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Homework answers / question archive / Natalie Koebel spent much of her childhood learning the art of cookie making from her grandmother
Natalie Koebel spent much of her childhood learning the art of cookie making from her grandmother. They passed many happy hours mastering every type of cookie imaginable and later creating new recipes that were both healthy and delicious. Now at the start of her second year in college, Natalie is investigating various possibilities for starting her own business as part of the requirements of the entrepreneurship program in which she is enrolled. A long-time friend insists that Natalie has to somehow include cookies in her business plan. After a series of brainstorming sessions, Natalie settles on the idea of operating a cookie-making school. She will start on a part-time basis and offer her services in people's homes. Now that she has started thinking about it, the possibilities seem endless. During the fall, she will concentrate on holiday cookies. She will offer individual lessons and group sessions (which will probably be more entertainment than education for the participants). Natalie also decides to include children in her target market. The first difficult decision is coming up with the perfect name for her business. In the end, she settles on "Cookie Creations" and then moves on to more important issues.
a) What form of business organization -proprietorship, partnership, or corporation- do you recommend that Natalie use for her business? Discuss the benefits and weaknesses of each form and give the reasons for your choice.
b) Will Natalie need accounting information? If yes, what information will she need and why? How often will she need this information?
c) Identify specific asset, liability, and owner's equity accounts that Cookie Creations will likely use to record its business transactions.
d) Should Natalie open a separate bank account for the business? Why or why not?
a. Since Natalie decided to start business herself, the best form or business organization is proprietorship or single management.
Advantages
1. Easy to start
2. He will enjoy the full profit
3. Sudden decision making
4. Less capital required than corporate
Disadvantages
1. Unlimited liability
2. Public sourcing of funds not available
3. Continuation is a question
b. The required accounting information are:
1. Entity concept- business is different from owner
2. Monetary measurement- transactions that are related to money terms are recorded.
3. Periodicity concept- financial information is recorded and valued based on a particular period of time e.g. one year.
4. Matching concept- to match expenses made against income earned.
5. Going concerned- business will run for a foreseeable future.
c.
| Assests | Owner's equity | Liability |
| Cookie maker | Not required any equity capital | Unlimited |
| Micro wave oven | Because she herself fund the program | Based on the debts she faces in her business |
| Mixer | ||
| And others |
d. Yes, to account separately the funds of the business.
