BUSINESS ACCOUNTING (GBB/GCB 1013) SEMESTER JANUARY 2013 TITLE: ___________________________________________ LECTURER: HEZLINA BT M HASHIM GROUP MEMBERS: No. | Name| Student ID| 1| | | 2| | | 3| | | 4| | | 5| | | DATE RECEIVED: __________________________ INTRODUCTION: Charitable organizations are NGOs whose purpose of existence is to benefit the public. The mission of a charitable non-profit expresses the particular way in which the organization will fulfil its public benefit purpose.
The board members of a non-profit organization entrusted with the supervision of the board members who have a legal obligation to ensure that the non-profit organization uses the funds to fulfil its mission. QUESTION: Better Days Ahead, a charitable organization, has a standing agreement with First National Bank. The agreement allows Better Days Ahead to overdraw its cash balance at the bank when donations are running low. In the past, Better Days Ahead managed funds wisely, and rarely used this privilege.
Jacob Henson has recently become the president of Better Days. To expand operations, Henson acquired office equipment and spent large amounts on fundraising. During Henson’s presidency, Better Days Ahead has maintained a negative bank balance of approximately $10,000. 1. – What is the ethical issue in the situation? The issue in this situation is the investment policy. Managers of non-profit organizations must ensure that investments are consistent with the values nd principles set to achieve the stated objectives to guide activities, and ethical behaviour of its employees, volunteers and board members. The lack of an ethical base as a result of the lack of creation and monitoring of ethical standards has the potential to lead to a lack of success in the organization. However the fulfilment of the ethical standards of the institution by the leader and employees, since success is reflected in the work to be carried out, ensuring the objectives and goals to reach.
Better Days Ahead, as a charitable organization, it is not normal to maintain a negative bank account as it has no benefits arise from its operations, but since the president of the organization is carrying out his work according to the duties of his job and the agreements with the bank, then it is acting properly and not against any ethics or agreements. 2. State why you approve or disapprove of Henson’s management of Better Days Ahead’s funds. I would approve of his management of the fund as he is taking out a loan in order to improve the fundraising ability of his charitable organization.
Since any charity relies on fundraising in order to increase their operating funds and potential, the usage of a loan during a “slow time” in order to increase this fundraising potential of the organization seems to outweigh the impact that the negative bank balance might show due to the loan. Certain company have to do this in order to maintain current condition. What has been done by Better Days Ahead is good to their company and will benefit them more. CONCLUSION As the conclusion, we can see from above statement, there are still many ways to improve the productivity of the company although the company is doing charitable work.
As a manager or even worker, they have to implement the way of ethics in doing business of work. Some of the company already implement company policy to smoothing the way of work. To disregard company policy is unethical because it has the potential to harm the company and other employees. To me, unethical behaviours can damage a company’s credibility, causing the business to lose customers and ultimately shut down. However, business owners and their management teams can work with employees to prevent unethical behaviours. In this case, the situation that they are acing is still ethical as they have to maintain their current status as charitable company. INTRODUCTION There are many different forms of business organizations. They are sole proprietorship, partnership, and corporation. A sole proprietorship consists of one individual doing business. Sole proprietorship are the most numerous form of business organization in Malaysia, however they account for little in the way of aggregate business receipts. There are no forms you need to fill out to start this type of business. This is the easiest form of business to set up, and the easiest to dissolve.
The purpose of most organization or business is mainly to earn profit. It is usually called as profit oriented business. So, it is actually a profit business or other organization whose primary goal is making money, as opposed to a non-profit organization which focuses a goal such as helping the community and is concerned with money only as much as necessary to keep the organization operating. This includes anything from retail stores to restaurants to insurance companies to real estate companies. Question: You are opening Quail Creek Pet Kennel.
Your purpose is to earn profit and you organize as proprietorship. 1. Make a detailed of 5 factors you must consider to establish the business. There are many factors that must be considered in order to start a business. Five of them are listed below: Types of business and a proper plan The first thing to be always decided upon is the type of business we want to do. Before selecting on any type, we should always do a thorough background check on the idea, such as the current trends. For example, people in Malaysia like to take cats and kittens as their own pet. It has even become a trend.
After that is done, a proper road-map should be planned for the road ahead detailing the various costs involved, growth plans, and operating ratio. A thought out plan should also enable us to get a start-up loan from the bank quickly if we want to get capital from bank. Capital The next factor that we need to consider is the money or capital. Usually, small businesses starts with small amount of capital which means only small amount of profit will be earned. While arranging the capital, we should always keep a little margin for the initial running cost and the loan repayment interest.
The latter can be avoided, if you can arrange the capital from the family or friends. We can also obtain capital by taking a loan from banks. But, as our business has unlimited liability it is too risky if the business failed. Pet kennel or care taking business doesn’t usually need much capital. Marketing Another of the many factors to consider when starting the business is the market you enter and how to reach out and inform people about our business. We also need to segment the market in order to satisfy everyone. For example, Malays usually keep cats as their pet and Chinese or Indians usually take care of dogs.
We can give pamphlets and distribute it from house to house. The pamphlets should contain the details and information. This doesn’t cost much as it’s just photocopy. Besides that, we should be very friendly while interacting with customers to maintain our pubic relation. If we have workers, they should be trained to be persuasive and friendly or maybe talkative. Equipment needed In order to start this kind of business, we need to determine what equipment we need. Firstly, we may need cat cages, dog kennels, cat and dog food, and other things.
