Project Summary (Introduction), Management Study and Accounting System - Revised.docx

8/10/2019 Project Summary (Introduction), Management Study and Accounting System - Revised.docx

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CHAPTER

PROJECT SUMMARY


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A. INTRODUCTION

In this chapter, the researchers will discuss the project summary, which will provide the

would-be users of this feasibility study and a synopsis of the entirety of the business. This

chapter highlights the descriptive definition of the projects potentiality, its long-range

objectives, and the feasibility criteria. Additionally, this chapter discusses the name of the

enterprise, logo of the business, mission-vision statement, location of the business, its related and

national programs, affinity to regional and sectored studies and the history and nature of the

industry.

The researchers believe that presenting this introduction would induce the readers to the

potentiality of this industry.

B. DESCRIPTION OF THE PRODUCT LOGO


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The oval shape of the logo with the colors green and bordered with orange color is the

companys logo. The oval shape symbolizes continuous business operations, envisioned by the

researchers. The number 6 logo is simply the numeric value of the Greek word Hexa, which is

the first word of the name of the business. The white color was used for the business and product

name since white color symbolizes the neatness and cleanliness of the place of production, the

business, and the product itself. The dragon fruit represents what our fruit spread is made of.

Since the main ingredient of our product is dragon fruit, we have used the dragon fruit itself, as

part of our product logo for it is easier for our customers to think of what are we trying to offer

them. The researchers have chosen the colors black, blue, and green for the product logo. The

black color is very appealing to the eye, which excites curiosity, making people very eager to try

the product; the blue and green color symbolizes nature, which attracts interest or attention.

C. NAME OF THE ENTERPRISE

The researchers have chosen the name HEXAS FOOD ENTERPRISE, since the

business is owned by six individuals who are partners in the business, thus the word HEXA,

which was derived from the Greek language, meaning six or the six partners. The business is

mainly to vend food products, thus the name FOOD ENTERPRISE. In addition, the business is

to offer the market a jam made out of dragon fruit, and so was named DRAGON FRUIT JAM.

This was derived from the main ingredient of the product, which is dragon fruit, and the product

from the process of combining the fruit with sugar and other ingredients to result to a kind of

fruit spread, which is so called JAM, hence, the name DRAGON FRUIT JAM.


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D. MISSION-VISION STATEMENT

Vision

We envision Hexas Food Enterprise to be one of the top food enterprises in the food industry.

Mission

To produce high quality products that promotes healthy lifestyle at a reasonable price, by

providing exceptional and nutritious foods that guarantees customerssatisfaction.

E. LOCATION OF THE BUSINESS

Hexas Food Enterprise will be established at Mines View because of the great

availability of customers. Mines View is one of the most visited places in the City, especially by

foreigners, students and other visitors all over the country, due to its quality products and

services as well as its scenic tourist spot, which is the Mines View Park, where you can have a

magnificent view of the mountains and some part of the city. People who will visit or who will

go home to their respective towns or provinces, can stop by on our stall, buy our products, and

have them as their pasalubong to their family and friends.


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F. DESCRIPTION OF THE PROJECT

Relation to the National Program

1.

Related National and Local Programs

a. The National Healthy lifestyle Program of the Department of Health (DOH),

cognizant of the increasing prevalence of lifestyle related diseases, has taken the

promotion of healthy lifestyle as one of its priorities for the year 2003.

The enterprise adheres to this program since Hexas Food Enterprise develops a

product that relates to the current trend of health and fitness. The unique characteristic

of the business is its ability to provide customers healthy benefits, since the product is

very suitable for all diets, as it supplements various vitamins and minerals that is

good for the body.

b.

The Promote Good Nutrition Program (PGN), program of National Nutrition Council,

aims to improve the nutrition knowledge, attitude, and practices of families to

increase the demand for adequate, nutritious, and safe food.

The enterprise adheres to this program by means of the product being proposed,

which will be nutritiously beneficial to customers.

c. Philippine Plan of Action for Nutrition (PPAN), program of the National Nutrition

Council, is a program that provides the framework for improving the nutritional status


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of Filipinos, which supports the food industry to continue to develop and market food

products that are nutritious and safe to the consumer.

The enterprise adheres to it by producing a safe and healthy product for the

consumers. Through this, it will help the consumers attain a nutritional status.

2. AFFINITY TO REGIONAL OR SECTORAL STUDIES

Department of AgricultureBureau of Agricultural Research (DA-BAR)

This sector aims to improve the system for agriculture and fisheries through innovation.

They prepare the implementation of comprehensive programs of Research and Development

(R&D) to enhance, support, consolidate, and make full use of the capabilities of the interlinked

National Research and Development System for Agriculture and Fisheries. They review roles,

functions, and organization of the various agriculture and fisheries national research,

development, and extension institutions. In relation to dragon fruit, DA-BAR aims to discover

planting techniques in increasing the productivity of dragon fruit with little investment capital. It

was able to enhance and share the production technology of dragon fruit, propagate seedlings for

distribution to other interested growers, and establish the value of the product. One agenda of

R&D is ensuring that the natural resources in the Philippines are used and maximized to its full

potential such as the unexplored fruits common in our country.


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Agri-business Development Project

The project was designed to address constraints to the development of the sector and to

exploit domestic and export market opportunities for agribusiness to increase economic growth

and rural employment. The establishment of more dragon fruit plantations and processing centers

in the country, the Philippine Dragon Fruit Growers and Processors National Council was

organized recently to make its presence felt in the export market.

