You can tell that you have not accounted for all your

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ts starting cash, which will increase the assets by $49,650. CHAPTER 6: DESCRIBE YOUR COMPANY 6.7 Important: The cash you want to have in the bank at start-up is different from the money raised to start the business. The total money raised must match what was spent as expenses and assets. The cash at start-up is one of the assets. If you increase the amount of money raised, then you have to increase the start-up assets, usually by increasing the starting cash. You have to fund start-up expenses as well as start-up assets. Total Start-up Requirements The Total Requirements row, shown in the start-up expenses and assets table, sums the start-up expenses and start-up assets. This is the money you’ve decided you need — by estimating start-up expenses and start-up assets — to start the business. Start-up Funding Your business plan isn’t complete with start-up costs unless it also includes planned start-up funding. You need to explain where you get the money to pay for start-up expenses and start-up assets. Generally accepted accounting (financial) principles (GAAP) require that the spending planned is financed by either debt or investment. In the Start-Up Funding table example on the next page, the “Additional Investment Requirement” amount (also known as the “left to finance” amount) shows up as a positive number only when you haven’t provided enough funding to finance both expenses and assets. If it shows as a zero, you may have exactly the right amount, or too much. You can tell that you have not accounted for all your incoming financing by looking at the “Loss at Start-up” value. That should be the same number as Total Start-up Expenses (except negative) shown in the Start-up Requriements table. If it is more negative than start-up expenses are positive, then you have brought in funds that haven’t been accounted for. You can fix that by adding more money into your starting cash to account for the additional financing. Investment is money that you or your investors sink into the...
View Full Document

Ask a homework question - tutors are online