by Heerak Choubisa

1. CASE STUDY ON “KIM FULLER”
Prepared by:
Heerak Choubisa

2. INDEX
Introduction
Accounting Information
Non-Accounting Information
Some Accounting Concepts
Strengths
Weakness
Opening Balance Sheet and Notes
Information needed to prepare Income Statement
Transaction and Assumptions
Income Statement
Analysis of Business
Closing Balance Sheet

3. INTRODUCTION
 Kim Fuller, who was working in a large chemical
firm as a District Sales Engineer. He learned that
company had developed use for the recycled
material in pulverized form.
 In November 2010, he checked for initial cost of
the business.

4.  For that he bought a truck, three trailers, two
grinding machine & supplies and parts to run
and maintain the business.
 He also purchased a computer, warehouse,
accounting software.
 He also invested his savings of $75,000.

5.  He borrowed $90,000 from his two sisters and a
brother for down payment of $50,000 for warehouse.
 He also hired a truck driver and grinding machine
workers.
 He took help of his neighbors for learning &
purchasing of accounting software.
 He obtained enough knowledge for recording
transactions from his neighbor.

6. ACCOUNTING INFORMATION
 Owned capital was of $75,000 from his savings.
 Acquired used truck and 3 trailers, grinding
machine, machine part, personal computer for
total of $65,000
 Borrowed $90,000 from two sisters and brother
for down payment of building.
 Warehouse of $162,000 and paid $50,000 as its
down payment.

7. NON ACCOUNTING INFORMATION
 Fuller think to start a business of plastic bottles.
 Learnt maintaining books of accounts for bank
dealings, tax returns and general management
of the company.
 List out the purchased items, debts and other
information in Accounting Software.

8.  Fuller signed contract with two bottling companies
and started business by companies and hiring
grinding machine workers and a truck driver.
 In Nov 2010, he started to find out the cost involved
in setting up the business Found a warehouse.
 Approval of mortgage from bank for balance of
building.

9. SOME ACCOUNTING CONCEPTS
Dual Aspect Concept:
The dual aspect concept states that every
business transaction requires recordation in
two different accounts. This concept is the
basis of double entry accounting.
 Accrual Concept:
Accrual concept is the most fundamental
principle of accounting which requires
recording revenues when they are earned
and not when they are received in cash, and
recording expenses when they are incurred
and not when they are paid.

10. Money Measurement Concept:
means only those transactions and events that are
capable of being measured in monetary terms are
recognized in the financial statements.
Matching Principle:
This is the concept that, when you record revenue,
you should record all related expenses at the same
time.

11.  CONSISTENCY PRINCIPLE:
This is the concept that, once you adopt an
accounting principle or method, you should
continue to use it until a better principle or
method comes along.
 COST PRINCIPLE:
This is the concept that a business should
only record its assets, liabilities, and equity
investments at their original purchase costs.

12. OPENING BALANCE SHEET OF KIM FULLER AS ON
NOVEMBER 2010
Liabilities Amounts($) Assets Amounts($)
Owner’s equity 75,000 Non – Current Assets
Fixed assets 65,000
Secured Loan Warehouse 1,62,000
Mortgage loan
(against Warehouse) 1,12,000 Current Assets
Cash/ Bank 50,000
Unsecured Loan
Family loan 90,000
Total 2,77,000 Total 2,77,000

13. FIXED ASSETS INCLUDE:
 Grinding Machine $ 29000
 Truck and Trailers $ 30000
 Supplies and Parts $ 5000
 Personal Computer $1000
$ 65000

14. WORKING NOTES
(Amounts in $)
 Fuller’s investment 75,000
+ Sibling investment 90,000
(-)Equipment cost (65,000)
(-)Warehouse deposit (50,000)
Cash/ Bank 50,000
 Mortgage
Warehouse costing 1,62,000
(-)Down-payment (50,000)
Mortgage 1,12,000

15. STRENGTHS
 Excellent location for business.
 Accounting support from neighbor.
 He researched the entire element before
starting the business.
 Ready raw material was available which
were cheaper so, he can grab high profit
due to low total cost.
 He manages to get the borrowed capital from
his relative on Cheaper bank interest rate.

16. WEAKNESS
 Borrowed capital is more than the owned
capital which result into more interest
payment.
 He is taken big amount of mortgage loan
which result into more interest payment.
 He invested a huge sum of money into
purchased the warehouse , which results into
more interest payment.

17. INFORMATION NEEDED TO DETERMINE
“PROFIT OR LOSS”
 As in the case there is no information is
available regarding profit and loss so we
required the following information.
a. Information related to Purchase and sales.
b. Information related to wages and salary paid to
workers and driver.
c. Information related to rate of interest on loan.
d. Information related to rate of depreciation on
various assets.

18. TRANSACTION & ASSUMPATION
 Purchased raw material worth $1,00,000.
 Paid wages to workers and truck driver is $30,000.
 Depreciation on Fixed Assets @15%, $4,065 for 5
months.
 Purchased accounting software $ 100
 Interest paid for mortgage loan @12%, $5,600 for 5
months
 Interest paid to the relatives for the borrowed loan @8%,
$3,000 for 5 months.
 Depreciation on Warehouse building @15%, $10,125 for
5 months.
 Sales made worth $ 1,50,000.
 Closing Stock at the end of year $20,000.

19. INCOME STATEMENT OF KIM FULLER FOR THE YEAR ENDED
31ST MARCH 2011
Receipts Amount($)
Sales revenue 1,50,000
Closing stock 20,000
(A) Total 1,70,000
Expenses Amount($)
Purchased 1,00,000
Wage paid 30,000
Depreciation on fixed asset 14,190
Interest on mortgage Loan 5,600
Interest on relative’s loan 3,000
(B) Total 1,52,790
Net income (A-B) 17,210

20. ANALYSIS OF FULLER’S BUSINESS
 Mr. fuller has just started his business and now he
is stared getting contracts but not having too much
of sales and the expenses are high so he was not
able to make high profit but now he is having all the
machinery and equipments so eventually he’ll
make profit.

21. CLOSING BALANCE SHEET OF KIM FULLER AS ON 31ST
MARCH 2011
Liabilities Amount(
$)
Assets Amount(
$)
Owners equity 75000 Non-current assets
Reserve & Surplus 17,210 Fixed assets
65,000
(-) Deprecation
4,065
60,935
Warehouse
1,62,000
(-) depreciation
10,125
1,51,875
Secured Load Accounting software 100
Mortgage loan
(against Warehouse) 1,12,000 Current account
Unsecured Loan Cash/ bank 61,300

22. THANK YOU…