G. PROJECTS LONG-TERM OBJECTIVES

Hexas Food Enterprise aims to become one of the top food enterprises not only in the

area of Baguio but throughout the world in the years to come. We are perceived to make other

new quality products, using dragon fruit as our raw material, to expand the business in the future.

The business has the following long-term objectives:

1. To increase the awareness of customers on the different ways a dragon fruit can be

introduce, from an ordinary fruit to a nutritious food product.

2.

To expand the business operations by performing possible product innovations using

dragon fruit as the main ingredient, and making the business open for franchise.

3. To line up with other competitors using our unique approach.

4. To offer an affordable, delicious, and satisfying food products that promotes healthy

lifestyle to the consumers.

5. To promote and practice responsible ethical and environmental standards.


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H. FEASIBILITY CRITERIA

The primary concern of the feasibility study is to assess the profitability of a business

itself. Hence, the main objective of every business is to maximize their profit. If this business

succeeds in achieving a high profit level then the proposed project is feasible.

The secondary concern considered is the customer satisfaction, which leads to a socio-

economic environment. We all know that the needs of people are unending, and the enterprise is

to offer an affordable product that will accommodate and satisfy their needs and demand. This

project would create a positive effect on the economy by increasing job opportunities for

unemployed and in promoting healthy lifestyle by providing nutritious products.

I. HIGHLIGHTS OF THE STUDY

1. History of the Project

One of our proponents recognized a dragon fruit when he was watching news. It

was his first time hearing such a fruit like that. Then, he made some research about it, and

found out that dragon fruit has many benefits. In addition, he found out that the said fruit

has also been used to produce different kinds of food products such as fruit cake, chips,

fruit shake and siomai wrappers. The said fruit is not so common in the market since it

has only been known recently. Many farmers continue to grow and expand the plantation

of dragon fruit in order to introduce it in the market since researches has proven the

health benefits of the fruit. The researchers then believe that this feasibility study is one

of the best ways to introduce dragon fruit in the market, which has a great room for

profitability because of the health benefits it can provide.


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2. Project Time Table and Status

A. Feasibility Study- August 2014- October 2014

This is the stage where the project is presently in. The partners are conducting a

study if the product is feasible or not. This stage is crucial and it includes the study

in the market, technical management, and socio-economic factor that would further

discuss the different aspects affecting our business decisions. Feasibility study is

done to measure the possibility and profitability of the project.

B. Procurement of Funds- October 2014 - December 2014

It would take to produce funds because researchers would seek help from different

individuals for the additional capital. Each partner will contribute P200,000 to be

used in the incoming expenses that is needed in the production and in operating the

business. The capital used for the operation of the business will come from the

equal contribution of the partners.

C. Completion of Legal Requirements- January 1- 15, 2014

All the requirements needed such as business registration at Securities and

Exchange Commission (SEC), registration at the Department of Trade & Industry

(DTI), business permits, sanitary permits, and other requirements or documents will

be complied during this period in order to start the operation of the business.

D. Acquisition of Materials and Supplies- January 16- 31, 2015

Before the start of operation, the partners already ordered the materials and supplies

from the supplier. There is no specific supplier because the partners will avail the


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supplies from the suppliers, which offers the lowest prices, and those suppliers who

will give a discount for bulk purchases, considering the quality of the product that

will be used in the long-term operation of the business.

E. Hiring of workers/employees- February 1- 10, 2015

The partners will choose the employee who has a work experience about the food

industry for the efficiency and effectiveness of the operation. They will be selected

carefully and fairly according to their job interviews. The partners will hire six

employees for the operation of the business.

F.

Advertisement and Promotion of the product- February 11-25, 2015

To make the product known to the public, the partners will advertise and promote

the product through posters, tarpaulins, free tastes, and flyers.

G. Full Operation- February 26, 2015

After accomplishing all the different activities and requirements needed, the

enterprise can now formally start its operation.

3. Mode of Financing

The primary source of financing the business will be the initial investment of each

partner. The partnership is composed of six people who share the same interest in the

business venture. Each individual will invest P200,000 for the common equity of

P1,200,000.

This amount of contribution from each partner is sufficient to purchase all the

materials and equipment needed, and for the payment of other expenses. Furthermore,

borrowing money from other sources, for example from a moneylender, friends or from


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parents is just one of the ways the researchers can come up with their respective

contributions to finance the business.

4. Nature of the Industry

The enterprise is in line with food industry that will serve Dragon fruit Jam and

sell it at a reasonable price. The enterprise will be under the small-medium enterprise

that desires to go beyond the consumers taste preferences.

5. Investment Cost

The partners will be contributing P200,000 to cover up all the expenses for the

first year of the business with the total investment of P1,200,000. It will be allocated to

the purchase of raw materials, rentals of production and store, processing of legal

requirements and documents, packaging, cleaning tools and others. This contribution is

enough to start the business.

J. MAJOR ASSUMPTIONS AND SUMMARY OF FINDINGS AND CONCLUSION

1.

Market Feasibility

The study aims to put up a business that is unique to the market. Every business

that has been put up has one main objective and that is profitability. For a business to be

profitable, it needs to have a high demand. For a business to be feasible, researchers

consider the market study as the basic foundation and emphasis is given on the

interaction between demand and supply following some factors affecting it.

The market study was conducted in Baguio City concentrating to the consumers

ages 4 years and above as the target market. Since jams have very soft texture, and are

easy to spread, it can already be consumed by consumers ages 4 years old and above. As


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for the study of the demand of the product, the market study showed an increasing

demand for the product. The demand and supply of the product is also affected by some

factors such as population growth, price, competition, income, availability of suppliers

and others. Thus, the business will carry out some marketing strategies to increase the

demand of the business product by giving away flyers, which indicates the necessary

information about the product and the health benefits it can give to every consumer.