We also need to decide from where we can get these things and decide which supplier to get these things. The prices of these equipments also need to be considered. Cheap price usually means low quality products and expensive products usually are more quality. Location The next important factor that we need to consider is the location of the business. It is appropriate for us to locate our business near neighborhoods where many people live. We can buy or rent a shop lot or even an empty house and it must be located where people can see and know about it.
We shouldn’t choose a place far away from people’s houses. But renting a house can annoy or disturb the next door neighbors with the smell of animals and their noises. This is unethical and can ruin our reputation as a business. So it is better if we rent a shop lot in areas where as we can’t afford to buy it. 2. Identify 5 or more transactions that your business will undertake to open and operate the Kennel. a) Debit cash credit capital. * This is important to open the business where the owner puts the capital in the business.
This can be said as the initial capital to open and help the owner to operate the business. b) Debit purchases cash credit. * The owner uses some cash to buy equipments from the suppliers as the stocks for his pet kennel business. c) Debit accounts receivables credit service revenue. * The customer now is paying on credit for the service. d) Debit maintenance expense credit cash * The owner spends some cash to repair the broken dog kennel. e) Credit accounts receivables debit cash * The customer on credit pays the remaining balances owed. f) Debit medication expense credit cash While taking care of the dogs, one of them was injured and need to be treated in the animal clinic. 3. income statement The Quail Pet Kenner income statement, statement of owner’s equity, and balance sheet at the end of the first month of operation. Quail Creek Pet Kennel Income Statement For the Month Ended January 31,2013 Revenue : Service3000 Expenses: Maintenance200 Medication430 Rent1700 Advertising 560 2890 Net Income 110 Quail Creek Pet Kennel Statement of Owner’s Equity For the Month Ended January 31,2013 Quail Creek Pet Kennel, capital, January 1,2013 30000
Add : Investment by owner 0 Net Income 110 Subtotal30110 Less: Withdrawal by owner 750 Quail Creek Pet Kennel, capital, January 31,201329360 Quail Creek Pet Kennel Balance Sheet January 31,2013 AssetsLiabilities Cash21360Account Payable 9800 Furniture 9800Owner Equity Equipment 8000Capital 29360 Total Assets39160Total Liabilities and Equity 39160 Evaluation of Business Since the business has just started up on its first month of operations, the figures of our accounts have shown good progress and shows that the business might be a success is the coming years.
However, we have to determine whether or not to continue the business with a few calculations that could be done for the business. First of all, we use the current ratio of the business where the we divide the Current Asset of the business with the current liabilities. This is to measure the business’s current ability to pay off all the liabilities of the business where the higher the ratio, the higher the probability of the business to have enough sufficiency to maintain its business operations. The calculations are as follows: Current Assets = 21360
Current Liabilities 9800 = 2. 1786 Since the Current ratio is above 1, the business could have a higher possibility of continuing running with lower risk of failing in the business line. This shows that the business can continue to run and succeed in the future as the business holds a small amount of risk. Another way of determining whether or not the business the business is by the Acid-Test ratio which determines the ability of the business to pay all current liabilities if they came due immediately. The calculation is as follows:
Cash + Short term investment + Net current receivables = 21360 Current liabilities 9800 = 2. 1786 Again, the Acid-test ratio indicates that the ratio of the business is above 1. This shows that the business does have the ability to pay all current liabilities if they came due immediately. This also shows that the business can run very smoothly and efficiently in the coming months and years to come and could be a good business to continue on investing and serving.
The final way to determine whether or not the business should continue its operations after evaluating its first month of operation is by using the Debt Ratio. This calculation is done to determine the financial risk of the business. The calculation of the Debt Ratio is as follows: Total liabilities = 9800 Total Assets 21360 = 0. 459 Since the Debt Ratio is below 1, the business shows a good ratio and record that if the business continues its operations, it has a low financial risk and can be a very good business to invest into.
In conclusion, after analyzing all of the probabilities, and calculating all of the results of the business’s first month operations, we can conclude that the business of the Quail Creek Pet Kennel should be continued and can be a success in the future as all the facts shows a positive outcome for the business. Conclusion From the first question, we can conclude that there are still many ways to improve the companies productivity even though the company is doing charitable work. As either a manager or an employee, the way of ethics have o be implemented in doing business of any sorts. A few of other companies or businesses have started to implement company policies of work ethics in order to improve the quality and efficiency as well as effectiveness of the work. To disregard company policy is unethical because it has the potential to harm the company and other employees of the company. An unethical behavior of an employee can ruin a company’s reputation as well as credibility in the eyes of the stakeholders as well as potential investors, which could cause the company to stop operations.
The business owners as well as their management teams can find a way to prevent their employees from making unethical decisions or behaviors in the company. From the final question, we can conclude that Quail Creek Pet Kennel has a higher possibility of continuing its operations. This is based on a thorough calculation of assets and liabilities of the business which has only been operating for 1 month and the results of the calculations done have shown positive outcomes for the business.
This has made us conclude that the business has a very good potential of expanding in the future, and has a probability of opening more branches nationwide and can project a very high success rate if the business continues its operations for the years to come. In conclusion, ethics for a business is not something that has to be put aside in any kind of business that we are operating. This also implies to charity work. Finally, a a charity-based business is not an excuse to not succeed in the business world as any kind of business can prove to be a success if we run it efficiently and effectively.