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Business Requirement for Finance 21 :]

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  1. 1. January 9, 2013Mr. Devzon Porras, MSA, CPAFaculty of the College of Accounting EducationUniversity of Mindanao, Davao CitySir Porras,Greetings!In partial completion of the requirements for the subject Finance 21, I would like to present toyou the following documents and statements in lieu of your requirement of letting us have our“2-week long business” operations with any business of our choice.I have to admit that I am no entrepreneur and domestic goddess per se but for the sake of thesubject and for the sake of truly appreciating the business world – entrepreneurship if I may beexact, here are the outputs for my business.I decided on having a small chocolate truffle business. So basically I made chocolate truffles.The process is quite easy, first, melt the chocolate. I decided to use Goya Dark Chocolate for it isnot too sweet and not too expensive also since I am only operating on a limited capital budget oftwo hundred and fifty pesos (250php). In order to melt the chocolate, I decided on placing itinside a pre-heated bowl and carefully mix it. I would present the steps in making this recipe onto the next documents that I would present.I got the idea from Food Network, thank God for that channel. Kidding aside, judging on howmy business went, I could say that it is likely to be successful in the future if given enough timeand enough effort. However, I could also say that I did have flaws during my businessoperations; the consistency of my quantities, the consistency of my the taste and flavour of myproduct – since I often shifted from muscovado to cocoa powder to Milo in terms of my coatingfor my chocolate truffles. I did not also opened to wide range of buyers since I frequently sold
  2. 2. my products to my neighbours and relatives but also, this opened to another possibility that Icould have occasional orders for the product which I actually did have during the New Year. Iwere not able to complete the business for the required two weeks – fourteen days to be exactand that is because of some personal reasons. Thus, I still present to you the requirements for thisproject. I had to make the most of what I could.Hence, in accordance of this requirement I present you the financial statements of my smallchocolate truffles business to show on how my business went in a short span of two weeks ortwelve days if I may say to be exact. Also I present to you the marketing strategies I used andapplied in order to promote and sell my product hence to acquire higher sales and greater profitper se. In lieu of this, I also have my realization regarding this requirement, and my thoughtsregarding the small business I ventured in.Hoping this would give you thoughts to see whether or not I did well in the short span of mybusiness.Expecting and hoping for your feedback soon!Sincerely,Kristine Joyce Tinga, BSA-studentUniversity of Mindanao, Matina Campus
  3. 3. INGREDIENTS10 packs of 38g Goya Dark ChocolateMuscovado SugarBrown SugarMiloWhite SugarPROCEDURES 1. Pre-heat the pan/bowl 2. Chop/slice the chocolates 3. Put them in the bowl 4. Pound/crush until medium-melted 5. Use spatula or spoon (in my case I used spoon) to mix the chocolate 6. Make sure the chocolate is free from chunks and bits of un-melted chocolates 7. When properly and thoroughly melted, chill for about 45-90 minutes.(in my case I opted for 1 hour) 8. Take out from the fridge, and grab a handful and roll them with your fingers until you make a circle 9. Roll the truffle on a bowl of muscovado sugar. 10. Viola! You now have your very own chocolate truffle. You can add peppermint syrup or vanilla if you like for additional taste. You can also use brown sugar instead of muscovado or any cocoa or milk powder depending on your choice.
  4. 4. MARKETING STRATEGY Okay, so here goes. Since my target market are my neighbours, I came up with a verybasic marketing strategy – Personal Selling; face-to-face contact with my customers which arepractically my neighbours. In layman’s terms, what I did was basically – visit each house door-to-door in order for me to introduce my product and give my contact number. I thought of doing the consignment thing but did not push through with it because first, Ihad to divide the profits. Second, I could not have any guaranty of keeping my product freshthrough my consignee even though he/she has the inherent responsibility of keeping it safe.Third, my consignee options were not really that eligible; a sari-sari store, a bakery, a mini-mart,a burger stand, a veggie-stall. In marketing terms, I could say that my marketing strategy could be related to one ofthe market coverage strategies – the Differentiated Marketing. Differentiated Marketing by definition concentrates on several market segmentsand designs separate product offers. It can be related to my case in such way that, I also have different market segmentsbecause my neighbours’ ages varies and so is their tastes and consumption and I also haveseparate product offers because some neighbours wanted to buy a couple of pieces only whileothers opted to buy a lot.
