be an annual audit conducted by the following accounting firm: (DESCRIBE)

15. The partnership shall dissolve upon the retirement, death, or incapacity of any partner unless the remaining partner elects the option of buying out that partner's share. (DESCRIBE THE DETAILS)

16. Upon termination or dissolution of the Partnership, the Partnership will be promptly liquidated, with all debts being paid first, prior to any distribution of the remaining funds. Distribution shall be made according to the percentage of ownership as set out in paragraph #5 above.

17. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

Project Partnership Agreement

9. Control and management of the partnership shall be split equally amongst the partners.

So agreed, this (#) day of (MONTH), 20 .

________________________ (NAME) ________________________ (NAME)

Review - make sure the following items are included in this agreement!

Detailed description of the business

Names of the partners

Address of the partnership and the partners

Roles of each of the partnersâbe as complete and detailed as possible

List of assets provided by each partner

Division of income

Division of partnership liabilities (debts)

Method by which the partnership may be dissolved

MAA103 Study Guide - International Accounting Standards Board, Cash Flow Statement, Financial Statement

Document Summary

Get access

Related Documents

MAA103 Lecture Notes - Lecture 2: Sustainability Reporting, Legal Personality, State-Owned Enterprise

MAA103 Lecture Notes - Lecture 1: Interest Expense, Financial Statement, Human Resource Management

MAA103 Lecture Notes - Lecture 1: Integrated Reporting, Pay-As-You-Earn Tax, Vicroads

Related Questions