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Forms of Business

Liam and Helen can enter into a partnership form of business as there is two or more than two person involved. An internet business is of less complexity and can be managed by the partners. Further, they can operate the business as per their own sense of understanding and little interference will happen in this form of business.

However, going by the overall scenario and the concern regarding the personal liabilities the best form of business will be a private company. This is due to the fact that the private company has a separate legal entity that is distinct from that of the members and hence, personal liabilities will not occur because the owners and the company are two different persons (Levine & Prietula, 2013).

A small painting business will come under the ambit of sole proprietorship as the business is managed by the owner and he wishes to employ his wife. Hence, it is a clear-cut indication that the business is small and intended to run on a small scale. Further, no outside party is involved hence; it will be suited for a sole The level of risk is less and can be easily managed by the owner. A sole proprietorship is best recommended for this business.

However, if the owner wants to expand the business or bring another party to the business then partnership business can be formed. This will help in expanding the business to another level.

Partnership form of business is best suited as three friends are coming together and sharing their expertise pertaining to the area of accounts, investment, and tax returns. Hence, the combined effort of three will fetch better reward in the partnership form of business. As two or more persons are present and will run the business on their own, therefore, it will be easy to create and maintain partnership and fees are less as compared to another form of business (Alter, 2013).

Another form of business that can be suitable is the private company but the business needs to be on a grand scale. It can be done once the partners decide to form a company and invite public for the deposits. However, the recommended business type is the sole proprietor form of business.

New vaccine development is an area that demands a lot of investment and since it needs listing on the Australian Stock Exchange it needs to be a company. Therefore, going by the operations public limited company is best suited and recommended for the medical researchers. It needs to have huge investments in research and development and this can be done by grants and aids from the government as it is engaged in the development of a vaccine. If it is established as a public company it will fetch many advantages including the benefit of taxation.

Variable Costs and Contribution Margin

However, it can even be formed under the concept of the private company and can attract money from the public at large (Olsen, 2012). This will provide them with the necessary funds and after complying with the listing requirements, the company can get listed.

As the case relates to providing tutoring to the undergraduate student with a friend it implies two or more person are engaged in this activity and hence, partnership form of business is the best form of business available to them. Felicity wants to keep a stern control on the activities and this can be done under partnership form of business. With two people operating the entire activity there will be more transparency and hence, control will be maintained (Hemmer & Labro, 2013). Hence, partnership form of business is best recommended for Felicity.

However, if Felicity is operating entirely in her own way and taking charge without much indulgence of her friend then she can vouch for sole proprietorship as a single person takes the entire control and management

Judgment – The achievements of Paula Kensington is by dint of her caliber of judgment. Though there were many backdrops yet she posed a strong self. Her judgment was accurate that led her to the current position. Her selection to join a printing company in a finance team proved to be a major success. Her insights were accurate and based on optimism.

Knowledge – Paula Kensington had immense knowledge and this is the sole reason why she has been successful. Both her father and brother were ACCA qualified and hence that skill was present in the blood somewhere.  She discovered the power of the network. Her knowledge helped the loss-making company in the transformation of the share price from 4 percent to 53 percent a share.  She created a finance function and implemented a financial system of robust nature.

The application skill of Paula Kensington was exemplary in nature.  Her role as a CFO is praiseworthy. This is the main reason why 12 sales people report to her. Being endowed with application skills she helped the salespeople in telling what they want to do. Her application skills help both male and female students in understanding the approaches to be confident (Williams, 2016).

Communication -  Paula Kensington has shown the immense result when it comes to communication.  The leadership flourished by dint of strong communication. To keep the tempo she hired at her own cost a virtual assistant so that the brand can be highlighted in social media (Williams, 2016). Moreover, the presence of LinkedIn profile is two-dimensional meaning if anyone wants to know her and her values then the blogs can be referred. She has set a strong tone when it comes to communication and being a strong communicator she has inspired allot. Further, other steps include speaking at conferences once every quarter and involved in twice a year for a press coverage.

Fixed Costs and Break-even Point

As per employability skills, communication is a vital factor and is done through speaking clearly, written communication like text, emails, etc. The power to negotiate and sharing of information is another consideration.

Critical thinking – This aspect is best described from the fact that Paula Kensington first job after school was in retail, however, as it did not meet the expectation. This did not let here down and she joined ACCA. The critical thinking aspect helped her in many areas of her professional career. She has mastered much business and her stint indicate that she has efficiently worked with the team.

a. Social media and employability go hand in hand. The presence of technology is an important consideration as it helps the employment in their conduct and ensures a better practice. It leads to better transfer of knowledge and information. Paua Kensington uses social media for enhancing the brand at social media. Secondly, she can update her followers with writing and blogs (Williams, 2016).