  5. 5. STATEMENT OF COMPREHENSIVE INCOMEINCOME % AmountNET SALES 100% 2,800phpTotal Profit 100% 2,800phpCost of Sales 73.98% 2071.30phpTotal Cost of Goods Sold 2071.30phpTOTAL INCOME 728.70Expenses:Consumption Expense 6.53% 182.92NET INCOME 19.49% 545.78php
  6. 6. STATEMENT OF FINANCIAL POSITIONASSETS Cash 318php Inventories 660.70phpTOTAL ASSETS 978.70phpLIABILITIES Accounts Payable 120phpOWNER’S EQUITY Tinga, Capital 858.7phpTOTAL LIABILITIES AND OWNER’S EQUITY 978.70php
  7. 7. REALIZATION and REFLECTION During the two-week course of my very short-termed, chocolate truffles business Irealized that one can start a small business even at home using the products and materials that arewithin reach and can be found at home or in stores nearby. I also realized that it is not easy doing such thing because it requires time, effort anddedication. To be perfectly honest, I really did not have my heart in this requirement however,there are things that one has to do so I convinced myself to just give it a shot. The first days were not so bad; I was able to sell all of my truffles because I sold them tokids who were playing outdoors, to my neighbours and to some of my relatives who werevisiting. However, there were days when not all my truffles were sold which made me really sadbecause first, I really put a lot of effort in making them, second I lost quite a good amount ofmark-up and sales and lastly, I could not sell them the next day because they would not taste thatgood anymore so I had no choice but to eat them. My small chocolate truffles business did okay in the span of twelve days if I may say andit feels good to start something on your own, earn a little on your own. It feels good to see thefruit of your very own labor in your own hands. However, I still do not have my whole heart onthis because being an entrepreneur is not part of my plans and goals. Although I can still do thisbusiness occasionally - whenever I receive orders and request but regularly? I doubt so. So that is practically all of it. Starting small and earning small is good and it feels niceand fulfilling as well because the fruit of your very own labor is right in front of you. Withproper time management, dedication, effort, selling and promoting skills – a small business suchas mine could turn out great in the long run. As they say, great things come from small beginnings.
  8. 8. GENERAL JOURNAL 2012 Cash Dec. 22 Tinga, Capital 250 To record the initial investment of Tinga Inventory Cash 210 To record the purchases of ingredients Cash Sales 312 To record the sales for the day Cost of Sales Inventory 209.82 To record the cost of goods sold for the day Inventory Dec. 23 Cash 200 To record the purchase of ingredients Cash Sales 248 To record sales for the day Cost of Sales Inventory 166.78 To record the cost of goods sold Inventory Dec. 24 Cash 248 To record the purchase of ingredients Cash Sales 280
  9. 9. To record sales for the day Cost of Sales Inventory 188.30 To record the cost of goods sold InventoryDec. 26 Cash 327 To record the purchase of ingredients Cash Sales 304 To record sales for the day Cost of Sales Inventory 204.44 To record the cost of goods sold InventoryDec. 27 Cash 280 To record the purchase of ingredients Cash Sales 184 To record sales for the day Cost of Sales Inventory 123.74 To record the cost of goods sold Consumption Expense Inventory 86.08 To record the consumption of unsold products for the day
  10. 10. PurchasesDec. 28 Cash 172 To record the purchase of ingredients Cash Sales 224 To record sales for the day Cost of Sales Inventory 150.64 To record the cost of goods sold InventoryDec. 29 Cash 268 To record the purchase of ingredients Cash Sales 256 To record the sales for the day Cost of Sales Inventory 172.16 To record the cost of goods sold InventoryDec. 30 Cash 261 To record the purchase of ingredients Cash Sales 248 To record sales for the day Cost of Sales Inventory 166.78 To record the cost of goods sold