Social media will also be one of the ways of introducing the product in the market.

2. Technical Feasibility

The nature of our product is in line with the food industry. The business will cater

dragon fruit jam in the market around Baguio City and will also be supplying the sellers

in pasalubong centers like Baguio City Public Market and Mines View Park.

3. Financial Feasibility

The financial study shows the overall statement of the enterprise. As a newly

established business, it is likely to have a lesser profit on the first year of operation since

the production is only at its minimum level. However, eventually, on the succeeding years,

it will generate more profit because the product is already out to the market and known to

the public thus, the project is considered feasible. .

The Financial requirement to put up the business is One Million Two Hundred

Thousand pesos (Php 1,200,000). Each partner will contribute Two Hundredthousand

pesos (Php 200,000). The financial statement will prove the profitability of the business in

the long run.


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2. Management Feasibility

The enterprise will be composed of a sales clerk, custodian, driver, and three

helpers. They are enough to sustain the operation. Each employee will be receiving a

minimum wage (Baguio rate) per day and will be working six days a week and have one

day for their rest day. The employees will be paid through checks every 10th

and 25th

day

of the month. Since the business will be operating even during holidays, employees are

also entitled to additional 100% of their daily wage as proclaimed by law.

3.

Socio-Economic Feasibility

Consumers Aspect

The proposed project directly affects the consumer with the affordable price of the

product. It is at the same time beneficial to the consumers because aside from the

satisfaction they can get, their health will not be at risk because the products will give

health benefits to the consumers.

Government Aspect

The proposed project will help the government raise funds through taxes and

other business permit fees generated from the business. Those funds will be used in

developing local communities, which improves the quality of life of the people.

Environment Aspect

The business promotes the maximization or resource utilization by introducing

another variety of products and not merely concentrating with the usual use of the product.


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Economic Aspect

The business will not only generate revenue for itself but it also gives benefits to

people. The establishment of the business will open job opportunities and become a source

of income for some individuals, which help in reducing the unemployment rate in the

country. By generating employment and income, the business directly benefits individuals

and families. Indirectly, the economy may be benefited as more income in the hands of the

people, which increase greater demand for goods leading to more production of goods.

The increasing demands of the people needs to be satisfied, therefore, the need to increase

the supply of goods in the market. The proposed project then is considered feasible in that

it aimsto satisfy the unsatisfied demands of the people, and increases the supplies of goods

in the market.


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CHAPTER 7

MANAGEMENT STUDY


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A. Introduction

Management in business and organizations is an art that coordinates the efforts of people

to accomplish goals and objectives. This is where the project attains or reaches its objectives

through having effective organization, which helps the company carry out its objectives.

This part of the study discusses the basic consideration, forms of ownership, the

companys organizational chart, and the key personnel with their respective qualifications, and

management policy.

B. Basic Consideration

The organization has taken into consideration the need for a sufficient supervision in its

manufacturing process. Accountability is also important especially in the disbursement of funds

and materials. Internal control procedures are strictly implemented to have an effective and

efficient process in order to realize the goals and objectives of the company.

C. Form of Ownership

The form of ownership established by the partners is General Partnership. Each

individual partner shares equal rights and responsibilities in connection with the management of

the business. Each partner assumes full responsibility for all of the business's debts and

obligations. Each of the partners is a capitalist-industrial partner since they contributed both

money and services to the management and operations of the business. The partners contributed

Two Hundred Thousand pesos (Php 200,000) each.


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E. Officer and Key Personnel

Partners

The partners are in-charge of managing and supervising the business. They will

be dividing the profit among themselves and will not receive monthly salary. As

managers of the business, the partners have the following functions:

Oversees and guides the works or activities of the employees

Performs cashiering

Keeps records of collections and verifies with respective customers

Decides for the accredited supplier of materials, supplies and other items needed

Decides on the advertisement of the product

Prepares the partnershipspolicies and procedures

One of the partners will act as sales representative during the sales clerk scheduled rest

day.

Specific Functions of the Partners

CUARESMA, Ryan MauriceManager 1

A. Officer in Charge, Inventory Control and Delivery

Responsible for the transfer of inventory in an out of storage areas.

Monitors inventory level

Checks damaged items in the storage area

Review sales orders


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Prepare goods for shipment and complete shipping documents

Release goods to carrier

In charge in the preparation of purchase requisitions for items needed

JOAQUIN, Jester B.Manager 2

A. Officer in Charge, Customer Orders

In charge of processing customer orders

Checks the acceptability indicated in the customers purchase orders

In charge in the preparation of sales orders

Checks credit limit available to customer

B. Officer in Charge, Purchasing of Items

Conduct price canvassing to determine the suppliers to be awarded the

purchase contract.

In charge in the preparation of purchase orders

BRUAN, Melissa S.Manager 3

A. Officer in Charge, Accounting Unit

In charge in the preparation of sales invoices, disbursement vouchers,

financial statements and checks.

Have checks signed by authorized signatory

Forward checks to vendors

Prepares bank reconciliation statements


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PETA, Jenny Babe S.Manager 4

A. Officer in Charge, Receiving Unit

In charge in the preparation if receiving reports for goods received

Compares goods received with the purchase order

Forward goods received to inventory control personnel

B. Bookkeeper

Records daily transactions

C. Officer in Charge, Payroll

In charge in the preparation of payroll register

RECILE, Aleja G.Manager 5

A. Authorized Signatory

Signs checks and disbursement vouchers

Checks the supporting documents attached to the disbursement

vouchers.

