ACC 201 Final Project Part II Bank Memo

ACC201 Final Project Part II Bank Memo

Students’Name

To:XYZ BANK

From:PEYTON APPROVED

4/4/2017

REQUEST FOR A BUSINESS LOAN FOR EXPANSION

Peyton Approved is a company that offers dogowners the best homemade treats that are all-natural andhypoallergenic. The company has been making and selling treats forthe past one year. The company has been operating successfully as asole entrepreneurship and it would like to, therefore, expand itsbusiness to offer services to a greater number of people. The purposeof this memo, therefore, is to request for a loan for the expansionof the company. The money would help to open a dog treat bakery.

Overviewof the Company’s Accounting System

The company uses the cash basis of accounting.This basis of accounting entails the recognition of revenue whenevercash is received and expense when paying bills. The choice of thebasis of accounting is due to its simplicity and the fact that it isthe most suitable method for small businesses. The selected method ofaccounting ensures responsibility when it comes to utilization ofincome only after its receipt thereby preventing the company fromfalling into debt. The company cannot spend what it does not have.

Accounting Process and Internal Controls forCash

The company is faithfully following the stepsof the accounting cycle to ensure responsible accounting practices.The accounting cycle strategy was selected since it ensures thattransactions are reported in the best way possible using a systematicand traceable approach. The overall accounting process of thecompany begins with the preparation of journal entries done on amonthly basis. At the end of a three-month period, that is quarterly,the stock is valued, T-accounts are prepared and so is the trialbalance. The financial statements are produced quarterly ensuringcontinual monitoring and improvement of Peyton Approved. Thestrongest internal control on cash available is the separation ofpersonal cash from cash belonging to the company. Utilization ofcompany cash to buy company related items only and the review ofreceipts and bills charged to company cash further act as controls oncash.

Resultsof Operations and Strengths and Weaknesses of the Company

An analysis of the company’s operationsindicates that the company makes good merchandise and bakery salesenabling it to make high net income. The results indicate that PeytonApproved is a profitable business venture. The company is making goodsales but it holds a very significant amount of cash that needs to bereduced or invested into company assets. The financial statementsindicate strength, for instance, the high amount of retained earningsand prepayments held by the company. The current ratio of the companyis 4.9 showing that the company can cover its liabilities without anyproblem. The company has about four times more assets than debt(R.Kajananthan and Prof.T.Velnampy, 2014).

Analysisand Opportunities

Overall, the company is headed in the rightdirection due to its profitability and its goal of expansion. Thecompany can explore more markets for the sale of its produce given itsuccess currently and this would lead it to increased access ofpeople, profitability and relevance.

Finally, all the details provided above are tofacilitate the request for the business loan for expansion. Attachedare the financial statements and other documents deemed necessary inthe loan request. Peyton Approved representatives would like torequest a face to face meeting with the bank officials in charge ofloan requests. The meeting will be an avenue for providingclarification and justification that may be needed by the loanofficer. Looking forward to your kind consideration.

Sincerely,

StudentSignature

References

R.Kajananthan, &amp Prof.T.Velnampy. (2014). Liquidity, Solvency and Profitability Analysis Using Cash Flow Ratios and Traditional Ratios: The Telecommunication Sector in Sri Lanka. Research Journal of Finance and Accounting , 163-166.