Transforming a Hobby to Business

Transforminga Hobby to Business

Transforminga Hobby to Business

Eventhough l have flourishing accounting career which sees to it that lcan pay all my bills and provide for my family, my mind still seeksrefuge on the God given talent l possess. At one point in time, lbelieve whatever l was doing for fun is there to stay, and no onewill interfere with the cycle. The same happened to me until lifegave me another path to walk on. As a kid l developed an incrediblegift in artistic creations. As parents struggled limiting hours ofplay to their children so that they can focus on education, my mothertried as much as possible to keep away drawing papers to have mefocus on my studies. I drew pictures of my teachers and took to themas present and all l got were praises about my skill. One time afterperforming well in school, the principle offered me a ticket to anart camp in Japan at Manga School of Art. The two weeks l was there llearned a whole lot and made friends in the various art classes.Coming back at home l used my savings to get some art materials andstarted practicing just as a hobby.

Consideringall the information l gathered from the camp as well l communicatewith my friends, art is a skill that can be converted into onerevenue generating a process in the best of ways possible. One needsto go right with coming up with a good business plan suitable to theproduct offered at the market. I believe l have the right exposure,talent and remarkable accounting knowledge in ensuring this hobby isturned to business. Any investor willing to put their money on thetable will not wait for so long until they start realizing a profit.

Staffingplan

Thefirst step to bringing out this success includes coming up with ageneral staffing plan. Organizations often complain of registeringlosses with the failure of note where there are problems. The processinvolves overstaying leaving the organizations suffering from highcosts as well as understaffing which brings about stress andoverworking each. The staffing plan l will use will involve (Sawyer,2015):

a)Gather statistics of probable existing staff

Iwill come up with various posts on what task will be required andlook for qualified staff on each department allocated. That willprevent the existence of ghost workers and be overspending as well asreduction of quality of work which is regarded very beneficial togoal attainment.

b)Gather the expected workload and distribute tasks.

Individualsneed to come to work knowing what is expected of them. That will helpdo away with being idle and therefore improve the amount of work doneand the service quality offered to customers. Payment of employeesand supervision will be well dealt with in the process.

c)Determining all the business needs

Asa business startup, we will need to have all resources needed toensuring the produced the best piece of art. Workers will have allthey need to help in the execution process and thereby reduction ofthe margin of error.

d)Create a plan concerning business operation

Nowhow to handle the business peaks and the whenever there is no work.Come up with a procedure that also keeps the organization running intimes business is not performing well.

Ibelieve this plan is going to work since it communicates the overalllayout of the organization and how the organization is prepared ontackling anything that would come up. We also have the idea ofworking responsibility and assigning tasks to help with the goal set.

Formof the business and the benefits

Theform of the business is dependent on the particular piece of art youare dealing with as well as the target group. The form of thebusiness helps in bringing about some various benefit among them willinvolve:

a)Returns that come with the products

Artrelated goods are considered very expensive concerning returnsprovision. If you ever visit an art show, you will meet billionairesfrom all over the world admiring, speaking highly and doing all ittakes to have the art as their personal possession. The processes areconsiderable higher depending on the age of the art, what it tries tocommunicate and the quality of these artistic figures. Consideringthese it can be detected that the art business is beneficial sincethe returns are very expensive.

b)Staff engagement and development

Theartwork is always keen on ensuring staffs are working in the mostefficient ways possible. There is also the aspect of ensuringemployees explore new perspectives as art also trigger emotions andtherefore improve employee productivity.

c)Brand development

Artassists in meeting different sponsorships caliber audience were,therefore, making it easy to address a specific demographic groupthat is very hard to reach through conventional marketing. Throughproper sponsorship, there are connections, attitude and values in thetarget since there is lining the brand to innovation and creativethinking.