Establish records of signed checks and cancelled checks

RULLAMAS, Mary Ann M.Manager 6

A. Officer in Charge, Human Resources

In charge in the hiring and firing of employees

Keeps employees records

Advertise available job opening

In charge in the processing of employees membership with SSS, Pag-

ibig, Philhealth, etc.


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Employees

1. Sales Clerk

Qualifications:

1828 years old

Preferably college level

Good in oral and written communication skills

At least 2 years experience in related industry

Functions:

Replenish, arrange and check the products at the selling area

Markets the product to the customers

2. Custodian

Qualifications:

20 years old and above

Must be physically fit

Honest and hard working

Must be willing to work overtime

Functions:

Collects and bags all garbage and placing it in a closed dumpster

Sweeps and maintains cleanliness of the establishment

Reports defective units, tools and equipment

Washes tools and equipment being used in the production area

3. Driver

Qualifications:

Must have a good driving skills

Must be cautious and alert in driving

Must acquire non-pro or professional driving license



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Functions:

Delivers the product to the customers

Transports raw materials from the plantation area to the establishments

storeroom

4. Laborer

Qualifications:

Must be physically fit

Preferably male

Honest and hard working


Functions:

Responsible for cleaning the raw materials

Steams, peels and shreds the dragon fruit

Receives and carries the raw materials in and out the production room.

F.

EMPLOYEES COMPENSATION, BENEFITS, AND SERVICES

Employees Compensation

All employees will be paid every 15th

day and 30th

day of the month. The first payday of

the month covers the wages earned from the 26th

day of last month until the 10th

day of the

current month. The second payday covers the wages earned from the 11th

day of the current

month until the 25th

day of the current month.


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Absences/Tardiness

When the employee comes to work beyond 8 A.M. in the morning and beyond

one hour for lunch break, the employee shall be considered late. Habitual late will result

to termination. Salary deductions for late will be implemented by the management and be

computed based on the following formulae:

No. of Late

(in minutes)

Salary Deduction

First Time-in( Before the store opens)

Second Time-in(After lunch break)

015 20% of wage per hour 20% of wage per hour

16 - 30 40% of wage per hour 40% of wage per hour



Absences due to fortuitous events shall be notified and excused from work. If an

employee plans to absent himself from work, he should notify the assigned supervisor a

week before his scheduled absence and submit an excuse letter with attached supporting

documents, if any. Unauthorized absence will give an employee a warning, and if he/she

incurs five unauthorized absences, then he/she will be terminated from work. Three

consecutive absences from work without official leave or any report from the employee

will result to termination. Absences are not compensable since the management is strictly

implementing the rules of no work no pay.


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Under time/Overt ime

Employees are allowed to work under time only for some excusable reasons.

Employees are only to work overtime if required by one in authority, the managers of the

business. The employees cannot recover their under time by having their overtime as an

exchange.

Benefits and Privileges of the Employees

1. Benefits:

Night Shift Differential - every employee shall be paid a night shift

differential of not less than 10% of his regular wage for each hour of work

performed between 10:00 in the evening and 6:00 in the morning.

Overtime pay- work performed beyond 8 hours a day provides an additional

compensation equivalent to the employees regular wage plus at 25% thereof.

Right to holiday pay-holiday includes New Years Day, Maundy Thursday,

and Good Friday, ArawngKagitingan, Labor Day, Independence Day,

National Heroes Day, Bonifacio Day, Rizal Day, Christmas Day, All Saints

Day, and Last Day of the Year.

SSS Benefits

PHILHEALTH

13th

month pay-employees are granted 1/12 of their wages within a calendar

year before December 24.

2. Privileges:

Employees are given 10% discount on company products.


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G. MANAGEMENT POLICIES

Work ing Days

The enterprises business hours will start at 8:00 A.M and will end at 5:00 P.M.

However, the employees should be at the business proper before or at exactly 7:45 A.M.

The allowance of 15 minutes is allotted for the preparation of displays, cleaning of the

store, checking of proper uniforms and grooming of the employees, and pep talks,

reminders, and/or announcements of the managers. The employees are required to render

eight (8) hours of service inclusive of preparation of materials.

Rest Day

A rest period of 24 consecutive hours after every six consecutive normal

workdays is provided for every employee. The partners will be the ones who will

schedule the rest days of each of the employees. None of the employees will have the

same scheduled rest day.

Lunch and Coffee Breaks

All employees will be given one-hour break for lunch and fifteen minutes coffee

break in the afternoon. The partners will schedule one-hour meal break and fifteen

minutes coffee break for each employee. Each employee will have his or her break one at

a time.


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Unif orm and Cleanli ness

Uniforms are provided by the company but are to be paid on two equal payments

directly deducted from the employees salary on two paydays.

All employees must wear appropriate attire at all times to observe proper

identification, product handling, and cleanliness. The production team must wear their

official t-shirt with the business logo, apron, gloves, and hairnet and face mask. The

employees in the selling area are required to wear the official t -shirt and hairnet.

In addition, all employees must be in proper grooming. Males should have short

haircut, well-shaved beard, and moustache and must always have their face towel with

them. Females should tie their hairs covered with hair net. All employees should maintain

short and clean nails, clean shoes, and clean and well-pressed uniforms.

Standard Operating Procedur es

1.

Before logging in, all employees assigned at the production area should wash

their hands before handling finished goods, raw materials and other tools.

