AISA 3 Assessment 2: Accounting for Start-up Businesses Report

This report provides an executive summary on the accounting aspects crucial for start-up businesses, including essential financial records such as trial balances, profit and loss accounts, balance sheets, aged payables and receivables, and inventory summaries. The report thoroughly evaluates and compares cloud accounting and traditional accounting software, highlighting the advantages and disadvantages of each. It presents the trial balance, profit and loss account, balance sheet, aged payable, aged receivable, and inventory item summary for the hypothetical company "Goodie Gumdrops." The analysis concludes that cloud accounting offers a superior platform compared to traditional accounting for the case study company, advocating its adoption due to enhanced data security and protection against various risks. The report references different sources to support its claims.

AISA 1
Accounting Information System (AIS) Assessment 2

AISA 2
Executive Summary
The basic aim of this report is to develop an understanding about the core accounting aspects of a
start-up business. There are different types accounting records that are important for a start-up
business such as trail balance, balance sheet, profit and loss account, Aged payable, inventory
item summary and Aged receivable account. In this report, information related to cloud
accounting and traditional accounting software has been evaluated and compared. Cloud
accounting has many advantage and disadvantage, which affects the business. The cloud
accounting is associated with the traditional accounting, self-install accounting software as well
as on-premises accounting. On the other hand, the traditional accounting is associated with the
recording, processing and saving of key accounting files on hard drive or storage of user. On the
basis of this report, it can be analyzed that the cloud accounting is better platform as compared to
traditional accounting for the “Goodie Gumdrops” wholesaler company. From the analysis of the
advantages and disadvantages of cloud based accounting and traditional accounting, it can be
recommended to the organizations that they should opt for cloud based accounting platform. It
can provide safety to the database from unauthentic users and safety to company database from
unfortunate events like computer corruption, hacking, virus attacks etc.

AISA 3
Table of Contents
Executive summary:........................................................................................................................2
Trail Balance of “Goodie Gumdrops”.............................................................................................4
Profit & Loss account of “Goodie Gumdrops”................................................................................5
Balance sheet of “Goodie Gumdrops”.............................................................................................8
Aged payable of “Goodie Gumdrops”.............................................................................................9
Aged receivable of “Goodie Gumdrops”.......................................................................................10
Inventory item summary of “Goodie Gumdrops”.........................................................................11
Cloud Accounting:.........................................................................................................................12
There is various advantage of cloud accounting such as:..............................................................12
Following the disadvantage of cloud accounting:.........................................................................13
Difference between cloud computing and traditional accounting software..................................14
References:....................................................................................................................................16

AISA 4
Trail Balance of “Goodie Gumdrops”
Account Debit ($) Credit ($)
Cash (Dr) 50000
Accounts receivable (Dr) 2000
Prepaid rent (Dr) 5000
Inventory (Dr) 10000
Leasehold improvements
(Dr)
2000
Accumulate depreciation
(Cr)
3000
Accounts payable (Cr) 30000
Accrued expenses (Cr) 300
Unearned income (Cr) 500
Long-term liabilities (Cr) 18000
Common stock (Cr) 9000
Dividends (Dr) 2000
Revenues (Cr) 24,200
Cost of goods sold (Dr) 9,700
Depreciation expenses (Dr) 1000
Rent expenses (Dr) 400
Supplies expenses (Dr) 1100

AISA 5
Utilities expenses (Dr) 600
Wages expenses (Dr) 800
Interest expenses (Dr) 400
Total 85000 85000
Profit & Loss account of “Goodie Gumdrops”
Particular Amount ($) Particular Amount
($)
To opening stock 40000 By sales 24200
Less: returns 400
23800
To purchases 15000
Less: returns 0
15000 By closing stock 10000
To carriage inward 250
To wages 300
To Gross profit c/d
(in case of GP)
By GP loss c/d (in case of gross
profit)
450
To GP b/d 450 By GP b/d (in case of GP)
To salaries and wages 800 By interest earned 500
To carriage outward 500 By dividend earned 700
To rates and taxes 800 By rent earned 250

AISA 6
To insurances 550 By discount received 100
To depreciation 1000 By profit on sale of fixed assets 50
To bad debts 0 By profit on sale of investments 80
To advertising 200
To interest paid 100
To travelling expanses 50
To discount allowed 0
To loss on sale of fixed
assets
0
To loss on sale of
investments
200
To loss by fire 150
To net profit transferred to
B/S (in case of net profit)
By net loss transferred to B/S (in
case of net loss)
24,420
60,350 60,350

AISA 7
Balance sheet of “Goodie Gumdrops”
Assets Amount($) Liabilities Amount ($)
Current assets:
Cash 50,000
Account receivable 2000
Prepaid rent 5000
Inventory 10000
Current liabilities:
Accounts payable 30,000
Unearned revenue 500
Total current assets 62000 Total current liabilities 35000
Long-term liabilities 18000
Owner’s Equity
Long-term assets:
Leasehold improvements
2000
Accumulated depreciation
3000
Owner’s equity 3000
Retained earnings0
Common stock 9000
Total long-term assets 5000 Total owner’ s equity 12000
Total assets 67000 Total liabilities and owner’s
equity
67000

