Question

Introduction

Now that you’ve created the basis for your fictitious restaurant, you can explore more topics that will allow you to record business transactions for your enterprise.

Part 1

Your first step in the project is to write a one-page paper to explain the basis of your business. Which business form (sole proprietorship, partnership, corporation) did you choose and why? Explain the three basic financial statements that your business will rely on to make decisions now that it is up and running. Which financial statement do you think you would rely on the most? Why?

Answer 1

Restaurant business at the start needs limited capital outlay but substantial working capital. While there are various business forms available like partnership and corporation, I shall choose to have my restaurant business in the properitorship form. The various reasons behind the same are:

• Ownership control
• Limited management issues
• No sharing of profit
• Less tax burden

Three basic financial statements would be Balance Sheet, Profit and Loss A/c and Cash Flow Statements.

I shall rely the most upon cash flows as it will make me aware of the cash needed in the business and how much cash I have as restaurant business have many expenditures of recurring nature like salaries, materials required, rent etc. Cash flow expenditure and inflows will help address the cash deficiency issues.