2. Employees should log in using the bundy clock. Logging in should be done before

the store opens, and after lunch break before proceeding to the assigned work

areas. Logging out should be done before lunch break and after the shift. If an

employee failed to log in and/or logged out, he/she will be issued a memo

concerning his/her failure to punch. Habitual failure to do so will result to

termination.


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3. Checking of proper uniform and grooming will be done every after logging in.

The employees will stay in one place and check if they are in their proper uniform

and grooming. The manager will do pep talks, reminders, and/or announcements,

if there are any, after the checking.

4. Damaged tools and equipment due to the fault of an employee should be charge to

him/her for two equal payments through salary deductions.

5. Employees caught violating the said rules shall be reprimanded, and if done

frequently may lead to termination.

6.

All employees must clean the facilities after work.

H. RULES AND REGULATIONS

Hexas Food Enterprise has policies to be observed, which cover the conduct and

behavior of its employees. If an employee has committed any of the following violation/s or

combination thereof will be a ground for the suspension or termination from the company.

1. Committing acts of discourteous, disrespect or impoliteness towards officials or co-

employees in the company, its customers and in public in general.

2. Committing disorderly acts with fellow employees or to other persons, such as

engaging in scuffling, horseplay, running, fighting or instigating a fight using

insulting words/ language and other similar related acts.

3.

Carrying a firearm or any deadly weapon without proper authority.

4. Attempting to inflict body injury or harm to another during working hours or inside

the company premises or property and anywhere in any dispute related to ones work

or employment.


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5. Soliciting personal business or conducting business transactions such as buying and

selling of goods and merchandise related to the products of the company.

6. Using without prior permission of the companys facility, tampering, damaging or

destroying company property and facilities through carelessness or gross negligence.

Negligence of Duty

1. Wasting time or loitering while on duty.

2. Leaving the company premises during working hours without permission.

3. Sleeping while on duty.

4.

Destroying companys property, other peoples property/customers property in

custody of the company, willfully or gross negligence.

Insubordination

1. Refusal to submit to or failure to meet security requirements of the company.

2. Failure to carry out verbal or written job work instructions issued by the employees

supervisor.

3.

Refusal to work overtime without good reason, after being scheduled to work

according to overtime policy.

Dishonesty

1. Falsification of time record either personally or through another employee in which

even both shall be held responsible.

2. Theft or removal from the company premises without proper authority of the

company property or funds of other employees, guests or customers property.

3. Using companys time, material or other equipment to do unauthorized work.


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4. Possession of master key or similar device which can open lockers, drawers of co-

employee or security devise of the company.

5. Giving false statements in the application from such as date of birth, civil status, etc.

Alcoholic Drinks, Drugsand Smoking

1. Drinking alcoholic beverages or bringing intoxicated beverages inside the company

premises.

2.

Smoking or bringing drugs inside the companys premises.

3. Performing work or being in the company premises while under the influence of

intoxicating drinks or liquor and smoking.

4. Possessing a habit and forming drugs inside the company premises without legal or

medical justification.

Company Unsafe Practices

1.

Failure to wear the prescribed uniforms without justifiable reasons.

2. Failure to report immediately a personal injury sustained in line of duty or in the

course of employment which occurred on company time, property or premises.

3. Reporting to work while suffering an ailment or disease.

4. Removing safety devices from machinery or equipment without proper permission

from superior.

5. Creating or contributing to unnecessary conditions or violating ordinary rules on

cleanliness and sanitation.


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6. Disclosing, leaking out, or revealing confidential or classified information like trade

secrets, procedure, and merchandising techniques or sales information to

unauthorized employees or outsiders.

7. Failure to report any contagious diseases of his own or other employees.


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CHAPTER 5

ACCOUNTING SYSTEM


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Introduction

An accounting system is very vital in every business. An accounting system focuses on

providing business owners and managers with supporting documents for making decisions.

Accounting systems focus primarily on financial transactions. Business owners, directors and

managers may not be on the forefront of the companys operations. This also provides several

benefits for owners and managers needing to review financial transactions.

The design, development, and use of the accounting and internal control system will help

the entity meet its objectives and reduce the risk of fraud and error occurrence. It must be noted

that the employees are properly and fully oriented regarding the systems to attain the level of

success the business partners are expecting as well as to provide help to employees regarding the

status of their lives, which is directly and indirectly affected by the benefits provided by the

company.


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PROPOSED CHARTS OF ACCOUNTS

A. BALANCE SHEET ACCOUNTS

Account Title Account Number

ASSETS

CURRENT ASSETS 100-00

Cash

Cash in Bank 101

Cash on hand 102

Petty Cash fund 103

Accounts Receivable 104

Allowance for bad debts-Accounts receivable 104-01

Inventory 105

- Finished goods 105-01

-Raw materials 105-02

Factory supplies 106

Other prepaid items 107


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NONCURRENT ASSETS 200-00

PROPERTY, PLANT AND EQUIPMENT

Office equipment 201

Accumulated depreciation- Office equipment 201-01

Delivery equipment 202

Accumulated depreciation-Delivery equipment 202-01

Furniture and fixtures 203

Accumulated depreciation furniture and fixtures 203-01

Factory Machineries and Equipment 204

Accumulated depreciation- Factory Machineries and Equipment 204-01

Leasehold Improvement 205

Accumulated depreciation - Leasehold Improvement 205-01

LIABILITIES

Accounts Payable 301

Accrued Utilities Expense 302

SSS Payable 303

Philhealth Payable 304

PAG-IBIG Premiums Payable 305

Withholding Tax Payable 306


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Income Tax Payable 307

VAT Payable 308

PARTNERS CAPITAL

B. INCOME STATEMENT ACCOUNTS

SALES 400

COST OF GOODS SOLD 500-01

Raw Materials Used 501

Purchases 502

Direct Labor 503

Factory Overhead 504

Indirect Materials 504-01

Factory Supplies 504-02

Depreciation 504-03

Rent 504-04

Indirect Labor 504-05

Utilities 504-06


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Account Title Account Number

