BBA2201 Unit II

Running Head: UNIT I CASE STUDY

Unit I Case Study: Accounting Principles

Cecilia Williamson

Columbia Southern University

UNIT I CASE STUDY 1

What form of business organization do you recommend that Natalie use for her business? Discuss

the benefits and weaknesses and explain the reasons for your choice.

After reading the background of Natalie and her cookie story it is obvious at the start of her

business it should begin as a sole-proprietorship. Natalie is a young college student that is just starting out

and would not have the knowledge to begin the business with anyone else. To first begin the cookie

creations as a sole-proprietorship it would be in the line of starting up as a “small business” model

( Weygandt, Kimmel, Kieso, 2017). With a sole-proprietorship all her business profits would go to her

which as a college student that extra income will be good. The best idea is to test the idea you have for

your small business in an inexpensive way that you can test whether or not her cookies are something

consumers like and will buy. It also can provide the answers to what you need to charge for her cookie

creations. If you see a profit and then Natalie can proceed with how to grow her company with the

information she learned.

Will Natalie need accounting information? What will she need and why? How often will she need

this information?

Every business over needs accounting information with a basic understanding of how to operate

the business finances, profits, losses, etc.. The recommendation that makes the most sense is to have a

separate bank account from her personal account. It is irresponsible from an accounting standpoint to not

keep your business finances separate from her personal finances. Having these items separate will make it

easier to keep up with all her income and expenses therefore making it easier for tax preparation the

following year. The next thing Natalie needs to take into consideration is how she will monitor her

business day to finances. She would need to either purchase an accounting software or find an accounting

firm to assist her. If she chooses to keep up with her finances on software it would be suggested to do this

on a weekly basis so as to not get behind inputting the information to stay on target. Hiring an accounting

firm she would need to work with them on how often to turn in her

UNIT I CASE STUDY 2

paperwork to them for input.

Identify specific asset, liability, and owner’s equity accounts that Cookie Creations will likely use to

record its business transaction.

In the beginning of her small business any items she purchases to help her conduct classes and

run her business will assist in making her revenue which will in turn make revenue. The main assets will

include the supplies for cooking, equipment for the classes to cook with and on, and the instructional

materials for the students. Since her business involves food she will have the additional need for personal

protective equipment for her students to use during classes. The liabilities she will have include utilities to

operate, ingredients for the class to use for cooking, and anything that pulls money from her profits. The

equity will be minimum in the beginning of the business but will grow as her bottom line and profit

grows.

Should Natalie open a separate bank account for the business?

Yes, as I said before having separate accounts is the responsible way to operate a business. By

having separate accounts Natalie will be able to keep better track of the business’s profits and loss, as

well help monitor the business financial records. If Natalie's business does well and she is able to

transition from Sole-Proprietorship, to Partnership, and then to Corporation, any future investors or

financial institutions will want to review any financial records available. Therefore, it is a must to be able

to show the increase of revenue over time that to justify her need for investors or loans to grow her

business even further. If her business is ever audited by the IRS it will be extremely important to have all

personal finances and business finances separated (Kasahun, 2020).

References

Weygandt, J.J., Kimmel, P.D., Kieso, D.E., (2017). Accounting Principles. Retrieved from

https://online.vitalsource.com/#/books/9781119411017

Kasahun, A. K. (2020). The Impact of Working Capital Management on Firms' Profitability-Case of

Selected Sole Proprietorship Manufacturing Firms in Adam City. IOSR Journal of Economics and

Finance (IOSR-JEF), 11(1), 45-55.