My business consists of printing t-shirts with various slogans and designs. The slogans as well as the designs are created by me. It is one form of art which includes t shirt painting as well as printing. The t shirts, once printed are then sold to retailers and they place the order for the most sold out t shirts. I create different designs and get them printed. I also sell them online via social networking sites which consists of uploading the pictures on the page and then sending them to the customers through couriers. The t shirts are my main product, along with them I also print customized t shirts on request. The t shirts consist for the size from age one to adults. Depending on the customization requirements, the t shirts are printed. The customers also get a color to choose for themselves. I eventually plan to expand into other garments manufacturing as well as selling. Most of the designs as well as slogans are created by me, I have appointed a staff of six which is divided for work into different departments. One is appointed for managing the orders as well as dispatch, two are allotted the work of operating the machines and carry out the printing of t shirts. One person manages my accounts and deposits the money in Bank, the fifth employee mediates between me and the two men who look into the printing of the t shirts. Because they are located at a distance, one person is constantly engaged in mediating between us. The sixth employee deals with the courier agency for online orders. The payments, time management as well as packaging and delivery of all the online orders are managed by him.
The business is owned and managed by me. It is a small scale business which does not need to much space. I work at home and create various designs, I also look into various material of cloth needed for printing. When I receive an order for customized t shirts, I need to procure additional stuff as per the requirements. The benefit of this business is that the whole unit is closely integrated. The staff knows what they are supposed to do and whom they are supposed to report to. There are no short deadlines. I already have different sizes of t shirts in stock, all that is needed is the printing on it. I can work at my flexible timing and I need not report to anybody. I just have to ensure that the orders reach the customer on time. The retailers usually provide me with enough time to print and send the t shirts.
My business is centralized in nature and all the major decisions are taken by me. I assign the work to each person in the business and I approve the products before dispatch. I check the designs requested by customers before confirming them. The customers are then required to pay online or through a bank transfer. Best-selling t shirts are always maintained in stock, new requests are separately segmented and kept aside. If there is adequate demand for any particular product, it is sent for production. Adequate demand is minimum 12 pieces. No customization requests are accepted without my consent, I personally speak to the customer and only then accept the order. No orders are delayed or sent without a quality check. Best quality is what I choose to provide. If the customers are unhappy with the product, they may contact online and return the product within a period of 30 days. I have two machines, one purchased and another one purchased with a bank loan. There are receivables of a period of 3 months and payables consist of purchase of ink and cloth for printing, it runs on a payable period of 4.5 months. The factory shed is taken on a rent which is payable monthly. The assets only consist of two machines which are charged with depreciation. Salary is paid monthly along with the rest of the printing and purchase expenses.
The business will basically function like this:
Series 1 consists of Sales, Series 2 consists of sales of customized t shirts and series 3 shows the expenses. I will be required to follow the GAAP and produce my financial statements. The value of inventory should be clearly shown as well as the assets and liabilities. Only then will the statements be true and accurate. Following the principles will also require me to produce details about the investment made by me and show the financial ratios of the business. The details of creditors and debtors will also be shown.
Pro forma income statement
Pro Forma Balance Sheet
Internal control is an integral part of a business. An efficient internal control will ensure that there is no manipulation in accounts or any events of fraud. The risk areas need to be analyzed before implementation of internal control. Ethics should also be followed in the organization. The internal control will consist of authorization of vouchers by me before payments exceeding the amount of $200 dollars is made. This will ensure that cash is not spent without my knowledge, also there are two men appointed for the work of printing to ensure that there is segregation of duties and no one person completes the task. Segregation of duties ensures that there are less chances of fraud or misappropriation. I also check the bank reconciliation statements prepared by the accountant so as to ensure that the cash and bank is in accordance. Any difference is to be reported by the accountant. To implement the internal control, I will need to have an efficient staff and leader who will ensure that there is no malfunction in the work. Each one will only be responsible with the work assigned to him. The staff will have to report to me. I will also ensure there is rotation among the employees who maintain the online department and the accountant who looks after the bank. Resistance among the staff shall be overcome by initiating a session where they can report if they are unsatisfied with the practices followed by the business. A capable leader will be chosen among the staff who shall ensure that all the policies and duties shall be adhered to. The inventory shall be physically checked and maintained by me. Other than designing of the t shirts, I will also look after the appropriate reporting and filing of returns. The income tax should be paid on time and I will ensure that it is done so.
The regulatory environment will ensure that the financial statements are prepared and reported in an appropriate manner. GAAP requirements need to be fulfilled so as to make sure that the accounts are reported in the correct manner. There could be an investigation or restatement of accounts if they are not prepared in accordance with the requirements by the Board. The tax payments will be made on time, the accountant shall look after the tax and the deductions that can be availed. Since there are no partners in the business, it is a proprietorship and all the exemptions or deductions available to a business shall be considered. The Sarbanes Oxley Act will ensure that the investments and stock are accurately reported. All the capital has been invested in the business. There are no specific investments but the stock and raw material should be reported at the fair value. The assets should also be reported at its fair value to ensure that there is no misappropriation in the reporting.
The business is only a start up hence there is not much stock maintained by us. The staff will eventually be expanded and there will be a proper work place created for them. The staff is required to follow ethics in financial reporting. With the expansion in business, the future prospects seem bright and there may arise a possibility of a stand alone store which will help increase sales directly to the customers instead of going through the retailers. The plan also consists of sales to other cities and other online portals where there will be more revenue generated and the expenses may be balanced. The loss situation can be converted into a fruitful one within a short duration. The staff can be increased in the future and work could be segmented. The GAAP requirements will be followed and appropriate action will be taken in case there are any disruptions or manipulations.
Bibliography
IFRS and US GAAP: similarity and differences. (2014). Retrieved from Pwc: http://www.pwc.com/us/en/issues/ifrs-reporting/publications/ifrs-and-us-gaap-similarities-and-differences.jhtml
Internal Controls. (2014, Feb 25). Retrieved from Blink: http://blink.ucsd.edu/finance/accountability/controls/
Harvey Coustan, L. M. (2004, Feb). Sarbanes-Oxley: What it means to the marketplace. Retrieved from Journal of Accountancy: http://www.journalofaccountancy.com/Issues/2004/Feb/SarbanesOxleyWhatItMeansToTheMarketplace.htm
Taulli, T. (2010, Jan 29). Five ways to protect personal assets. Retrieved from Business Week : http://www.businessweek.com/smallbiz/content/jan2010/sb20100128_588604.htm
