Business Structure Of Cynthia’s Hairdressing And Beauty Salon

Financial Information

Discuss about the Business Structure Of Cynthia’s Hairdressing And Beauty Salon.

1. A lot of factors needs to be kept in mind while selecting a business structure for any company. The most important of these factors being-

• Control – The level of control that the founders wants to have on the incorporated business. There can be various business structure like sole proprietorship, partnership, and company formation. It is important to select the best business type that suits the needs of the owner.
• Cost and complexity of formation of the legal structure- Setting up of business includes large amount of cost and legal matters that needs to be addressed, hence that must also be considered.
• Tax Implication – The business structure would define the type of tax implications that the business would be entitled to, hence that must also be considered.
• Ongoing Administration – Each business structure needs specific type of planning and administration, hence that should be also kept in mind(Abbott & Kantor, 2017).

Based on all these factors it can be said that there needs a lot of planning and research before starting with any business and keeping in mind the type of business structure that the venture would have.

1. The said business would be a partnership, and the company form and the sole proprietorship business have their own share of advantages and disadvantages. In terms of benefits, the sole proprietorship has more control but there is unlimited liability associated with it. In case of company, the structure is more organized and there is less amount of control related issues associated with it. In case of partnership both the revenues and the liabilities get divided between the partners.

The main accounting and supporting systems would be required by the company to provide support to the company and will help in the day to day operations of the company. The accounting software would be required to provide support in formation and maintenance of accounts of the company and formation of the financial statements. This will help the management in better calculation of revenues and generation of results. There is various software available in the market that can easily help the management like Tally, Xero, SAP etc (Dichev, 2017). The company also needs to appoint experts that have knowledge regarding this software and can help the company in maintaining their data. The company would also require laptops and computers for accounting purpose and will require machines that would help in billing and generation of receipts. Since it is a beauty parlor it will require various type of cosmetics and beauty related gadgets that are used extensively in parlors (Kusolpalalert, 2018). Hence, we see that the management has to arrange for a variety of systems that they would require running the business seamlessly without any issues.

The major four accounting assumptions are – going concern principle, accrual concept, consistency, matching concept. All these forms the pillar of accounting and it is necessary to follow them to make sure that the books of the company are free from all kind of errors. Accounting assumptions and principles forms the basis of the financial statements and cannot be ignored while preparation of the books of accounts for the company. Going concern principle signifies the fact that the business is an ongoing one and it has no plans to shut down in near future. The accrual concept is based on the principles when should a transaction be recorded for business purpose, when it is accrued or when it is realized. Hence this helps in accurate revenue recognition for the business and plays an important role in ascertaining the total profitability of the business. One more assumption is that of consistency which means that the transactions should be recorded on a consistent basis and there should be no negligence in the same. All these are very important from business point of view and following of accounting principles and policies are necessary for any business (Chariri, 2017).

Capital Requirements

The possible capital expenditure that can arise during the business would include getting a place on rent for the salon, this would be the biggest investment. After that the company needs to get certain equipment, gadgets, machinery that would be required in the salon. Also, being in the beauty industry the venture would require a large amount of investment in the beauty products, makeup products, etc. So, all these would be the initial investment that the company would be required to make. Apart from the that the company would need to appoint expert staff that would help them in management of their business, trained beauticians that will help in providing good services to the customers. Also, getting the business registered and getting all the dealing done would require a large amount of investment. The owner needs to think of possible ways from where they can boot strap their business and invest in the company or they can also take loan from the market but this will again increase their overall cost of investment in the initial phase. Thus, the management should explore all the possible options before raising funds and one that is the cheapest method should be applied by the company. The overall capital structure needs to be defined properly so that the company does not face much issues in the later stages. The overall level of liquidity should be maintained and while investing in the assets the same should be kept in mind (Dichev, 2017).

Budgeting is an important tool for any business and it will give an overview of the business for the coming 3-5 years. It is an important tool for the success of any business and will help in gaining overall knowledge about how the company is functioning and what are the changes that are needed so that the overall performance of the company improves.  It helps the management in deciding which are the years in which the need to focus so that the overall profitability is more than the budgeted amount. In case the budgeted amount differs from the actual the company can raise the issue and analyze the reason of such difference and check whether the company can make more profit or not. It is very important to take expert advice during this whole process of budgeting and forecasting and generating the best results possible. The management of the company should try to prepare a budget for a period of coming 3years, as the venture is a new one, it is not known how will it function in the times to come (Yadao, 2018). So, it may become difficult to forecast the overall development in the analytics of the company for a longer period. So, keeping that in mind, the management should design the budget for a period of coming 1-3 years so that even if there is  a lot of fluctuations it can be erased with the help of this budgeting tool by the company.

References

Abbott, M., & Kantor, A. (2017). Fair Value Measurement and Mandated Accounting Changes: The Case of the Victorian Rail Track Corporation. Australian accounting Review.

Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education, 71(4), 411-431.

Chariri, A. (2017). FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING WITHIN INSTITUTIONAL FRAMEWORK. Journal of Economics, Business and Accountancy, 14(1).

Chron. (2017). five-common-features-internal-control-system-business. Retrieved december 07, 2017, from https://smallbusiness.chron.com/five-common-features-internal-control-system-business-430.html

Dichev, I. (2017). On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), 617-632.

Kusolpalalert, A. (2018). The relationships of financial assets in financial markets during recovery period and financial crisis. AU Journal of Management, 11(1).

Maynard, J. (2017). Financial accounting reporting and analysis (second ed.). United Kingdom: Oxford University Press.

Yadao, J. (2018). Forensic accountants and big data.

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