Peyton Approved is a fast growing company that deals in the production of dog food. The company does well to produce numerous foods for dogs depending on age of the dogs. It has been in operation for three months during which it has experienced a significant demand in its products. The company has thus resorted to diversification of dog foods to ensure total customer satisfaction because of the increased demand. In this regard, the key purpose of the company is to produce and distribute all kinds of hypoallergenic and natural dog foods. The following memo seeks to request for a loan that will facilitate the expansion of the Peyton Approved. The memo shows the accounting system of the company and the effectiveness it has had in the management of finances of the business. The memo further illustrates internal controls, operational strengths and weaknesses the company has and some of the prospectus opportunities of the company.
Overview of the Accounting System of Peyton Approved
The financial statements and related reports are prepared and studied on quarterly basis. The primary reason for the quarterly reporting system is to establish a proper accountability system for all transactions conducted by the business. Moreover, the company is at its prime and thus the system proves imperative because of the low cost of the preparation process as well as the ease and fast pace of preparation. The accounting system that Peyton Approved has sought for is that of the accrual basis thus all expenses of a given financial frame of time are charged against revenues realised in that period (Arnold, 2014).
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The company endeavours with the above in a bid to align with the appropriate standards of accounting as per the outlined guidelines of the GAAP. The system of accounting acknowledges all transactions as and when they take place. For instance, it will recognise invoice delivery of purchase of goods as a transaction and would not wait for the reception of cash but rather record the transaction the instance it has occurred. The company does not use the cash basis because the method goes against the GAAP and would thus disregard the company as a going concern. Assets of the firm depreciate at the basis of a straight-line as they are seen to have a low salvage value at the end of their active life. The accounting system does well to permit the recording of all prepaid expenses as well as the accrual expenses that are crucial in tracking down usage of funds in the company.
Accounting Process and Internal Controls for the Cash
The Peyton Approved Company has established proficient strategies that will facilitate the appropriateness and activeness of the accounting system. The company employs professionals that are qualified to be responsible for operating the system of accounting. In this regard, the company has ensured that it hires employees with at least three years experience in the field of accountancy having the most appropriate qualifications in academics (Brigham et al. , 2012). The management has further made it an obligation of utmost importance to oversee the maintenance of accounting standards and ensure every employee in that docket adheres to them.
Peyton Approved has enabled major checks and balances by separating duties in the firm in its plight to ensure a stable and prominent internal control. The management has thus established that persons who record cash transactions do not receive the cash. Furthermore, the process of cash approval has various and numerous stages. In addition, it is mandatory that the management at the top level is alerted and append their approval on every cash disbursement in the company.
The firm has also done well to institute a policy that sees that no employee stays at their job position for a long time in a bid to avoid fraudulent activities (Melicher et al., 2013). Cash remittance is such that those that receive the cash are different from those that make the records in the books of account.
Operational Results, Strengths, and Weaknesses of the Company
The company has a good financial standing as it stands currently. It has made sales with a revenue of $71000 during its last quarter. The number marked a 23% increase from the previous volume of sales indicating that the company is growing progressively. The costs of sales were low amassing to $203. However, the company experienced a significant overhead cost of $23,038. The management has decided to source out means of reducing such overhead costs (Brigham et al., 2013). The firm enjoys a suitable and stable position that will enable it meet its short-term financial obligations as per the current ratio of 8.02.The firm further saw a net profit margin of 56.31% that is more than the average of the industry. As seen or rather judged from the accounting of the company, the main weakness of the firm is the overhead expenses.
Analysis and Company Opportunities
The company is progressive as seen from the financial accounts having realized significant profits in its last quarter. The numbers suggest that the company will see a high yield in its economic growth today and in the near future. Peyton Approved is able to make profits and sustain itself in the dynamic market. It thus has a good profit margin that puts it at a right position to take off on a competitive edge (Nobles et al., 2014).
Conclusively, the primary aim of the memo is to seek finances that will facilitate the expansion of Peyton Approved. The company enjoys a good financial position courtesy of the profits and corporate governance. Peyton Approved has an important path towards growth, as the opportunities are vast and suitable hence the need to have finances to expand.
Arnold, G. (2014). Corporate financial management. Pearson Higher Ed.
Brigham, E.F., & Daves, P.R. (2012). Intermediate financial management. Nelson Education.
Brigham, E.F., & Ehrhardt, M.C. (2013). Financial management: Theory & practice. Cengage Learning.
Melicher, R. W., & Norton, E.A. (2013). Introduction to finance: markets, investments, and financial management. Wiley Global Education.
Nobles, T.L., Mattison, B.L., Matsumura, E, M, (2014). Horngren’s financial and managerial accounting (4 th Ed.). Upper Saddle River, NJ: Pearson Education, Inc.