Case Scenario:
Assume the role of an accounting intern who receives an email from an old high school friend. Your friend is planning to open a new business and does not have an accounting background. He has been talking to a bank about a loan to start his business and he knows he will need an accounting system for his new enterprise. He is asking you for some basic information.
Write an email to your friend addressing the following concerns:
1. He has heard that his financial statements must be in accordance with GAAP and wants to know what that means.
2. He has also been told that he needs an accrual basis accounting system. He asks you if that is any different than just keeping track of cash coming in and going out. He wants to know what makes for good accounting information.
3. The bank has also suggested he consider having another investor for his business. He has heard of partnerships, but the bank also mentioned LLCs and corporations. He would like to know what options exist for different business structures, and which structure might be the best option for him.