Hot and Sour Pepper's Restaurant: Financial Accounting Analysis

This report provides a comprehensive analysis of the financial aspects of Hot and Sour Pepper's Restaurant, a sole proprietorship planning to launch in North Melbourne, Australia. It covers the legal form of business, financing options like bank loans and venture capital, and projected financial statements including an income statement and balance sheet. The report details the role of accounting in the restaurant's operations, emphasizing the importance of financial statements for decision-making and profit distribution. The income statement projects sales revenue, cost of goods sold, and various expenses to determine net profit, while the balance sheet presents assets, liabilities, and owner's equity. The report also discusses the significance of maintaining proper accounts, the importance of financial statements for measuring performance, and strategies for profit retention and future investments. The restaurant's business plan focuses on offering a variety of continental cuisines to attract a diverse customer base, and the financial analysis is crucial for assessing the restaurant's potential success and making informed business decisions.

ACCOUNTING FOR
MANAGERS

TABLE OF CONTENTS
Introduction to Hot and Sour Pepper's Restaurant.................................................................1
Legal form of business...........................................................................................................1
Financing options...................................................................................................................2
Projected balance sheet and income statement.......................................................................3
Role of accounting related with Hot and Sour Pepper's.........................................................6
Importance of financial statement..........................................................................................6
Profit distribution or retention................................................................................................6
REFERENCES................................................................................................................................8

Introduction to Hot and Sour Pepper's Restaurant
A critical planning is required on the basis of demands and needs of consumers at
particular location. To take a plunge in restaurant world Hot and Sour Pepper's is going to
introduce itself in Australian market Restaurants and product or services related to it always has
high demand in every market as it has good responses by consumers. There can be variations in
demands of buyers as per the demographic differences like, Age, Gender etc. The organisation
took surveys at various locations regarding changes required by consumers in hospitality sector
(Collier, 2015). Information can be generated by professional of Hot and Sour Pepper's in respect
with deciding a favourable plan that will be beneficial in introducing business. Manager of
organisation has planned budget relating to cost of raw materials to be purchased and
promotional cost. The entity is planning to introduce various continental food like, Mexican,
Romanian, Italian, Indian, Chinese etc. Motive is to attract all categories of consumers and
introduce them to the new tastes. Owner has decided to launch restaurant at North Melbourne
which is most heritage and commercial area in Australia so it has good numbers of consumers,
tourists and will be beneficial in gaining good reputation and funds as well.
Legal form of business
Hot and Sour Pepper's is being a Sole proprietorship company as it has governance of the
single owner. This can be beneficial for owner to take all actions under his consideration as
Proprietor can make changes in planning and marketing techniques, it will be their own decision.
Entrepreneur will be benefited with profits earned at the end of year. Owner have to look for the
proper management of funds, human resource etc. The plus or positive side is that Proprietor has
authority to have first right over the earnings of organisation, but the negative point is that all the
crisis or risks has to be bear by Entrepreneur (Chen, TAN and Wang, 2013). Company has a
good vision and has better planning in their mind regarding introduction of restaurant and the
volume of human capital required for such operations. Plans are made as per the requirement of
employees for restaurant and serving consumers. Concept of launching various food variations
like Chinese, Mexican, Indian, Italian, Romanian in the different courses of meals. There will be
requirement of highly talented or experienced chefs who can cook multiple dishes which will be
good in taste and also in consideration of health. There will be requirements of 2 chefs, 3 waiters,
one manager or receptionist and one sweepers or cleaning staff. Number of employees can be
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increases on weekends as assumption can be made by the owner that there will be heavy rush in
the restaurant in those days, so to serve them there will be need of more workforce.
The planning has been made by mangers that they will serve Chinese food at the
breakfast as the dishes can be made quickly and it will fill the hunger very promptly. The Indian
and Italian dishes are in lunch menu. Mexican and Romanian dishes are to be served at dinner
time (Ahmed and Duellman, 2011). These decisions can be taken into consideration by owner
and manager.