Self-management goes a long way in planning and organizing. Paula Kensington backed herself with a strong will power and ensured that the adverse situation is in his favor. When she was named as the CFO of the year she carried on a personal analysis through SWOT analysis that provided a better answer.

Academic performance hardly matters because the only things that need to be done are to be a graduate. There is hardly any effect of academic performance because the only thing that keeps being in mind is the smooth flow of the journey. This should be done because it helps in the subject matter and leads to a better course of action It can be done in a strong manner and helps to ensure a better practice.

Given Information

Hire of kitchen in local area including electricity

  300 per week

Charge to client per cooking lesson

                       210

Additional food to be used per session during lesson

                           30

Cost of additional items required by actress – music/wine etc.

  80 per lesson

Cost of cleaners (2 hours of cleaning required after each session)

  15 per hour 

Cost of feeding actress’ minders and entourage

  60 per session

Hire of music equipment for four weeks

                        200

1

Calculation of the variable costs per cooking lesson session (unit)

Additional food to be used per session during lesson

                             30

Cost of additional items required by actress – music/wine etc.

                             80

Cost of cleaners

                             30

Cost of feeding actress’ minders and entourage

                             60

Total variable costs per cooking lesson session

                          200

2

Calculation of the contribution margin per cooking lesson session (unit)

Charge to client per cooking lesson

                          210

Variable costs per cooking lesson session

                          200

Contribution margin per cooking lesson session

                             10

3

Calculation of the fixed costs of the proposed lessons

Hire of kitchen in local area including electricity

                       1,200

Hire of music equipment

                          200

Total fixed costs

                       1,400

4

Calculation of the profit or loss of the proposed lessons

Charge to client per cooking lesson (210*5*4)

                       4,200

Variable costs per cooking lesson session (200*5*4)

                       4,000

Fixed costs

                       1,400

Net Profit / (loss)

                     (1,200)

Nigel should not accept the proposal as this will result in net loss of $1200 to him.

If Nigel expects the publicity from teaching the actress to be so positive that he will not need to advertise his other business this year, which will save him $1,000 in advertising, even than he should not accept the proposal as the net loss from the propsal is $1200 in current scenerio, even if the advertisement cost is not incurred, than Nigel will have to incur a net loss of $200.

PART-B

Given Information

He would need to hire the kitchen for the entire year (annual rent)

 $15,000

He would charge

 $50 per person per lesson

Food per lesson will be

 $5 per person

Cost of cleaners

  One cleaner to be paid a salary of $12,000 per year

1

Calculation of the contribution margin per cooking lesson per person

Charge to client per cooking lesson

                             50

Variable costs per cooking lesson session

                               5

Contribution margin per cooking lesson session

                             45

2

Calculation of the fixed costs of the proposed lessons

Hire of kitchen in local area including electricity

                     15,000

Cost of cleaners

                     12,000

Total fixed costs

                     27,000

3 (a)

Calculation of break even

Break Even

 Fixed costs / contribution margin pu

 27000/45

 600

Nigel requires to take 600 classes to achieve break even

No. of students required to achieve break even

 600/(30*3)

 7

3 (b)

Calculation of break even to make a target profit of $30,000

Break Even

 (Fixed costs +target profit) / contribution margin pu

 (27000+30000)/45

   1,267

Nigel requires to take 1267 classes to achieve break even with a target profit of $30,000

No. of students required to achieve break even

 1267/(30*3)

  14

4

Calculation of the profit or loss from these lessons for the year if his class size was 15 students per class

Charge to client per cooking lesson (50*15*30*3)

                     67,500

Variable costs per cooking lesson session (5*15*30*3)

                       6,750

Fixed costs

                     27,000

Net Profit / (loss)

                     33,750

Nigel will earn a total profit of $ 33,750 from these classes.