EXPENSES 600-00

Salaries Expense 601

SSS contribution 602

PhilHealth contribution 603

PAG-IBIG contribution 604

13th Month Pay 605

Organization cost 606

Registration for SEC606-01

Documentary Stamps606-02

Legal Fees606-03

Taxes and Licenses 607

Business Permit607-01

Mayors Permit607-02

Sanitary Permit607-03

BIR Permit607-04

SEC Registration607-05

DTI Registration607-06

Light, power and water 608

Advertising Expense 609

Communication Expense 610

Office supplies expense 611

Depreciation expense - Office equipment 612


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Depreciation expense -Delivery equipment 613

Depreciation expense- furniture and fixtures 614

Depreciation expense - Factory Machineries and Equipment 615

Depreciation expense - Leasehold Improvement 616

Rent Expense 617

Doubtful Accounts Expense 618

C.DESCRIPTION OF ACCOUNTS

BALANCE SHEET ACCOUNTS

ASSETS

CURRENT ASSET

The entity classified assets as current when it is expected to be realized, or to be sold or

consumed in the entity's normal operating cycle. Current assets include cash and those assets

which can be readily converted into cash within one year or the normal operating cycle

whichever is longer.

Cash

Consists of coins and currencies on hand and some checks from customer.


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Cash On Hand

It includes cash collections that were not depositedor cash items awaiting

deposits. Cash on hand is being maintained by the company at minimal amount to meet

requirement in case of inevitable circumstances.

It is debited when a cash sale of merchandise, collections of other revenues,

proceeds from sales of fixed and other assets,collections from customers, and other

borrowers, and proceeds of loans taken.

It is credited when a cash purchase of merchandise arise, cash purchases of fixed

and other assets, payments of expenses and payments to creditors and other lenders.

Cash In Bank

Cash in bank includes demand deposit or checking account, time deposit and

saving deposit that is available for companys operations. All transactions involving cash

outlay will be paid by this fund with the proper authorization by the authorized officer or

signatory.

It is debited when a cash deposit is made and proceeds of loan are taken.

It is credited for payments of expenses.

Petty Cash Fund

It is used to pay small expenses that cannot be paid conveniently by means of

checks.

It is debited when this account is set up for replenishment of this fund.

It is credited when it is used to pay for petty cash expenses.


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Accounts Receivable

Collectibles from customers arising from sale of goods or services on open

accounts without any formal written promise to pay.

Allowance For Doubtful Accounts

Is a contra asset account used to record accumulated balance of customers

accounts that are doubtful of collectability. It is an offset against an asset that is why it is

a contra asset to produce a more useful and reliable measure of the entity's liquidity.

Inventories

Assets held for sale in the ordinary course of business, in the process of

production for such sale or in the forms of materials or supplies to be consumed in the

production process. For a manufacturing firm, inventory accounts include raw materials

inventory, work -in process inventory and finished goods inventory.

F in ished Goods I nventory- these items include goods ready for sale in the

ordinary course of business.

Works in Pr ocess Inventory- these items are partially completed products that

require further process or work before they can be sold.

Raw Materi als Inventory- are goods that are tobe used in the production process.

No work or process has been done on them as yet by the company inventorying them.

They are physically incorporated in the production of other goods and which can be

traced directly to the end product of the production process.


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Prepaid Expenses

Expenses paid and recorded as assets before they are used or consumed.

It is debited when the firm pays in advance.

It is credited when the firm consumed the whole or a portion of the prepayment.

NONCURRENT ASSET

All other assets that cannot be classified as current are classified as noncurrent assets.

This includes tangible, intangible, operating and financial assets of a long term nature.

Fixed Assets

Fixed assets are known as Property, Plant and Equipment. These are tangible

assets which are held by an enterprise for used in production or supply of goods and

services and are expected to be used for more than one accounting period. It may also be

defined as "tangible assets with an estimated useful life beyond one year, used in the

conduct of business, and are not intended for sale in the ordinary course of business". It

includes:

Equipment, Machinery, Furniture and fixture, Office equipment, Store equipment,

Delivery equipment

Accumulated Depreciation

Accumulated depreciation is a contra asset account representing usage of asset or

expired cost of the asset up to the present. It is a contra asset account because it is offset


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or deducted from the appropriate fixed asset account to produce the book value for the

asset.

Intangible Asset

Identifiable non-monetary assets without physical substance held for use in the

production or supply of goods and services. They are long lived assets without physical

characteristic and whose value lies in the rights, privileges, and competitive advantages

that they give the owner.

Trademark

It is the symbol, sign or name used to mark a product to distinguish it from other

products.

LIABILITIES

CURRENT LIABILITIES

Liabilities are classified as current when it is expected to be settled in its normal

operating cycle and obligations which are due to be settled within one year from the balance

sheet.

Account Payable

Refers to the indebtedness that arise from the purchase of goods, materials,

supplies or services in an open charge account, that is, it is not evidenced by any written

promise to pay.

This is debited for payments to creditors to apply on account.


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This is credited for purchases of merchandise on account, purchases of fixed

assets, other assets, and services on account.

Unearned Revenues

Represents obligations for goods and services that the entity must provide in a

future accounting period in return for an advance payment from a customer.

