Case 1-1 Ribbons and Bows
INTRODUCTION Carmen Diaz, with a ten thousand dollar loan from two of her cousins, and one thousand dollars that she invested in equity, was able to open a specialty store called Ribbons an’ Bows, Inc, which was located in Coconut Grove, Miami, Florida. Four months after opening the business, Carmen’s relatives requested a financial report, which was part of the original business arrangement. Within a short time, Carmen had expanded the business, purchased small equipment, paid wages to a part-time employee, and by all outward indicators, had been running a flourishing business. As Carmen gathered the necessary information to prepare financial statements, she started to scrutinize the transactions and was somewhat perplexed. Carmen realized that numbers were not adding up as she had anticipated. Additionally, it became questionable whether the business was operating successfully, at least when accounting principles were appropriately applied.
Statement of the Problem It was fortuitous for Carmen Diaz to have family who were supportive of her small business endeavor, thereby providing start-up funds and legal advice. Carmen’s endeavor can be recognized as a “microbusiness” operation; “microcredit”, microenterprise” and “microfinance” are terms that have been associated with microbusinesses (Datar, 2009). Clearly, Carmen would have benefitted from some professional entrepreneurial guidance that is widely available at no cost in the United States. Indeed, her uncle practiced law, but it was not clear if business law (finance/ accounting) was within his forte. It was noticeable that Carmen was unskilled in accounting principles; she had apparently prepared a business plan but was not adept in all accounting proficiencies, for example, budgeting and long term planning. There was no evidence to indicate that Carmen had planned for the replacement of essential equipment, such as the computer and essential accounting management software, beyond the basic business
Statement of the Problem It was fortuitous for Carmen Diaz to have family who were supportive of her small business endeavor, thereby providing start-up funds and legal advice. Carmen’s endeavor can be recognized as a “microbusiness” operation; “microcredit”, microenterprise” and “microfinance” are terms that have been associated with microbusinesses (Datar, 2009). Clearly, Carmen would have benefitted from some professional entrepreneurial guidance that is widely available at no cost in the United States. Indeed, her uncle practiced law, but it was not clear if business law (finance/ accounting) was within his forte. It was noticeable that Carmen was unskilled in accounting principles; she had apparently prepared a business plan but was not adept in all accounting proficiencies, for example, budgeting and long term planning. There was no evidence to indicate that Carmen had planned for the replacement of essential equipment, such as the computer and essential accounting management software, beyond the basic business
References: Anthony, R.N., Hawkins, D. F., &Merchant, K. A. Accounting: Text & Cases 12th Edition, New York, NY; McGraw-Hill Irwin Publishing Company Datar, S., Epstein, M., & Yuthas, K..(2009). MANAGEMENT ACCOUNTING AND CONTROL: Lessons for and from the World 's Tiniest Businesses. Strategic Finance, 91(5), 27-34. Retrieved August 15, 2010, from ABI/INFORM Global. Sergeant, D.J., (2009, October). Painless Cost Cutting. Alaska Business Monthly, 25(10), 42. Retrieved August 15, 2010, from ABI/INFORM Dateline.