Particular

 Oct

 Nov

 Dec

 Total

Sales (units)

        44,000

        35,000

        38,000

     117,000

Sales price (per unit)

                12

                12

                12

                12

Total sales

     528,000

     420,000

     456,000

  1,404,000

Particular

 Oct

 Nov

 Dec

 Total

Units purchased

        33,000

        50,200

        50,800

     134,000

Purchase price

                  6

                  6

                  6

                  6

Total purchases

     198,000

     301,200

     304,800

     804,000

Inventory on 1st Oct

        25,000

                 -  

                 -  

Units sold

        44,000

        35,000

        38,000

Desired Inventory on 31st Dec

(40% of following month sales)

(40%*35000)        14,000

  (40%*38000)     15,200

      (40%*32000)  12,800

Units purchase

        33,000

        50,200

        50,800

Desired inventory on 31st December is computed as follows:

-Opening inventory = 25000 units

- Desired inventory = 40% of following month sales

Employability Skills

- For October = 40%*35000 = 14,400 (sales of 35000 of the following month)

-For November = 40%*38000 = 15,200 (sales of 38000 considered of the following month)

-For December = 40%*32000 =12,800 (sales of 32000 considered of the following month)

Budget refers to the estimation of income, revenues, production, sale, etc. for a future period. Normally, it is prepared for a accounting period and is always prepared in advance. It requires depth understanding of the organization structure and financials so that the appropriate estimations can be made. Budgeting is a technique of financial planning and thus serves as a financial tool for the management and helps in analyzing and decision making at various aspects (Brealey et. a, 2011).

Budget preparation responsibility lies with different departments for their respective areas, for e.g. direct material cost and volume estimation would be provided by procurement department, units sold and the price of sales estimation would be provided by sales department, etc.

Generally as a whole, high level management is involved in the preparation of budgets. But, 2 types of methods are prevalent for budget preparation namely, top down technique and bottom up technique. In top down technique the budget is prepared by the upper level management with the help of employees whereas in latter case, the budget is prepared by the employees and then reviewed by the management (Graham & Smart, 2012). Both the techniques have their advantages and disadvantages and the selection of appropriate technique depends upon the management policies and intention. If the management is of the view that employees can be involved in the preparation of the budget and confidentiality of the information is not of much relevance then bottom up technique can be followed otherwise the top down method can be considered.

Currently, the company is using top down approach for the preparation of budgets, however engagement of employees is also necessary for setting up a good and attainable budget. Hence, the management is advised, to engage the employees and take their inputs for preparation of budget, as they are the peoples who have to ultimately achieve the budget or perform it practically

 Assets

 =

 Liabilities

 +

 Owner's Equity

Trans

Date

 Cash

 Accounts Receivable

 Prepaid Rent

 Supplies

 Vehicle

 Office Equipment 

 GST paid

 Accounts Payable

 GST collected

 B. Swan Capital

 Revenues

 Expenses

Transfer of capital to business

01-Jan-17

                   25,000

           12,000

      37,000

Payment of Rent

04-Jan-17

                   (6,600)

             5,000

                600

      (1,000)

Purchase of office equipment

05-Jan-17

                   (4,400)

             4,000

                400

Purchased supplies on credit

06-Jan-17

                860

                   86

           946

Received commission

14-Jan-17

                     5,500

           500

        5,000

Motor Vehicle expenses paid

18-Jan-17

                         (88)

                     8

            (80)

Withdrawal for personal use

20-Jan-17

                         (60)

            (60)

Earned sales commission

25-Jan-17

             4,576

           416

        4,160

Paid for supplies purchased on 6/1

28-Jan-17

                       (946)

          (946)

Total

            18,406

        4,576

        5,000

           860

      12,000

        4,000

        1,094

          -  

       916

  36,940

    9,160

   (1,080)

Office Equipment

Dr

                     4,400

To Cash

Cr

                   (4,400)

(Being purchase of office equipment recorded)

Dupont Real Estate

BALANCE SHEET

For the month ended on 31st January, 2017

 (Amount in $)

Particulars

 As at
31 Jan, 2017

Current assets

Cash and cash equivalents

                   18,406

Trade and other receivables

                     4,576

Inventories - Supplies

                        860

GST Paid

                     1,094

Prepaid Rent

                     5,000

Total current assets

            29,936

Non-current assets

Property, plant and equipment

Vehicle

                   12,000

Office Equipment

                     4,000

Total non-current assets

            16,000

 Total assets - (a)

            45,936

Current liabilities

Trade and other payables

                            -  

GST collected

                        916

Total current liabilities

                 916

Non-current liabilities

Financial liabilities

                            -  

Employee benefits

                            -  

Total non-current liabilities

                    -  

Total liabilities - (b)

                 916

Net assets (a-b)

            45,020

Equity

Contributed equity

                   36,940

Reserves

                            -  

Retained earnings

                     8,080

Total equity

            45,020

GST collceted

Dr

                        916

To GST paid

Cr

                       (916)

(Being GST payable and receivable adjusted)

As per the General Accepted accounting principle, the company has a right to set off the similar liabilities and assets,

if the law permits them. Here, the company has both the liability and asset for GST collected and paid.

