Business name: Yum Scrum Catering Service
Location: Providence Rhode Island
Executive Summary
Yum Scrum Catering Service provides its services to the Providence population and other major towns in Rhode Island. Yum Scrum Catering Service offers lively, multihued, and diverse cuisines to provide diverse options to suite the assorted preferences of the clients. Yum Scrum Catering Service is a sole proprietorship. The owner of the catering service decided to turn his hobby and fervor of cooking into a business. Some of the benefits that realized by sole proprietor for stating this form of business are that the establishment and management the business is relatively unsophisticated and economical, there is tax simplicity and the decision making process is uncomplicated and easy
Services
Yum Scrum Catering Service will endow Providence and other major towns in Rhode Island with reputed and authentic catering services. Yum Scrum Catering Service will offer its catering services to an assortment of festivities, which will include corporate revelries & golf excursions, weddings and interment services, private intimate banquets, baby showers, birthdays and wedding anniversaries and any other party that may need catering services. Yum Scrum Catering Service will also engage in home and company delivery of foods, sale of beverages (non-alcoholic) renting tables, chairs and glassware, on-site catering services and event planning.
Staffing plan
The sole proprietor will be the catering manager and will be accountable for the general organization and administration of the company. Two supervisors will aid him in performing his operational duties. A part-time position will also be available for a consultant to examine and give advice on the ingredients of foods that require delicate handling of ingredients. Five servers will be hired to serve the food at the events as well as help with set up and take down any event. Three chefs will be employed to set up the dishes that the owner of the business, has developed. Finally one delivery boy will be hired to deliver foods to homes and or companies
Chart of accounts specific to Yum Scrum Catering Service
Assets that will be utilized in the catering company for more than 12 months will be the company’s long-term assets and will be run down by means of a G.A.A.P. Supported straight-line depreciation technique to determine their annual depreciation. These long-term assets will include five custom stoves and dishwashers, five sets of cookware and dishware for the cooks, two vans, a PC, a printer and a variety of serving kits.
| Expenses | |
| Taxes | $475 |
| Stationery etc. | $225 |
| Promotional material | $250 |
| Rent | $0 |
| Miscellaneous | $350 |
| Total Expenses | $1300 |
| Assets | |
| Cash needed | $39,550 |
| Additional in-progress Assets | $450 |
| Long-term Assets | $31,300 |
| Sum total of Assets | $71,300 |
| Total requirements(funded by investment from the investors) | $75,000 |
| Loans | $ 0 |
Use of Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) accounting methods
Most businesses in the US are required to use Generally Accepted Accounting Principles (GAAP) to maintain and uphold a record of their books. However, even those businesses that are lawfully require to use GAAP use it to for bookkeeping processes. GAAP is a group of policies regulations established by the Federal Accounting Standards Advisory Board (Weygandt et al., 2009). U.S. law does not oblige joint venture partnerships, sole proprietorships or businesses that have their stock wielded in private terms to use GAAP.
IFRS
Approximately 100 nations around the globe mandate businesses operating in their soil to use IFRS standards for accounting. The American Institute of Certified Public Accountants, (2013) defines IFSR as a global accounting organization based in London, which established a set of accounting standards in a bid to let the financial realm have rules, which could consistently be used in all the nations. IFRS allows easy hoisting of capital transversely across borders and allows the comparison of the financial state of businesses in multiple countries for investors.
GAAP or IFRS
By 2011, the US was the only nation with an intricate investment market, which does not let businesses to apply the IFRS standards to account their fiscal records. The Securities and Exchange Commission stipulated that it was mulling over espousing the IFRS standards in the US though not any sooner than 2015. The nature and location of the Yum Scrum Catering Service places it in a position where it is neither bound the GAAP principles or the IFRS standards. However, despite the fact that it is not lawfully obligated to, Yum Scrum Catering Service will utilize the GAAP principles to keep their records and books. Yum Scrum Catering anticipates the lifting of the restrictions on IFRS in the US so that it can shift from BAAP to IFRS. In this scenario, the following are the considerations that the Yum Scrum Catering Service will make.
Considerations in case of change the accounting methods
IFRS is at variance in copious methodological ways with GAAP and presents a lesser amount of information for investors. A greater impediment that Yum Scrum Catering Service implementation will face is that, it is not just an issue of official formalities: The business would have to transform its tax coverage and accounting techniques, interior reviews and IT structures. However, transit to IFRS will present the catering company an opportunity to venture in outside country business prospects without changing its accounting methods.
Pro forma balance sheet
Assumptions
The financial assumptions made are shown in the table below.
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It assumed that all the other non-financial factors that may affect the assets capital and liabilities would remain constant. For example, the pro forma balance sheet does not anticipate any robberies fires or any other hazard or opportunity that might improve or lessen the quality of service delivery to the customers.
| Pro Forma Balance Sheet | |||
| 1st year | 2nd year | 3rd year | |
| Assets | |||
| Cash | $8,750 | $56,570 | $113,950 |
| Total current Assets | $8,750 | $56,570 | $113,950 |
| Long-term Assets | $33,275 | $33,275 | $33,275 |
| Depreciation | $6655 | $13,310 | $22,500 |
| Total Long-term Assets | $26,620 | $19,965 | $13,310 |
| total Assets | $35,370 | $76,535 | $127,260 |
| Liabilities and Capital | 1st year | 2nd year | 3rd year |
| In-progress Liabilities | |||
| Accounts owed | $9,650 | $12,100 | $13,000 |
| Total in-progress Liabilities | $ 9,650 | $12,100 | $13,000 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $ 9,650 | $12,100 | $13,000 |
| Paid-in Capital | $75,000 | $75,000 | $75,000 |
| Earnings | $10,099 | $38,715 | $35,773 |
| Total Capital | $25,720 | $64,435 | $112,308 |
| Liabilities + Capital = assets | $35,370 | $76,535 | $127,260 |
| Net Worth | $26,099 | $63,159 | $114,260 |
Support of the valuations assigned
The current/in-progress assets are gotten from the cash that the owner of the business will plough in to the business. The long-term assets include the vans cooking utensils and the rentable materials such as the tables and chairs and they are assigned a depreciation of 20% per year. The paid in capital is the capital that the business expects to get from the investors. The current liabilities are the borrowings from families and friends.