Illustration 1:Restaurant Accommodation
(Source: Ahmed and Duellman, 2011)
Financing options
Hot and Sour Pepper's and its owner can generate funds through various sources, as it
will be helpful in the initial start-up of business. There will be planning required on the basis of
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deciding budgets for requirements regarding purchase of raw material, ingredients, employee’s
salary, accommodation facilities and etc. To bear all the costs and requirements owner will need
adequate amount of funds that will beneficial in making smooth running of organisation
(Kornberger, Justesen and Mouritsen, 2011). There can be various ways of generating a good
amount of funds to fulfil all requirements of restaurant. Necessity of funds and investments for
having a better growth, there can be several methods with which owner can generate finance.
Bank loan: Banks will lend money to entrepreneur as it grants loans to fulfil initial
requirements like installation of machineries such as microwave, grill, chimney, Owen and etc.
These kinds of investments are very helpful in having adequate and favourable amount of funds
that will fruitful in daily operations (Hall, 2010).
Personal savings: The savings made by entrepreneur that is internal source of finance
and it will be beneficial in initial start-up or Hot and Sour Pepper's restaurant. Owner must pre-
plan the expenses going to done in the launch of restaurant and must consider sources of having
raw material (Hartley, 2014). There should be use of healthy and fresh products or ingredients in
restaurant and the consumers must be satisfied with the quality of food and services. To meet all
the requirements the Proprietor, need to make investments in developing the infrastructural
facilities as well as the raw material requirements.
Venture capitalist: The money lent by the investors in favour with the new start-up of
business. In this regard, Hot and Sour Pepper's will have high growth as well as high risks. The
capitalist invites investor to make favourable investments in the organisation as to help them in
their introduction in the market. (Zadek, Evans and Pruzan, 2013). They will look their benefits
in the future with the consideration of entity's growth. Vision of business is to setup continental
food services which related with dishes of various countries (4 Small-Business Financing
Options You’ve Probably Never Heard Of, 2017). New concept can be beneficial in gathering
more consumers and which will result in generation of income or funds for the organisation.
Projected balance sheet and income statement
Income statement of Hot and Sour Pepper's
INCOME STATEMENT
Sales assumptions Amount
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Sales product per unit
Breakfast meals 31750
Lunch 44511
Dinner 65212.5
Total sales revenue 141473.5
Less: cost of goods sold (25% on sales) 35368.37
0
GROSS PROFIT 106105.12
0
LESS: INDIRECT EXPENSES 0
Advertisements 4244.2
Wages to staff 9903.14
Rent 2829.47
Interest on loan 48100.99
OTHER EXPENSES 21221.025
Total indirect expenses 86298.83
0
NET INCOME BEFORE TAX 19806.29
Less: tax (32.5%) 6437.04
0
NET PROFIT 13369.25
Interpretation: As per the above calculations it is to be interpreted that Hot and Sour
Peppers have served throughout the year and has favourable balance at end of every month
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which denotes that the concept is highly appreciated by consumers. Cost on production or
providing services to consumers is in control and organisation is able to meet cost as well as gain
profits through it. Expenses done on promotion, rent and wages to employees were done and it
did not affect profit earning of business. Concept of adopting new changes in restaurant line
introducing various food products will help organisation in gaining the good success throughout
the whole year. 3 course meal will be beneficial for entity as they are able to make much profit in
it. Profit earned by business on the sales of it products denotes that, the prices set by managers on
the courses are easily affordable by consumers and they are satisfied with food quality at
restaurant.
Balance sheet of Hot and Sour Pepper's
Particulars Historical projected
Current Assets
inventory 49500 50000
cash 28000 32000
prepaid expenses 1200 1473.5
FIXED ASSETS
Furniture 12300 20000
machinery 14000 15000
Goodwill 7000 9000
deposits 12000 14000
Total assets 124000 141473.5
Liabilities
current liabilities
creditors 21000 22473.5
Capital 78000 89000
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bank loan 25000 30000
Total liabilities 124000 141473.5
Interpretation: As per the above statement the balance sheet of the Hot and Sour Pepper's has
equally balanced which denotes that organisation is able to meet the expenses and pay their
creditors. It will reflect the good relationship with the creditors of the business.