Accrued Expenses

Expenses that have been incurred but not yet paid.

It is debited when it is paid.

It is credited as an adjusting entry to recognize the incurred expense and the

corresponding liability for the period.

CAPITAL

INCOME

Increases in economic benefits during the accounting period in the form if inflows or

decreases in liabilities that results in the increase if the equity. It is the increase in owner's equity

resulting from the sale of goods or from rendering services to customers.

Sales

Main source of revenue or manufacturing firm.


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Sales Return

Contra revenue account which represents merchandise returns from customers. A

deduction from the original sales price.

EXPENSES

Decreases in economic benefits during the accounting period in the form of outflows or

depletion of assets or incidences of liabilities that result in decreases in equity. These are

decreases in owner's equity resulting from the cost of goods sold.

Advertising Expense

Refers to cost of publications in newspapers, radio, television, and either cost of

promoting the business.

Communication Expense

Refers to cist of all means of communications used during the period like

telephone, and postage.

Delivery Expense

Refers to the cost of gasoline, oil and other related expenses in transporting goods

to customers.

Depreciation Expense

Refers to the portion of total cost of fixed assets allocated to current operations.


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Rent Expense

Refers to charges on the right to occupy shop or office space.

Repairs And Maintenance Expense

Refers to cost of repairing and servicing certain assets like building and office

equipment.

Salary Expense

Refers to compensation or remuneration in whatever form given to employees for

the services they render to the firm.

Supplies Expense

Refers to the cost of ball pens, stationery and other supplies used or consumed by

the enterprise.

Taxes And Licenses

Refers to business taxes, licenses, and other fees due to the government.

Utilities Expense

Refers to the cost of electricity and water consumed during the current accounting

period.


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Costs of Goods Sold

Represents the value of items sold to customers, which is computed by adding the

beginning inventory, purchases and freight in to come up with goods available for sale

and deducting ending inventory.

SOURCE DOCUMENTS

Official receipt

Document that gives evidence to a transaction involving the receipt of cash. The

document includes the amount of cash received, the name of the person or party from

whom cash was received, and the date of receipt.

Cash voucher

Document which gives evidence to a transaction involving payment if cash. This

document includes the name of the payee, the date of payment and the amount.

Sales invoice/ purchase invoice

The seller issues a business form called invoice after a sale had taken place. The

invoice shows details about the seller and buyer, terms of sale, list of product sold, their

unit price and the total amount due including the value added tax. The invoice serves as

evidence that a transaction has occurred.


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JOURNAL AND LEDGERS

General Journal

The two column record used to record journal entries that do not fit in any

special journals.

General Ledger

The principal ledger, when used in conjunction with subsidiary ledgers, that

contains all of the balance sheet and income statement accounts.

Purchase Order

It notifies the vendor of the companys intent to purchase goods. It contains

information about the goods to be purchased such as description, price, quantity,

credit period, delivery data, fright, and other terms.

Receiving Report

It acknowledges the receipt of goods delivered to the company. It contains

information about the quantity and description of the item received.


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DATA FLOW DIAGRAM

A. REVENUE/RECEIPT CYCLE

CREDIT SALES

Accept

Customer

Order

Prepare salesorder

Sales Order 1

Sales Order 2

Sales Order 3

Sales Order 4

To

accounting

To

customer

To inventory

control

File


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INVENTORY CONTROL

Sales Order 2

Prepares goods forshipment and

complete shipping

documentsFrom

Customer

Order

Shipping Document 2

Shipping Document 1

File

To accounting


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ACCOUNTINGFromCustomer

Order

From

Delivery

Sales Order 4 Shipping

Document 2

Compare

Prepare Sales

Invoices and sales

summar

Sales Summary

Sales Order 4

Sales Order 2

Shipping Document 2

Sales Invoice 2

To

Customer

File

Sales Invoice 1


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CASH SALES

Customer picks/

orders items at theselling area

Cashier

Issues official receipt to

customers generated by

the cash register

Official receipt 1

Official receipt 2

To customer

To accountingpersonnel


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NARRATIVE DESCRIPTION OF THE REVENUE RECEIPT CYCLE

The revenue/receipt cycle encompasses both the sales of goods to customers and the

collection of cash.

Customer Order

When a customer order is received by phone, fax, mail, or through personal requisition,

the following procedures are performed:

1. Checks the acceptability if terms (date of delivery, pricing, credit period, and discount, if

any) indicated in the customers purchase orders.

2. Checks the availability of resources to meet deadline.

3. If terms are not acceptable, the customer is notified and the purchase order is returned.

4. If terms are acceptable, a sales order form is prepared and a file is retained.

Personnel in charge in the customer order department prepare a sales order. Four (4)

copies of the sales order are prepared and then forwarded to the proper personnel for processing,

and a copy is filed for a pending shipment or delivery.

Upon the preparation of the sales order, the personnel in charge of the customer order

also perform the following procedures:

1. Checks credit limit available to customer.

2.

If credit standing is not satisfactory or credit limit is exceeded, proper personnel is

notified which, in turn, notifies the customer.

3. If credit status is satisfactory and credit limit is observed, the sales order is approved

and one is forwarded to inventory control.


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Inventory Control and Delivery

The inventory control personnel should be responsible not only for controlling transfer of

inventory in and out of storage areas, but also for monitoring inventory levels and for reporting

damaged items. The following procedures are performed:

1. Review sales order.

2. Initial copies of sales order to order the release of goods from the storage area.

For delivery of goods, delivery personnel will compare sales order from inventory control

with sales order from customer order department. The following procedures are performed:

1. Examine goods from storage area and compare with the sales order.

2. Prepare goods for shipment and complete shipping documents.

3. Release goods to carrier and obtain receipt.

4. Notify customer order personnel that the goods have been shipped to billing; retain

file copy of sales order and shipping documents.