  11. 11. InventoryDec. 31 Cash 292 To record the purchase of ingredients Cash Sales 328 To record sales for the day Cost of Sales Inventory 225.96 To record the cost of goods sold 2013 InventoryJan. 2 Cash 282 To record the purchase of ingredients Cash Sales 184 To record sales for the day Cost of Sales Inventory 123.74 To record the cost of goods sold Consumption Expense Inventory 96.84 To record the consumption of unsold goods for the day InventoryJan. 3 Cash 192 To record the purchase of ingredients Cash Sales 232
  12. 12. To record sales for the day Cost of Sales Inventory 156.02 To record the cost of goods sold Class Contribution Accounts Payable 120 To record proposed class contribution from profit Sales 2800 Cost of Sales 1888.38 Expenses 132.92 Income Summary 778.70 To close income and expenses Income Summary Tinga, Captial 778.70 To close the income summary accountGENERAL LEDGER CASH12-22-12 250 210 31212-23-12 248 20012-24-12 280 24812-26-12 304 32712-27-12 184 280
  13. 13. 12-28-12 224 17212-29-12 256 26812-30-12 248 26112-31-12 328 29201-02-13 184 28201-03-13 232 192 3050 2732 318 INVENTORY12-22-12 210 209.8212-23-12 200 166.7812-24-12 248 188.3012-26-12 327 204.4412-27-12 280 209.8212-28-12 172 150.6412-29-12 268 172.1612-30-12 261 166.7812-31-12 292 225.9601-02-13 282 220.5801-03-13 192 156.02 2732 2071.30 660.70 ACCOUNTS PAYABLE 120 120
  14. 14. CONSUMPTION EXPENSES12-27-12 86.0801-03-13 96.84 182.92
  15. 15. NOTES – INCOME STATEMENT(1)Beginning Inventory 0Purchases 2732phpGoods Available For Sale 2732phpEnding Inventory 660.70phpCost of Goods Sold 2071.30php(2) The consumption expenses for the dates December 27, 2012 and January 2, 2013 areactually goods that were not sold and rather consumed by me and my family. I decided not to sellthem anymore the following day because the texture and moisture of the product will be affectedif chilled overnight and will not taste as good as it should if it were fresh and it will be muchharder to bite and chew. If put in the refrigerator rather than the freezer, the product will moistand may smell like the refrigerator which is not good since it could affect the image of myproduct when it comes to freshness; and I do not want to risk the quality of my product thatcould affect my profitability since I am still starting. These expenses are credited to the inventory account net of mark-up since it is the actualcost of the goods. However, even if it is deemed to have been sold, I am operating on a soleproprietor basis and these consumption expenses are rather personal and still could be reflectedin my financial statements.(3)The cost of goods sold is net of the mark-up price and I believe that the higher the sales, thelesser the cost of goods sold since the profit margin mark-up absorbs the latter.
  16. 16. NOTES – FINANCIAL POSITION(1) The aforementioned accounts payable reflects the class contribution that I will beparticipating in. Hence, I decided to get the money from the profit of this business since it wouldbe better because I could already spare beforehand the contribution and avoid contingencies suchas I might overspend and unwillingly spend the allotted contribution.(2) The inventories stated are deemed to be the remnants of the muscovado sugar, Milo andbrown sugar. Hence, I no longer have finished goods on hand because as mentioned earlier,unsold and are already consumed by me and my family. Thus, there are also no more darkchocolates left since I melt everything I purchase so that I can convert it to finished goods –chocolate truffles. I do this so that I can make the most of what I have.
  17. 17. PRODUCT PRICING250php -210php = 40php210php – ingredients used to make chocolate truffles.On the first day, I was able to make 78 chocolate truffles so...210php/78pcs = 2.69php/chocolate truffle
  18. 18. Selling price 4phpLess: Unit Price 2.69phpTotal mark-up per unit 1.31php 48.70% mark-up on priceNote: I decided to use the same unit price over the days during the operations to uniformitypurposes.