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CCC1 CONTINUING COOKIE CHRONICLE
(a) Natalie has a choice between a sole proprietorship and a corporation. A
partnership is not an option since she is the sole owner of the business.
A proprietorship is easier to create and operate because there are no
formal procedures involved in creating the proprietorship. However, if
(b) Yes, Natalie will need accounting information to help her operate her
business. She will need information concerning her cash balance on a
daily or weekly basis to help her determine if she can pay her bills. She
will need to know the cost of her services so she can establish her
prices. She will need to know revenue and expenses so she can report
her net income for personal income tax purposes, on an annual basis.
(c) Assets: Cash, Accounts Receivable, Supplies, Equipment, Prepaid
Insurance
Liabilities: Accounts Payable, Unearned Service Revenue, Notes
Payable
CONTINUING COOKIE CHRONICLE (Continued)
(d) Natalie should have a separate bank account. This will make it easier to
prepare financial statements for her business. Regardless of the
(e) I recommend that Natalie keep the car as a personal asset and pay for
all costs personally. She should keep track of how many miles she
drives for business purposes versus personal use and determine the
percentage of business use versus personal use. She should keep
track of all costs of owning and operating her car including such things
as fuel, insurance, registration, and repairs and maintenance. Then she
can multiply the percentage of business use by the total cost of owning
and operating her car to calculate the amount of expense the business
can record for travel.
The business will record this as an expense. Natalie can either reim-
burse herself for these business expenses by taking cash out of the
