This preview shows page 1. Sign up to view the full content.
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
- Winter '09