Hence, the company can adjust them, and can show the only remaining balance of either asset or liability.

In the given case, after set off the net balance of GST paid will remain

Date

Particulars

Ref

 Dr

 Cr

04-Jan-17

Bank

          15

To Interest earned

          15

(Being interest earned recorded)

09-Jan-17

Bank

        450

To DC Morris Music

        450

(Being amount read)

26-Jan-17

Telephone exp

          88

To Bank

          88

(Being telephone bill paid)

27-Jan-17

Bank

        150

To Dividend received

        150

(Being dividend rec recorded)

27-Jan-17

Bank charges

            8

To Bank

            8

(Being bank charges debited by bank)

Munro Music Store - General Ledger

Cash at bank

Date

Particulars

Jnl Ref

 Dr

 Cr

 Bal

01-Jan-17

Balance bd

        14,200

06-Jan-17

Sales

CR1

        550

        14,750

06-Jan-17

Bella's Bows

1253

    2,400

        12,350

06-Jan-17

Optus

1254

        674

        11,676

09-Jan-17

OZ Loans

Transfer

        800

        10,876

11-Jan-17

Careful freight Ltd

1255

    3,125

          7,751

12-Jan-17

Crisp & Co.

1001

        363

          8,114

13-Jan-17

Sales

CR2

        880

          8,994

16-Jan-17

RSCM

1256

        345

          8,649

18-Jan-17

Munro- Capital

1002

    1,000

          9,649

20-Jan-17

Sales

CR3

    1,045

        10,694

20-Jan-17

Wages

Transfer

    4,650

          6,044

23-Jan-17

Sundry exp

1257

        200

          5,844

23-Jan-17

Joe's Organ Pipes

1258

    1,055

          4,789

24-Jan-17

Chen Pyt Ltd

1003

    1,320

          6,109

25-Jan-17

Brisbane City Council

1259

    1,353

          4,756

26-Jan-17

Toyota servicing

1260

        750

          4,006

27-Jan-17

Sales

CR4

    3,410

          7,416

30-Jan-17

Sales

CR5

        825

          8,241

04-Jan-17

Inerest earned

          15

          8,256

09-Jan-17

DC Morris Music

        450

          8,706

26-Jan-17

Telephone exp

          88

          8,618

27-Jan-17

Bank charges

            8

          8,610

27-Jan-17

Dividend recd

        150

      8,760

Balance as per cash book

    8,760

Less: Amount debited by bank not recorded

20-Jan-17

Cheque number 2670 has been paid out from Munro Music Store’s account in error by the bank

       (2,000)

   (2,000)

Less: Cheque not deposited/cleared in bank but recorded in cash book

27-Jan-17

Sales

       (3,410)

30-Jan-17

Sales

           (825)

   (4,235)

Add: Cheque issued but not yet cleared

16-Jan-17

RSCM

345

23-Jan-17

Joe's Organ Pipes

1055

25-Jan-17

Sundry Exp

1353

    2,753

Balance as per bank statement

  5,278

References

Alter, S 2013, Work System Theory: Overview of Core Concepts, Extensions, and Challenges for the Future, Journal of the Association for Information Systems, vol. 14, no. 1, pp. 72-121.

Levine, S. S., & Prietula, M. J 2013, Open Collaboration for Innovation: Principles and Performance, Organization Science, Harvard Press

Hemmer, T., & Labro, E 2008, On the optimal relation between the properties of managerial and financial reporting systems, Journal of Accounting Research, vol. 46, pp. 1209–1240.

Olsen, E 2012,  Strategic Planning Kit for Dummies, John Wiley & Sons.

Weistroffer, H.R, Smith, C.H and Narula, SC 2010,  Multiple criteria decision support software, Springer: Oxford University Press.

Williams, P. (2016). Eyes on the price, viewed 21 April 2017, https://www.accaglobal.com/an/en/member/member/accountingbusiness/2017/02/interviews/paula-kensington.html

Brealey, R, Myers, S & Allen, F 2011, Principles of corporate finance, New York: McGraw-Hill/Irwin.

Graham, J. & Smart, S 2012, Introduction to corporate finance, Australia: South-Western Cengage Learning.

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