Chartof accounts

Assets

Currentassets

Stationeries

Accountsreceivables

Bank

Cash

Inventory

Prepayments

Fixedassets

Computers

Printers

Furnitureand fittings

Artequipment

Cameras

Liabilityaccounts

Currentliabilities

Accountpayables

Accruals

Longtermliabilities

Bankloan

Equityaccounts

Capitalaccount

Reserves

Retainedearnings

Revenueaccounts

Artsales

Photographyservices income

Costof goods sold

Rawmaterial purchases

Framespurchases

Artsupplies

Expenses

Salariesand wages

Officerent and rates

Exhibitionrental space

Electricity

Insurance

Marketingand advertising expenses

Postageshipping and couriers

Telephone/broadbandexpenses

Travellingexpenses

Officesupplies expenses

Licenses

Depreciationexpense

Utilitiesexpense

Interestexpense

GenerallyAccepted Accounting Principles (GAAP)

Fromthe information represented by the chart of accounts, it is evidenthow the business will require extraordinary accounting skills to helpin the determination on how the organization runs everything. One ofthe best ways will include the use of the accepted accountingprinciple and therefore coming up with different ways and standardsthe company ought to follow while coming up with their financialstatements. In the absence of GAAP will be difficult to investorssince the organization will lack the particular type of informationneeded to report. Typically being a creditor or an investor requiresone to get timely reports since they fund the company and need toknow the performance of the organization. Through using GAAP, thecompany enjoys the fact that it has its economic reality well ironedout. Investors are therefore given a chance to make rationalinvestments as well as different financial decision since GAAP assistin making the company’s financial reports understandable andcomparable. To be completely useful to users all that is required byGAAP is compiling financial statements to help improve itsconsistency, reliability, and relevance. International finalreporting standards on the other hand details on how various types oftransactions and other events need to be reported in financialstatements. It is also good for the determination of information onfinancial statements to investors. However, GAAP will be beneficialconsidering it is a startup business that needs application ofvarious factors all with the goal of profit realization. As artbusiness research development and advertisement, costs are veryimportant to the face of the business. Considering they areintangible assets the IFRS have no clear picture of whether it willbe beneficial to the business and therefore excluding thisinformation but the GAAP will consider it in their financial books(Barth2012).

Proformabalance sheet and income statement

Proforma Balance Sheet

PARTICULARS

‘000’

‘000’

‘000’

Fixed Assets

&nbsp

&nbsp

&nbsp

Computers

&nbsp

2,570

Cameras

&nbsp

800

Furniture and fittings

&nbsp

1,320

Printers

&nbsp

1400

Art Equipment

&nbsp

220

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

6,310

Current Assets

&nbsp

&nbsp

&nbsp

Stationeries

500

&nbsp

&nbsp

Accounts receivables

150

&nbsp

&nbsp

Bank

1,700

&nbsp

&nbsp

Cash

600

&nbsp

&nbsp

Inventory

800

&nbsp

&nbsp

Total Assets

&nbsp3,750

&nbsp

Current LIABILITIES

&nbsp

&nbsp

&nbsp

Rent expense

100

&nbsp

&nbsp

Account payables

300

&nbsp

&nbsp

Tax expense

1,357.80

&nbsp

&nbsp

wages

200

&nbsp

&nbsp

&nbsp

(&nbsp1,957.80)

&nbsp

Net Current assets

&nbsp

&nbsp1,792.20

Total Assets

&nbsp

&nbsp

8,102.20

Long Term liabilities

&nbsp

&nbsp

&nbsp

Bank loan

&nbsp

&nbsp4,334

&nbsp

&nbsp

&nbsp

&nbsp

Total Liabilities

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

Capital

&nbsp

&nbsp

&nbsp

Opening balance Equity

&nbsp

100

Capital stock

&nbsp

500

Retained earnings

&nbsp

3,168.20

Total liabilities &amp Equity

&nbsp

&nbsp

8,102.20

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

&nbsp

Proforma income statement

Shs `000`

Shs `000`

Shs `000`

Sales

7,000

Cost of sales

Raw material purchases

486

Frames purchases

810

Art supplies

190

Purchase returns

(100)

1,386

Gross profit

5,614

Expenses

Salaries and wages

200

Office rent and rates

210

Exhibition rental space

50

Electricity

100

Insurance

120

Marketing and advertising expenses

65

Postage shipping and couriers

40

Telephone/broadband

30

Travelling expenses

45

Office supplies

50

Licenses

48

Depreciation expense

20

Utilities expense

10

Interest expense

100

1,088

Profit before tax

4,526

Tax expense (30%)

1,357.80

Net profit after tax

3,168.20

Internalcontrols

Sincewe are a startup business, there is significantly essential to theidea of safeguarding assets. The process requires more than moneyrelated aspects in an organization. The organization has two internalcontrols that will prove very helpful in the determination of thebusiness operations. These controls will involve:

  1. Proper authorization and approval

Withinthe organization, there is a need to find out individuals that havedecision-making responsibilities explaining where, what, who and whenof any financial transaction questions. The various strategies beingaddressed involve:

    1. Ensuring staff member understands their responsibilities such as who has authority to obligate nonprofits funds.

    2. Establishment of an annual budget promptly and come up with a board to review and approve it before the start of the next financial year.