Income statement
Two internal controls that owner of the business will implement to protect the company’s assets and resources
1 Inventory and Asset Control
Inventory and asset controls will be instrumental in safeguarding the business’s intellectual and corporeal assets from maltreatment and larceny. This will be achieved by limiting the workforce’s access to a variety of the assets; the criteria that will be used to limit access will be the employees’ echelon of responsibility and function and the level of fragility of the assets. This will also go an extra mile in limiting outsiders from accessing or obliterating these assets. In order to oversee the implementation of this control the company will embrace instruments such as electronic ID tags, boundary markers, security structures, and many others. The challenges and resistances of this control might be manifested in low motivation of the employees who will be restricted from accessing the assets. This will be countered by encouraging the employees to work harder so that their rank can be raised hence allowing them to access the assets. The customers might also get afraid of visiting the company premises due to the restrictions of accessing the company’s assets by non-authorized personnel but the good quality services offered will make them keep their concerns at bay.
2 Recordkeeping and Documentation
This will ensure that financial statements and data are precise, correct and constructed on a timely basis. This will help in protecting the company’s data, which is a step forward in ensuring the viability of a business. Drawing reference from Lastovica (1999) sentiments, documentation controls will also assist in ensuring that the business’s activities are in line with any legal quality or policy guidelines. Yum Scrum Catering Service will achieve this by employing the ISO 9000 standards in a bid to meet the credential guidelines and illustrate that its internal controls can be aligned to meet certification requirements and produce excellent results in the process.
Competitive Environment
Yum Scrum Catering Service’s major competitors are full-service caterers, turnkey caterers, and general caterers who are all thriving in the Rhode Island market. The other level is full-service caterers who are involved in the organization of the event. The other low levels of competitions consist of eateries, fast food and grocery stores.
Impact of the regulatory environment
Conceivably, one of the major salient distinctions linking small and large businesses in business organizations law is determined by the intensity to, which their proprietors put up with the private liability for business threats. The regulatory environment for a business is subject to the major preferences that the business makes. In numerous scenarios, one preference has inferences for another. Unincorporated businesses like Yum Scrum Catering Service, can sustain business liability hazards that can jeopardize the assets and have different (generally sluggish) expansion courses from corporate businesses (Ribstein, 2004).
Previous studies for example Fan and White (2003) have unearthed the existence of a “chilling effect” of stringent private bankruptcy regulations on private enterprises like Yum Scrum Catering Service. There is an extensive concern that alterations to the personal bankruptcy law, that hardens the process of the individuals acquiring a “fresh start,” will aggravate the differentiation between incorporated and unincorporated businesses in terms of the stratum of fiscal threat born by the proprietors and auxiliary ‘chill’ entrepreneurship.
One may plausibly articulate in response to the annotations above that entrepreneurs can choose an organizational status for their business, and that if smaller businesses are yearning to avoid liability menaces, they can simply incorporate themselves. However, the small business owner has to consider the following two countervailing aspects before making that decision. First, the official procedures requisite to incorporate (including not only the preliminary paperwork, but also formation and administration of control organizations) engross fixed costs, which a small business like Yum Scrum Catering Service cannot bear. Second, even if a small business had the ability to bear the expenditure of incorporating, doing so does not essentially eradicate the threat of private liability for shareholders, especially for closely held businesses. As a result, the Yum Scrum Catering Service will not consider this as an option.
The Sarbanes-Oxley Act of 2002 (“Sarb-ox”) requires business to follow extra requirements. These requirements have key inference for the control, bookkeeping, assessment, and managerial reimbursement settings of the business.
In juxtaposition with other regulatory/listing necessities, Yum Scrum Catering Service will have to correspond to the following guidelines as directed by Sarb-ox: Annual reports will comprise of, (as a supplement to the audited fiscal declarations) “an in-company control statement, which affirms the accountability of management and an evaluation of the efficiency of the internal-control organization
The reason why Yum Scrum Catering Service will have to correspond to the guidelines as directed by Sarb-ox is because Sarb-ox’s legislative lingo does not leave out “small businesses” for particular or dissimilar treatment in accordance to the Act.
References
American Institute of Certified Public Accountants, AICPA. (2013): IFRS FAQs. Retrieved from: http://www.ifrs.com/ifrs_faqs.html
Fan, W. and White, M. J. (2003). Personal bankruptcy and the level of entrepreneurial activity. Journal of Law and Economics, 46, 543–567.
Lastovica, A. (1999). Starting a Successful Catering Business. Virginia Cooperative Extension Service, Revised. NY: John Wiley & Sons, Inc.
Ribstein, L. (2004). Unincorporated Business Entities (Third Edition). NY: Wiley & Sons, Inc
Splaver, B. (1997). Successful Catering, 3rd Edition. NY: Wiley & Sons, Inc
Weygandt, J., Kieso, D., & Kimmel, P. (2009).Wiley Plus: Accounting Principles, 9th edition; (two-term). NY: John Wiley & Sons, Inc.
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