Kim Fuller started a recycling business in November 2006. He invested $75,000 of his savings and borrowed $90,000 from family. He purchased equipment, a warehouse, and set up accounting software. In the first year, the business had $20,200 in receipts from sales and appreciation of the warehouse. Expenses totaled $15,650. The business made a net income of $4,550 in its first year. While the business was profitable, taking out a large mortgage loan for the warehouse left Fuller with high debt levels in the early stages of the business.

1. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 1
Good After-noon!!!!Good After-noon!!!!
Welcome to the Session !!!!Welcome to the Session !!!!
Thank you for switching off your mobile phone.Thank you for switching off your mobile phone.
As presentation contains some auto scroll slides,As presentation contains some auto scroll slides,
Please pay complete attention to the session toPlease pay complete attention to the session to
avoid unnecessary repetition.avoid unnecessary repetition.

2. 06/02/1506/02/15 11:17 AM11:17 AM GHPIBM (Dept. of MBA), SPUGHPIBM (Dept. of MBA), SPU 22
Kim FullerKim Fuller
A Case Study in Managerial AccountingA Case Study in Managerial Accounting
Get Set And…..

3. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 3
Prepared ByPrepared By
Nirav PatelNirav Patel
Dhaval DaveDhaval Dave
Mehul RathodMehul Rathod
Neeta PithiyaNeeta Pithiya
Pooja ShekhawatPooja Shekhawat
Rajendra ThakareRajendra Thakare
Rajul PatelRajul Patel

4. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 4
INTRODUCTIONINTRODUCTION
-By Nirav Patel-By Nirav Patel

5. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 5
Kim Fuller, who was working in a largeKim Fuller, who was working in a large
chemical firm as a District Sales Engineer.chemical firm as a District Sales Engineer.
He learned that company had developed aHe learned that company had developed a
use for the recycled material in pulverizeduse for the recycled material in pulverized
form.form.

6. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 6
In November 2006, he checked for initialIn November 2006, he checked for initial
cost of the business.cost of the business.
For that he bought a truck, three trailers,For that he bought a truck, three trailers,
two grinding machine & supplies and partstwo grinding machine & supplies and parts
to run and maintain the business.to run and maintain the business.

7. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 7
He also purchased a computer, aHe also purchased a computer, a
warehouse, accounting software.warehouse, accounting software.
He also invested his savings of $75,000.He also invested his savings of $75,000.
He borrowed $90,000 from his two sistersHe borrowed $90,000 from his two sisters
and a brother for down payment ofand a brother for down payment of
$50,000 for warehouse.$50,000 for warehouse.

8. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 8
He also hired a truck driver and grindingHe also hired a truck driver and grinding
machine workers.machine workers.
He took help of his neighbour for learningHe took help of his neighbour for learning
& purchasing of accounting software.& purchasing of accounting software.

9. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 9
He obtained enough knowledge forHe obtained enough knowledge for
recording transactions from his neighbour.recording transactions from his neighbour.

10. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 10
ACCOUNTING & NON-ACCOUNTING & NON-
ACCOUNTING INFORMATIONACCOUNTING INFORMATION
-By Dhaval Dave-By Dhaval Dave

11. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 11
In this case there are the following classification are available on theIn this case there are the following classification are available on the
basis of accounting and non-accounting information:basis of accounting and non-accounting information:
Accounting InformationAccounting Information::
Owned capital was of $75,000 from hisOwned capital was of $75,000 from his
savings.savings.
Acquired used truck and 3 trailers,Acquired used truck and 3 trailers,
grinding machine, machine part,grinding machine, machine part,
personal computer for total of $65,000.personal computer for total of $65,000.

12. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 12
Borrowed $90,000 from two sisters andBorrowed $90,000 from two sisters and
brother for down payment of building.brother for down payment of building.
Warehouse of $162,000 and paidWarehouse of $162,000 and paid
$50,000 as its down payment.$50,000 as its down payment.

13. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 13
Non-Accounting InformationNon-Accounting Information::
Fuller think to start a business of plasticFuller think to start a business of plastic
bottles.bottles.
In Nov 2006, he started to find out theIn Nov 2006, he started to find out the
cost involved in setting up the business.cost involved in setting up the business.

14. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 14
Found a warehouse.Found a warehouse.
Approval of mortgage from bank forApproval of mortgage from bank for
balance of building.balance of building.
Learnt maintaining books of accounts forLearnt maintaining books of accounts for
bank dealings, tax returns and generalbank dealings, tax returns and general
management of the company.management of the company.

15. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 15
List out the purchased items, debts andList out the purchased items, debts and
other information in Accountingother information in Accounting
Software.Software.
Fuller signed contract with two bottlingFuller signed contract with two bottling
companies and started business bycompanies and started business by
hiring grinding machine workers and ahiring grinding machine workers and a
truck driver.truck driver.

16. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 16
OPENINGOPENING
BALANCE SHEETBALANCE SHEET
-By Neeta Pithiya-By Neeta Pithiya

17. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 17
Kim Fuller Ltd.Kim Fuller Ltd.
Balance SheetBalance Sheet
as of 31as of 31stst
December 2007December 2007
Assets Amount Liabilities & O.E Amount
Current Assets: Owner's Equity 75,000
Cash/Bank 50,000 Current Liabilities:
Stock 2,000 Family Loan 90,000
Mortgage Loan
(Against Ware house) 112,000
Non-Current Assets:
Fixed Assets 63,000
Ware House 162,000
Total 277,000 Total 277,000
Figures in $Figures in $

18. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 18
STRENGTHSSTRENGTHS
-By Mehul Rathod-By Mehul Rathod

19. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 19
Excellent location for the business.Excellent location for the business.
Accounting assistance from a neighbour.Accounting assistance from a neighbour.
He researched the entire element beforeHe researched the entire element before
starting the business.starting the business.

20. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 20
Ready raw material was available whichReady raw material was available which
were cheaper so, he can grab high profitwere cheaper so, he can grab high profit
due to low total cost.due to low total cost.
He managed to get the borrowed capitalHe managed to get the borrowed capital
from his relatives on relaxable interestfrom his relatives on relaxable interest
rates in comparison to bank interest rate.rates in comparison to bank interest rate.

21. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 21
WEAKNESSESWEAKNESSES
-By Rajendra Thakare-By Rajendra Thakare

22. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 22
Because of heavy debt creditor wouldBecause of heavy debt creditor would
not like to give him loan.not like to give him loan.
Borrowed capital is more than the ownedBorrowed capital is more than the owned
capital which result into more interestcapital which result into more interest
payment.payment.

23. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 23
He invested a huge sum of amount intoHe invested a huge sum of amount into
purchasing the warehouse, which resultspurchasing the warehouse, which results
into less working capital.into less working capital.
He has taken big amount of mortgageHe has taken big amount of mortgage
loan which result into more interestloan which result into more interest
payment.payment.

24. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 24
TRANSACTIONSTRANSACTIONS
-By Pooja Shekhawat-By Pooja Shekhawat

25. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 25
Following Transactions were occurredFollowing Transactions were occurred
during the year:during the year:
Purchased raw material worth $1,000.Purchased raw material worth $1,000.
Carriage inward $50.Carriage inward $50.
Paid wages to workers and truck driverPaid wages to workers and truck driver
$1,000.$1,000.
Depreciation on Fixed Assets @10%,Depreciation on Fixed Assets @10%,
$6,300.$6,300.
Purchased accounting software $100.Purchased accounting software $100.

26. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 26
Interest payable for mortgage loan @5%,Interest payable for mortgage loan @5%,
$5,600.$5,600.
Interest payable to the relatives for theInterest payable to the relatives for the
borrowed loan @3%, $2,700.borrowed loan @3%, $2,700.
Ware house building appreciated @10%,Ware house building appreciated @10%,
$16,200.$16,200.
Sales made worth $4,000 (cost priceSales made worth $4,000 (cost price
$2,500).$2,500).
Closing Stock at the end of year $500.Closing Stock at the end of year $500.

27. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 27
ANALYSIS STATEMENTANALYSIS STATEMENT
-By Pooja Shekhawat-By Pooja Shekhawat
OpeningOpening........

28. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 28
INCOME STATEMENTINCOME STATEMENT
-By Rajul Patel-By Rajul Patel

29. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 29
Receipt Amount
Sales Revenue 4000
Appreciation on Building 16200
(a) Total(a) Total 20200
Expenses Amount
Wage Paid 1000
Depreciation on Fixed Assets 6300
Interest on Mortgage Loan 5600
Interest on Relative's loan 2700
Carriage Inward 50
(b) Total(b) Total 15650
Net Income (a-b) 4550
Figures in $Figures in $
Income Statement for the year ended 2007-08Income Statement for the year ended 2007-08

30. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 30
CLOSINGCLOSING
BALANCE SHEETBALANCE SHEET
-By Rajul Patel-By Rajul Patel

31. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 31
Kim Fuller Ltd.Kim Fuller Ltd.
Balance SheetBalance Sheet
as of 31as of 31stst
December 2007December 2007
Assets Amount
Liabilities &
O.E Amount
Current Assets:
Closing Stock 500 Owner's Equity 77050
Cash/Bank 51850 Other Liabilities 210300
Non-Current Assets:
Fixed Assets 63000
(-) Depreciation 6300 56700
Warehouse 162000
(+) Appreciation 16200 178200
Accounting Software 100
Total 287350 287350
Figures in $Figures in $

32. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 32
SUGGESTIONSSUGGESTIONS
-By Nirav Patel-By Nirav Patel

33. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 33
Though Kim Fuller showed some quick decision makingThough Kim Fuller showed some quick decision making
skill by starting the business at right time, but alsoskill by starting the business at right time, but also
showed immaturity by purchasing warehouse building atshowed immaturity by purchasing warehouse building at
such an early statesuch an early state
Suppose, if he had taken warehouse on rent for a periodSuppose, if he had taken warehouse on rent for a period
of 20 years & cost price is $162,000. Then he had to payof 20 years & cost price is $162,000. Then he had to pay
$8100$8100** every year which provides him more workingevery year which provides him more working
capital for day to day operations.capital for day to day operations.
* Rent =* Rent = Property AmountProperty Amount == $162,000$162,000 = $8100 Per Year.= $8100 Per Year.
Time PeriodTime Period 2020

34. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 34
We are thankful to Mr. Ashish Mehta for hisWe are thankful to Mr. Ashish Mehta for his
valuable suggestions and providing anvaluable suggestions and providing an
opportunity to prove ourselves .opportunity to prove ourselves .
- Team- Team

35. 06/02/15 11:17 AM GHPIBM (Dept. of MBA), SPU 35
Thank you!!!!!Thank you!!!!!