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Corporate Form Of Business And Utilizing The Accounting Cycle

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Peyton Approved sells dog treats that are all natural and hypoallergenic for dogs that have severe allergies and cannot consume the usual store bought dog treats. This dog treat bakery has been quite successful within the first three months of business and looks promising to target an even larger market. Looking from July to September Peyton Approved has a service revenue of $60,221 and a net income of $32, 184.07. To continue to grow these numbers and provide more dog owners with reasonable all natural and hypoallergenic treats, Peyton Approved’s purpose of this memo is to request for funding from Bank of America to expand Peyton Approved. With the growth seen within those three months, this line of credit can help further expand this…show more content…
Since Peyton Approved is still a new business, the accrual basis of accounting was the best system to follow because it is common and allows the company to stay on top of each transaction and how it affects the business, which is outlined in the GAAP ruled by the FASB. “GAAP rests on a conceptual framework that identifies the objectives, characteristics, elements, and implementation of financial statements and creates the acceptable accounting practices” (Nobles et al., 2014). The accrual basis of accounting lets Peyton Approved have the appropriate information and faithful representation for their financial reporting that allows them to make smart investments and decisions. Peyton Approved benefits from this basis of accounting because it provides a more precise picture of where they stand financially, through revenues and expenses recorded in that period (Nobles et al., 2014). The company is not using the cash basis of accounting because it does not follow the acceptable accounting practices like the accrual basis of accounting does. The accrual basis of accounting supports responsible practices within the company because Peyton Approved can record all prepaid and accrual expenses that will help them see how the money has been used and what decisions need to be made. Accounting Process and Internal Controls for Cash The company uses the accrual basis of accounting to also aid in implementing strategies to ensure
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