Fuller also purchased a personal computer with the intention of using it to keep company records. These items used $65,000 of the $75,000 Fuller had saved and invested in the company. A warehouse costing $162,000 was found in an excellent location for the business. Fuller was able to interest family members enough in this project that three of them, two sisters and a brother, invested $30, 000 each. These funds gave Fuller the$50,000 down payment on the warehouse. The bank approved a mortgage for the balance on the building. In granting the mortgage, however, the bank 0fficial suggested that Fuller start from the beginning with proper accounting records. He said these records would help not only with future bank dealings but also with tax returns and general management of the company.
He suggested Fuller find a good accountant to provide assistance from the start, to get things going on the right foot. Fullers neighbor, Marion Zimmer, was an accountant with a local firm. When they sat down to talk about the new business, Fuller explained, I know little about keeping proper records. Zimmer suggested Fuller should buy an off-the-shelf accounting system software package from a local office supply retailer. Zimmer promised to help Fuller select and install the package as well as learn how to use it. In order to select the fight package for Fullers needs, Zimmer asked Fuller to list all of the items purchased for the business, a11 of the debts incurred, and the information Fuller would need to manage the business. Zimmer explained that not al l of this information would be captured by the accounting records and displayed in financial statements.
Based on what Fuller told Zimmer, Zimmer promised to create files to accommodate accounting and non-accounting information that Fuller could access through the companys personal computer. As Fullers first lesson in accounting, Zimmer gave Fuller a brief lecture on the nature of the balance sheet and income statement and suggested Fuller draw up an opening balance sheet for the company. Confident now that the venture was starting on solid ground, Kim Fuller opened the warehouse, signed contracts with two local bottling companies, and hired two grinding machine workers and a truck driver. By February 2003 the new firm was making regular deliveries to Fullers former employer.
1. What information will Fuller need to manage the business? Classify this information in two categories: accounting information and non-accounting information. 2. See what you can do to draw up a beginning of business list of the assets and 1iabilities of Fullers company making any assumptions you consider useful. How should Fuller go about putting a value on the companys assets? Using your values, what is the companys opening owners equity? 3. Now that Fuller has started to make sales, what information is needed to determine profit and loss? What should be the general construction of a profit and loss analysis for Fullers business? How frequently should Fuller do such all analysis? 4. What other kinds of changes in assets, 1iabilities, and owners claims will need careful recording and reporting if Fuller is to keep in control of the business?