AISA 8
Aged payable of “Goodie Gumdrops”
Supplier Amount ($) current 1-30 31-60 >60
Invoice 1 60,000 10,000 20,000 20,000 10,000
Invoice 2 70,000 30,000 40,000
Supplier A 13,0000 10,000 50,000 20,000 50,000
Invoice 3 80,000 30,000 20,000 20,000 10,000
Invoice 4 12,0000 60,000 20,000 40,000
Supplier B 2,00000 90,000 40,000 60,000 10,000
Invoice 5 50,000 10,000 40,000
Invoice 6 40,800 20,400 20,400
Supplier C 90,800 20,400 10,000 20,400 40,000
Total 4,20,800 1,20,400 1,00,000 90,800 1,00,000

AISA 9
Aged receivable of “Goodie Gumdrops”
Customer
name
Total A/R 0-30 days 31-60 days 61-90 days 90+ days
XYZ 3,00,000 1,00,000 75,000 1,00,000 25,000
ABC 6,00,000 3,00,000 3,00,000
CBA 2,00,000 1,00,000 1,00,000
MNQ 5,00,000 50,000 2,00,000 2,50,000
Total 16,00,000 1,50,000 6,75,000 2,00,000 5,75,000

AISA 10
Inventory item summary of “Goodie Gumdrops”
Item
code
Item
name
Opening
balance
purchase COGS Adjustment
s
Closing
balance
Sales
10123 Raw
material
1,50,000 80,000 1,00,000 1,30,000
11231 Raw
material
1,30,000 70,000 1,00,000 1,00,000
10142 Raw
material
1,00,000 1,00,000 90,000 1,10,000
10196 Raw
material
1,10,000 60,000 70,000 1,00,000
10175 Raw
material
1,00,000 20,000 30,000 90,000
10224 Raw
material
90,000 5,000 85,000 10,000
10331 Raw
material
10,000 1,000 10,000

AISA 11
Cloud Accounting:
The cloud accounting is related to the traditional accounting, self-install accounting software as
well as on-premises accounting. This system of accounting supports only a particular type of
servers and that software, which are in a business form (Aiton and Russell, 2011). Data is sent in
the form of “the cloud database”, where it is preceded or returned into the data user. In case of
financial accounting, all applications perform their functions off-site. It is not applicable in the
desktop of users (Fisher, 2013).
Advantages of Cloud Accounting:
The ease of access is the primary advantage of the cloud accounting. The company and
company’s employee can access company’s financial data throughout anywhere universally, by
several times without including downloading and installing any software or files on their
desktop. In a company, low price is most important advantage of cloud accounting, as it would
be going the cheapest accounting platform.
In order to manage cash flow, the monthly payments can be prepared in easier form with the
usage of cloud based accounting. Computer costs can also be decreased due to the occurrence of
normal costs like upgrading versions, costs of system administration, maintaining and failures in
servers faces no problems due to managing service provider through cloud computing.

AISA 12
When real time financial information is handled properly, cloud computing provides recent and
updated financial information for businesses like presenting the financial dashboard in the form
of packages (Hill, et al., 2012). This aids in responding the alterations in business by providing
financial information at the tips of fingers.
Disadvantages of Cloud Accounting:
Confidentiality of Data: It is the biggest disadvantage of cloud accounting for the all business
entities that all businesspeople share the data with third party business entity. They may use the
business data for the interest of their business like storage of the data, which is totally controlled
by the cloud service provider. Company’s data would be gathered from the various countries.
Any business entity and the government of the nation can also review and audit the company’s
data.
Date Back Up: Many clouds accounting software’s do not provide the facility of backup of the
business data on the computer. If companies can change the software, they may lose the data,
which is already maintained with the last cloud accounting software, and companies would have
required continue to pay them to use its data.
Restrictions in the Applications: The cloud accounting may not support every application.
They provide whatever the companies have. Some of the requirements of the company may not
be available in cloud accounting.

AISA 13
Traditional Accounting Software: This method is also known as conventional method. This
refers to the process of allocating the manufacturing overhead costs to the product that has been
manufactured. This method focuses on allocating the indirect cost of the factory to its
manufactured products taking the volume or quantity as basis (Perry and Newmark, 2011). For
example, if a company uses machine hours for the purpose of allocating the overheads to the
products, then it can be implied that machine hours can be held responsible for the happening of
overheads of factory.
Difference between Cloud Computing and Traditional Accounting Software:
Speed: This is the most important difference lies between cloud computing and traditional
accounting software. Information can be accessed very easily and in very short time with the
help of cloud computing. It can also help in analyzing the data in a very systematic manner.
Accuracy: With the help of cloud computing, the chances of errors can be minimized to greater
extent. If the data is recorded using the traditional system, then there may be chances of
happening of errors. The usage of cloud computing has proven very useful to maintain the
accuracy of the data.
Costs: In case of this aspect, traditional method has been proven effective as compared to cloud
computing. Because the cost of tools that are used in traditional methods have low costs and the
equipment that are used in cloud computing seems very costly.

AISA 14
Backups: In case of manual system, there is always a risk of losing the data. There is no such
facility of backup in case of manual system. But in case of cloud computing, data is always
remains protected (Ling Pan, 2015).There is always a facility of backup of data.
Considerations: The financial information can be organized in systematic manner using the
computerized accounting system. It is very easier in assessing and analyzing the information in
case of cloud computing as compared to traditional accounting software.