Accounting

The sales order received from the customer order personnel are compared with the sales

order and shipping documents receivedfrom the inventory control and delivery personnel. These

documents are matched and become the basis in preparing a sales invoice. Once copy of sales

invoice is forwarded to the customer and one is forwarded to the accounting personnel for the

preparation of reports on cash collections.


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Internal Control for Revenue/Receipt Cycle

1. Perform a credit check for all new customers.

2. Prepare and periodically updates lists of authorized customers, indicating a maximum

credit limit for each customer.

3. Maintain updated lists of authorized prices and sales terms.

4. Establish procedures for reviewing and approving prices and sales terms before

shipment.

5. Pre-number and control credit memoranda or other related forms.

6.

Verify that ordered products are in box, and therefore can be shipped on a timely basis.

7. Limit access to shipping documents to authorized personnel.

8. Document policies and procedures for scheduling shipments.

9. Establish procedures for prompt reporting and investigation of shipments not billed.

10. Establish processing and recording procedures.

11. Reconcile input totals with processed and output totals.

12. Review customer statements for accuracy and follow up on discrepancies.

13. Periodically substantiate and evaluate recorded account balances.

14. Follow up promptly on customer complaints.


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B. PURCHASING/DISBURSEMENT CYCLE

PURCHASING PROCESS

Inventory

control

personnel

Prepares purchaserequisition

File Purchasing

Personnel

Prepares purchaseorder

Purchase Order 1

Purchase Order 1

Purchase Order 1

Purchase Order 1

To vendor

To accounting

personnel

To receiving

personnel

File

Purchase

Requisition 1

Purchase

Requisition 2


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RECEIVING PROCESS

Receiving

Personnel

Purchase Order 2

From

Purchasing

Personnel

CompareGoods received

Prepares receiving report.

Updates receiving log.

Receiving log

Purchase order 2

Receiving Report 1

Receiving Report 2

Receiving Report 3

Receiving Report 4

File

To

PurchasingPers

To

Accountingpers

To Inventory

Control

Personnel

Forward to

Inventory control

Personnel


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INVENTORY CONTROL

Inventory control

personnel

From

Receiving

Personnel

Receiving Report 4

Compare

Goods received from

receiving personnel

Prepares and updates

bin cards

Bin Cards

Receiving Report 4

File


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DISBURSEMENT

Accounting

Personnel

Reviews, prepares

checks and

disbursement vouchers

Checks signed Checks cancelled

Checks

Purchase Order 3

Receiving Report 3

Disbursement

Voucher

To Vendor

File


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NARRATIVE DESCRIPTION OF REVENUE AND ACCOUNTING CYCLE

The activity involves the acquisition of goods and services from vendors and the payment

of liabilities.

INVENTORY CONTROL PERSONNEL

1. The officer in charge for inventory control makes a daily observation of the bin card

balances.

2. A purchase requisition is made once the inventory is down to its minimum level and a

purchase of merchandise is approved. The inventory control personnelis the one who

prepares the purchase requisition for the quantities needed. Once approved, one copy

forwarded to the purchasing personnel, where the request is retrieved, and a vendor is

selected.

PURCHASING PERSONNEL

1. Accept approved purchase requisitions from officer in charge of inventory control.

2. Conduct price canvassing to determine the suppliers to be awarded the purchase contract.

Accredited suppliers are given the priority in the price surveys to be made.

RECEIVING PERSONNEL

1. File purchase orders until goods are received.

2. Upon receipt of goods, count quantities and compare with purchase order.

3. Prepare receiving report.


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4. Forward goods to inventory control personnel.

5. Forward copies of the receiving report to accounting officer for the payment of goods;

another copy is forwarded to inventory control personnel and purchasing personnel. Retain

a file copy of the receiving report, purchase order and updated receiving log.

Disbursements (OIC, Accounting)

1. Prepare vouchers and review supporting documents.

2. Prepare checks and have it signed by authorized signatories.

3. Forward checks to vendors.

INTERNAL CONTROL

Disbursements

All cash disbursements, except those from the petty cash fund, should be made by

checks.

All checks should be pre-numbered to facilitate proper control over their use and

issuance.

Unused checks should be kept under proper control to prevent their use for fraudulent

purposes of unauthorized persons.

Cancelled checks should be properly mutilated and held available for subsequent

inspection to prevent misuse.

Persons signing checks should not be responsible for the recording of transactions or

the custody of cash.


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Vouchers and Documentary Supports

Checks should be accompanied by vouchers and other supporting documents when

presented for a signature.

Persons who sign checks or vouchers should ascertain that the payment is in order before

affixing the signatures.

An official other than the person initiating the payment should approve vouchers for

payment.

Vouchers and other supporting documents should be marked, paid or otherwise cancelled

at the time of payment.

Bank Reconciliation

Bank reconciliation should be prepared monthly.

Reconciliation should be prepared by persons not having anything to do with the

recording or handling of cash or the signing of checks to ensure an independent check of

these activities.

Monthly bank statements and paid cash should be delivered or mailed by the bank direct

to the person preparing the reconciliation.

The sequence of check numbers should be checked when reconciling bank accounts.

Paid checks should be examined as to date, payees name, bank cancellation and

endorsements with the employee reconciling the bank account.

Documents

Project Summary (Introduction), Management Study and Accounting System - Revised.docx