Strategies to ensure responsible accounting practices

Overview

One of the measures of success in any business is profitability. All successful managers and business owners must have an understanding of how to assess the profitability of a company. This is done through the use of accounting.

By working through the accounting cycle, you will understand how money flows through a company and what other components are included in the assessment of profitability and financial stability. Using this information can also help you determine whether or not the organization can afford to stay open employing current practices. The accounting information helps you determine what types of changes might need to be made to allow the organization to become profitable if it is currently struggling financially. This process also helps you understand the level of commitment to attention to detail that is required in a successful business venture.

In the ratio analysis and memo, you will use course-provided information to 1) demonstrate the purpose and importance of the ratios used, and 2) communicate the results of operations to stakeholders and/or interested parties.

This assessment addresses the following course outcomes:

· Apply the accounting cycle to business transactions for communicating financial data

· Interpret financial statements for informing business decisions

· Analyze the importance of industry standards and regulations in the implementation of the accounting cycle in supporting responsible practices

Prompt

Your dog, Peyton, has severe allergies and cannot have the usual store-bought dog treats. You have been making homemade treats for him that are all-natural and hypo-allergenic. Over the past year, you have been making and selling these treats out of your home and have been quite successful. You now have an opportunity to open your own dog treat bakery. You have decided on a corporate form of business and have named your company “Peyton Approved.”

During the first part of this final project, you were asked to follow the business transactions for a six-month period from that initial stage of analysis and recording through the reporting process. Now, you will use this information to compose a memorandum to the bank detailing the results of operations as communicated in the financial statements you have produced based on the business transactions for the period.

Use your completed workbooks to prepare your ratio analysis and memo, which will include an overview of the company’s accounting system, discussion of the results of operations and what those results mean, and a discussion on what changes in operations might need to be made to make the company more profitable. This memo will be used as part of a loan package to request additional funding for potential expansion in year two.

Specifically, the following critical elements must be addressed:

1. Ratio Analysis

a) Create a ratio analysis. Be sure to include all relevant ratios.

b) Discuss each ratio. What does the ratio tell you?

c) Why is ratio information useful? What decisions will you make based on the ratio?

2. Prepare a Memo to a Bank

a) Provide an overview of the company’s accounting system. What basis of accounting is used? Why?

b) What strategies is the business using to ensure responsible accounting practices? Why have these strategies been selected?

c) Describe the overall accounting process. For example, when are entries made, how often are statements produced and reviewed, and why? Describe the internal controls for cash that are in place.

d) Analyze the results of operations. What do these results tell a business?

e) What do the statements themselves tell about the strengths and weaknesses of the company’s financial position? What does the ratio analysis tell someone about the strengths and weaknesses in the company’s financial position?

f) Discuss the changes in operations that might need to be made to make the company more profitable. Justify why each change may be necessary.

g) What are the company’s financial strengths and weaknesses? What specific changes can be made to alleviate the weaknesses?

h) What opportunities can the company explore because of its strengths? How would these be beneficial?

Final Project Part II Rubric

Guidelines for Submission: The submission for Final Project Part II will include your ratio analysis and a memo to the bank. Your accounting memo should be 5–7 pages, double-spaced, with one-inch margins, 12-point Times New Roman font, and APA format.

Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions.

Critical Elements

Exemplary

Proficient

Needs Improvement

Not Evident

Value

Ratio Analysis: Ratio Analysis

Creates a ratio analysis including all relevant ratios

(100%)

Creates a ratio analysis, but does not include all relevant ratios (55%)

Does not create a ratio analysis (0%)

4.6

Ratio Analysis: Discuss

Discusses each ratio and describes what each ratio informs

(100%)

Discusses each ratio, but does not describe what each ratio informs

(55%)

Does not annotate each ratio

(0%)

32

Ratio Analysis: Decisions

Meets “Proficient” criteria, and decisions are well supported and appropriate

(100%)

Explains what ratio information is useful and determines decisions to be made based on the ratios

(85%)

Explains what ratio information is useful, but does not determine what decisions will be made based on the ratios

(55%)

Does not explain why ratio information is useful

(0%)

4.6

Prepare a Memo: Accounting System

Meets “Proficient” criteria and demonstrates knowledge of different bases of accounting

(100%)

Provides an overview of the company’s accounting system, identifies the basis of accounting used, and addresses why basis is used

(85%)

Provides an overview of the company’s accounting system and identifies the basis of accounting used, but does not address why basis is used (55%)

Does not provide an overview of the company’s accounting system

(0%)

10.6

Prepare a Memo: Strategies

Meets “Proficient” criteria and demonstrates awareness of strategies and their implications on accounting practices

(100%)

Identifies strategies being used to ensure responsible accounting practices and describes why strategies have been selected

(85%)

Identifies strategies being used to ensure responsible accounting practices, but does not describe why strategies have been selected

(55%)

Does not identify strategies being used to ensure responsible accounting practices

(0%)

10.6

Prepare a Memo: Internal Controls

Meets “Proficient” criteria, and description is exceptionally clear and contextualized

(100%)

Describes the overall accounting process and describes the types of internal controls for cash that are in place

(85%)

Describes the overall accounting process, but does not describe the types of internal controls for cash that are in place

(55%)

Does not describe the overall accounting process

(0%)

10.6

Prepare a Memo: Operations

Meets “Proficient” criteria and uses concrete examples to substantiate claims

(100%)

Analyzes the results of operations and describes what the results tell a business (85%)

Analyzes the results of

operations, but does not describe what the results tell a business (55%)

Does not analyze the results of operations

(0%)

4.6

Prepare a Memo: Strengths and Weaknesses

Meets “Proficient” criteria, and description is exceptionally clear and contextualized

(100%)

Describes what statements and ratio analysis tell about the strengths and weaknesses of the company’s financial position

(85%)

Describes what statements or ratio analysis tell about the strengths and weaknesses of the company’s financial position

(55%)

Does not describe what

statements and ratio analysis tell about the strengths and weaknesses of the company’s financial position

(0%)

4.6

Prepare a Memo: Changes in Operations

Meets “Proficient” criteria and demonstrates awareness of what makes a company profitable (100%)

Discusses the changes in operations that may need to be made and justifies changes (85%)

Discusses changes in operations that may need to be made, but does not justify changes

(55%)

Does not discuss changes in operations that may need to be made

(0%)

4.6

Prepare a Memo: Financial Strengths and Weaknesses

Meets “Proficient” criteria and offers insight into why changes will alleviate weaknesses

(100%)

Identifies the company’s financial strengths and weaknesses and determines changes to alleviate the weaknesses

(85%)

Identifies the company’s financial strengths and weaknesses, but does not determine changes to alleviate the weaknesses

(55%)

Does not identify the company’s strengths and weaknesses

(0%)

4.6

Prepare a Memo:

Meets “Proficient” criteria and

Identifies opportunities that the

Identifies opportunities that the

Does not identify opportunities

4.6

Opportunities

demonstrates awareness of the business climate

company can explore due to its strengths and describes how the opportunities could be beneficial

company can explore due to its strengths, but does not describe how the opportunities could be beneficial

that the company can explore

(100%)

(85%)

(55%)

(0%)

Articulation of

Submission is free of errors

Submission has no major errors

Submission has major errors

Submission has critical errors

4

Response

related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-to-read format

related to citations, grammar, spelling, syntax, or organization

related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas

related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas

(100%)

(85%)

(55%)

(0%)