Role of accounting related with Hot and Sour Pepper's
For growth of Hot and Sour Pepper's restaurant there must be proper maintenance of all
accounts. It will beneficial in keeping all records of transactions held in premises related with
purchase of raw material, selling of product and services, number or consumers visited
restaurant. It will also beneficial in making favourable decisions relating with services offered
such as which product has highest demand and which is preferred by consumers of large basis
(Klopper, 2015). There must be installation of computer devices as it will fruitful in keeping
adequate data and chances of theft and fraud can be reduced. Records can be related with
investments made by investors and loans generated by owner from various banks. Proper
maintenance of accounts helps in giving good strength to the organisation in meeting the
creditability, filling liabilities and also it effects in building a good image in the market. Hot and
Sour Pepper's will appoint auditors and will have quarterly or yearly audit of their accounts and
analysis should be made in the financial statement as to help investors or clients to take look over
profit or turnover generated by organisation. This information is very helpful in generating good
volume of clients, investors and capital investments. Accounts will keep all details regarding the
number of dishes served at particular time in whole day it can be beneficial for managers to
make investments decisions as to make more profit for the particular time when there is rush in
restaurant. They expand the number of employees and can arrange more tables for consumers.
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Importance of financial statement
The profit earned by Hot and Sour Pepper's is measured in income statement of
organisation. These statements are very helpful in knowing total quantity to be sold in respect of
all the courses of meals. The rates can be applied over that and the numbers of consumers have
particular meal (Garrison and et.al, 2010). These is helpful in analysing the which part of the
daily time schedule have the maximum number of buyers. It will be beneficial in deciding and
planning which meal course needs more finance. The business need to focus over satisfying
every category of consumers including age group, gender and etc. there must be more expenses
done over the accommodation facility in the organisation as to make the pleasant and healthy
environment. The restaurant has good earning at serving the dinner meals.
Profit distribution or retention
The owner of the Hot and Sour Pepper's must keep profits without distributing it. As it is
an initial start-up so the organisation needs time to get stable in this competitive market. Owner
and manager should collect their revenue so as to meet their daily personal expenses but they
must focus over keeping the favourable amount in reserve for securing future (Macintosh and
Quattrone, 2010). Profit and funds can be useful in meeting expenses of organisation in
expanding the product or service chain. There is need to improve infrastructural facilities. The
business should facilitate gaming zone for kids, it will create a positive image and helpful in
satisfying large numbers of consumers. There must be implementation of rules and regulations
for enhancing and motivating the workforce. There must be proper and adequate payment of the
wages to be paid to the workers it will be fruitful for the business to have the satisfying workers.
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REFERENCES
Books and Journals
Zadek, S., Evans, R. and Pruzan, P., 2013. Building corporate accountability: Emerging
practice in social and ethical accounting and auditing. Routledge.
Ahmed, A. S. and Duellman, S., 2011. Evidence on the role of accounting conservatism in
monitoring managers’ investment decisions. Accounting & Finance. 51(3). pp.609-633.
Chen, W., TAN, H. T. and Wang, E. Y., 2013. Fair value accounting and managers' hedging
decisions. Journal of Accounting Research. 51(1). pp.67-103.
Collier, P. M., 2015. Accounting for managers: Interpreting accounting information for decision
making. John Wiley & Sons.
Garrison, R. H., And et.al, 2010. Managerial accounting. Issues in Accounting Education. 25(4).
pp.792-793.
Hall, M., 2010. Accounting information and managerial work. Accounting, Organizations and
Society. 35(3). pp.301-315.
Hartley, W. C., 2014. An introduction to business accounting for managers. Elsevier.
Klopper, S. M., 2015. Accounting Research Manager. Journal of Business & Finance
Librarianship. 20(3). pp.230-236.
Kornberger, M., Justesen, L. and Mouritsen, J., 2011. “When you make manager, we put a big
mountain in front of you”: An ethnography of managers in a Big 4 accounting firm.
Accounting, Organizations and Society. 36(8). pp.514-533.
Macintosh, N. B. and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Online
4 Small-Business Financing Options You’ve Probably Never Heard Of, 2017. [Online].
Available through:<https://quickbooks.intuit.com/r/loans/4-small-business-financing-
options-youve-probably-never-heard-of/>. [Accessed on 31st August.2017].
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