    3. Track purchases from request through payment by creating a purchasing process (Hardwick et al. 2016).

  1. Proper Security

Thevaluables associated with the art business is considered to have alot of need to have security as the internal control. That comes fromthe idea concerning the pricing of the different artifacts. Apartfrom that, there is need to ensure only those authorized can directlyaccess the art, documents, money or any other valuables in theorganization. Strategies for this section include:

a)A different person controls ensuring blank checks to one who cutsthe checks.

b)Other staff members should sigh out blank checks

c)Using of password or clearance cards while accessing any sectionsof the organization and that is the computer system or any othersecure rooms.

Havingthese two concepts up and operational the business will have internalcontrols that ensure the smooth running of events in theorganization.

Implementationprocess

Theimplementation process of these particular internal controls processis the most crucial process and therefore the determination of theability to meet the set goals. The first step will be gatheringknowledge on anyone applying for the job so as to get detailedinformation and determine where to give different people jobsaccording to their qualification. The process should be slow andprecise so that you get the best results that one could get in thewhole process of recruitment. The process will be consideringdepartmental processes that will involve the building a strongworking teamwork that will help in the coming up with a team thatwill assist in the goal attainment process. The overall head of theorganization selection process will be a very important one for thatmatter. The idea is since he is the overall determinant of whetherthe organization will receive profits or losses.

Challengesand the Sarbanes-Oxley Act

Theprocess, however, will have some challenges in coming up with theprimary goal of making the business environment productive in thebest way possible. Considering the fact that we need highly qualifiedindividuals, the process will be so long at the expense of theorganizations need to start realizing profits in the fastest wayspossible. There will also be limited individuals to help in theprocess of safeguarding assets and protection of personal data andart related figures in the organization. The organization, however,will do all that can be in their power to have the process welldetermined in ensuring the challenges are as minimal as possible.ConsideringSarbanes-Oxley (2012), we will have proper disclosure of accountinghence leading to protection of frayd related activities. The ideawill be focused on different corporations and therefore preventingfraud.

Conclusion

Consideringall these steps, we are most likely to have our product prove to beso beneficial in achieving some different tasks. The reason is solelybased on the fact that it has dealt with all sectors that could helpinvestors feel comfortable in investing in the product. The primaryprocess remaining will be the execution procedure which is not somuch difficult in a process that you have all the process in placeand waiting to be put to work. Through the establishment of properstaffing, well explanation of the business form and its particularbenefits as well as coming up with the charts of account wellexplains how there is proper preparation to commence the business.The idea through which we decide to use the accepted accountingprinciple shows how wide we require our business to go since weinvolve the aspect of advertisement hence creation of brand royalty.The expected figures that will help us with going on with ourbusiness plan is involved on the proforma balance sheet and thereforethe internal business controls that will help improve the outcomeconcerning productivity as well as the creation of an environmentthat will not let the organization suffer from any unseenoccurrences. Explanation on the importance of these differentinternal controls and the effect on the type of business as well asthe effect on the investors on the art business. We can, therefore,conclude that the art business has an advantage of meeting all itsgoals and therefore maximum profit realization.

References

Barth,M. E., Landsman, W. R., Lang, M., &amp Williams, C. (2012). AreIFRS-based and US GAAP-based accounting amounts comparable?.&nbspJournalof Accounting and Economics,&nbsp54(1),68-93.

Hardwick,S. A., Chen, W. Y., Wong, T., Deveson, I. W., Blackburn, J.,Andersen, S. B., … &amp Mercer, T. R. (2016). Spliced syntheticgenes as internal controls in RNA sequencing experiments.&nbspNatureMethods,&nbsp13(9),792-798.

Sarbanes-Oxley,A. G. T. (2012). Sarbanes-Oxley Act.&nbspViawww. soxlaw. com o p,&nbsp26.

Sawyer,T. Y. (2015). The Staffing Model: Make the Most of Human Resources.In&nbspFinancialModeling for Business Owners and Entrepreneurs(pp.57-81). Apress.