Assignment: Flow Diagram Project- Accounting for a Small Business
You are to create a new business (hypothetical) and at the highest level talk about the nature of your business, the products you sell and/or services you provide, the target market for your products or service, the organizational and business structure, key business risks and the key technology components appropriate for the first year of operation. Your company must be headquartered in the US and follow US GAAP.
Background:
Each person has initial total assets equal to $500,000 with the following composition: Cash $450,000 and Short-term investment $50,000. $75,000 of the $450,000 cash is a bank loan (5-year note payable) at interest rate of 4% and the remainder is contributed capital based on your business structure. Your company was incorporated on April 8, 2020 and all transactions occur in the month of April. The first reporting date is April 30, 2020.
Imagine that you are providing information to the board of directors and the external auditors. The information contained in the company overview document, the chart of accounts, AIS, and controls matrix should be descriptive enough for an outsider to understand the company but not wordy or redundant. It should be professional - using appropriate headers, paragraphs, diagrams, color, and any other formatting or tools available to ensure the information is understandable.
Overview:
The purpose of this project is for you to:
1. Develop an in-depth understanding of origination of a business and constructing flow diagrams to couple business requirements
2. Build professional briefs to explain your business
Deliverables:
1. High-Level document explaining your company created above ($500,000) which should include the business name, nature of business, products sold, target market, business structure (should have a board), business risks and technology.
2. Understanding to operate you need to purchase resources to use and consume (assets and expenses) in order to earn revenue - this is called expenditure cycle. Please create a narrative describing a sample transaction's flow through your expenditure cycle. The narrative should include:
a. the requirement determination, vendor selection, and the purchase order
b. the receipt of goods
c. the invoice verification
d. the vendor payment
In addition, you will create a flowchart that illustrates the process.
3. It is imperative that your business make money/revenue. As such you will create a narrative describing a sample transaction's flow through your revenue cycle.
The narrative should include:
1. The initial inquiry from a potential customer
2. The creation of the contract, if appropriate,
3. The credit policy, if you extend credit
4. The order entry
5. The shipment, delivery, or rendering of the merchandise
6. The billing, if appropriate
7. The cash collection
In addition, you will create a flowchart that illustrates the process.
Company Overview
Consider how each concept/topic discussed relates to your business.
Expenditure Cycle
Craft a response to the expenditure cycle using the following two requirements:
• Word document that describes an expenditure transaction from procurement to payment (e.g. a narrative of the process).
• Flowchart (either in Microsoft Visio or in PDF if another tool is used) visually depicting the expenditure process
A few things you may want to discuss:
1. Who initiates and who authorizes purchase requisitions and purchase orders?
2. What are the potential threats to your ordering process? What internal control policies are you going to enforce to mitigate these risks?
3. How do you assign job responsibilities to ensure segregation of duties in ordering, receiving, and disbursement?
4. Inbound logistics is a labor-intensive process. What technological tools do you plan to use to improve the efficiency of the process?
5. How many duplicates of the purchase order and the receiving report are appropriate for your business and where do they go after they are created?
6. When and who will prepare the payment voucher?
7. When is the "inventory" account debited and the "accounts payable" updated in the subsidiary ledger and in the control ledger? Who is responsible for each of these tasks?
8. What are the key internal controls that you would implement to ensure the records are accurate, valid, and complete?
9. Are there independent checks and reconciliations in your procurement process?
Revenue Cycle
Consider the following questions as part of your related submission for the revenue cycle.
1. Who responds to initial inquiries?
2. Who handles the proposal/negotiation?
3. What is the credit policy?
4. How do customers order goods or services? (by Internet? By Phone? Walk-in?)
5. Where does the order go?
6. Who will see which part of the order? (Warehouse? Billing? Inventory Control? Cashier?)
7. When and who will prepare the invoice, if appropriate?
8. When and how does the order become sales revenue and accounts receivable?
9. What is the outbound logistics process?
10. What are the internal controls that you would implement to ensure the records are accurate, valid, and complete?
11. What internal control techniques (e.g., customer audit, secret shopper, petty cash) would be appropriate for your cash collection process?
12. Is a cashless payment system appropriate for your business? If so, what type might you use? How does a cashless payment affect how transactions are recorded?
13. Consider the key decisions you will make throughout the revenue process, what quantitative analyses will offer insight into these decisions? When and where would you collect such information?
14. What controls would you implement to ensure privacy (customer) and confidentiality (trade secrets, etc.)?
Craft a response to the expenditure cycle using the following two requirements:
1. Word document that describes each major revenue stream from order to cash receipts (e.g. a narrative of the process)
2. Flowchart (either in Microsoft Visio or in PDF if another tool is used) visually depicting the revenue process
Format your assignment according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.