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Kim Fuller: A Case Study in Managerial Accounting

Kim Fuller started a business recycling plastic bottles. He invested $75,000 of savings and borrowed $90,000 from family. He purchased equipment, a warehouse, and hired employees. Over the first year, the business earned $4,000 in sales and $16,200 in appreciation on the warehouse. Expenses totaled $15,650. The net income was $4,550, increasing Fuller's equity to $77,050. The business analysis provides accounting details to track profits, losses, and financial position over time.

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Sarju Mavi
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461 views

Kim Fuller: A Case Study in Managerial Accounting

Kim Fuller started a business recycling plastic bottles. He invested $75,000 of savings and borrowed $90,000 from family. He purchased equipment, a warehouse, and hired employees. Over the first year, the business earned $4,000 in sales and $16,200 in appreciation on the warehouse. Expenses totaled $15,650. The net income was $4,550, increasing Fuller's equity to $77,050. The business analysis provides accounting details to track profits, losses, and financial position over time.

Uploaded by

Sarju Mavi
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Kim Fuller

A Case Study in Managerial Accounting

Presented by: Mayur Fofandi


Omkar Mishra
Amit Singh
Nitish Choudhary
Saurabh Makwana
INTRODUCTION
• Kim Fuller, who was working in a large chemical firm as a District Sales Engineer
HE learned that company had developed use for the recycled material in
pulverized form.
• In November 2006, he checked for initial cost of the business. cost of the
business.
• For that he bought a truck, three trailers, two grinding machine & supplies and
parts to run and maintain the business.
• He also purchased a computer warehouse, accounting software.
• He also invested his savings of $75,000.
• He borrowed $90,000 from his two sisters and a brother for down payment of
$50,000 for warehouse.
• He also hired a truck driver and grinding machine workers.
• He took help of his neighbors for learning & purchasing of accounting software.
• He obtained enough knowledge for recording transactions from his neighbor.
ACCOUNTING INFORMATION
Accounting Information: : Owned 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.
• Borrowed $90,000 from two sisters and brother for down payment of building.
brother for down payment of building.
• Warehouse of $162,000 and paid $50,000 as its down payment.
NON-ACCOUNTING INFORMATION
• Fuller think to start a business of plastic Fuller think to start a business of plastic bottles.
bottles.
• In Nov 2006, he started to find out the In Nov 2006, he started to find out the cost involved in
setting up the business
• Found a warehouse. Found a warehouse.
• Approval of mortgage from bank for Approval of mortgage from bank for balance of building.
balance of building.
• Learnt maintaining books of accounts for Learnt maintaining books of accounts for bank
dealings, tax returns and general bank dealings, tax returns and general management of the
company.
• List out the purchased items, debts and other information in Accounting other information in
Accounting Software. Software.
• Fuller signed contract with two bottling Fuller signed contract with two bottling companies and
started business by companies and started business by hiring grinding machine workers and a
hiring grinding machine workers and a truck driver.
OPENING BALANCE SHEET OF KIM FULLER
as of 01st April 2006
Assets Amounts Liabilities Amounts

Current Assets Owner’s equity 75,000

Cash/ Bank 50,000 Current Liabilities

Stock 2,000 Family loan 90,000

Mortgage loan

(against Wearhouse) 1,12,000

Non – Current Assets

Fixed assets 63,000

Warehouse 1,62,000

Total 2,77,000 Total 2,77,000


TRANSACTIONS
• Purchased raw material worth $1,000.
• Carriage inward $50
• Paid wages to workers and truck driver
• Depreciation on Fixed Assets @10%, $6,300. Purchased accounting software 100
• Interest payable for mortgage loan @5%, $5,600.
• Interest payable to the relatives for the Interest payable to the relatives for the
borrowed loan @3%, $2,700.
• Ware house building appreciated @10%, $16,200.
• Sales made worth $4,000 (cost price Sales made worth $4,000 (cost price
$2,500.
• Closing Stock at the end of year $500.
Trading and Profit and Loss Account
for the period ending
Particulars Total Particular Total
To Opening capital By Sales
To Purchase By Closing stock
To Gross profit

To selling and distribution By Gross Profit b/d


expenses
To administrative By interested received
expenses
To depreciation and By discount received
maintenance
To financial expenses By commission received
To abnormal losses
To net profit transferred
to capital
Income Statement of Kim Fuller
for the year ended 2007-08
Receipts Amount
Sales revenue 4,000
Appreciation on building 16,200
(A) Total 20,200

Expenses Amount
Wage paid 1000
Depreciation on fixed asset 6300
Interest on mortgage 5600
Interest on relative’s loan 2700
Carriage inwards 50
(B) Total 15650

Net income (A-B) 4550


ANALYSIS STATEMENT
• To determine profit and loss, Fuller needs to consider all the expenses incurred
and incomes earned by the business.
• The expenses would include all trade expenses and office expenses, which are
debited. The incomes would include all operating and non-operating incomes,
which are credit
• Kim Fuller should ideally do such an analysis on a quarterly basis as the business
is young and small.
CLOSING BALANCE SHEET OF KIM FULLER
as on 31st March 2007
Assets Amount Liabilities Amount
Current account Owners equity 77,050
Cash/ bank 51,850 Other liabilities 2,10,300
Closing stock 5,00

Non-current assets
Fixed assets 63,000 56700
(-) Deprecation 6,300
Warehouse 1,62,000 1,78,200
(+) Appreciation 16,200
Accounting software 100

Total 2,87,350 Total 2,87,350

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