Scenario

Baker’s Blueberry Breakfast Bars was a one-person shop up until a few months ago when a viral video and a successful crowdfunding campaign increased sales by 1000%. Now Idris Baker has been approached by investors who want to back his company and eventually take it public. Idris Baker’s accounting system right now consists of his bank statements. He has approached you to help him implement something that would give him better information he could eventually share with his backers.

You briefly explained accrual basis accounting and the accounting cycle to Idris, but he is skeptical. He thinks it’s too complicated and would be too expensive to implement because he would have to hire someone (like you) to do it.

Discussion Questions

Briefly outline the following items:

  • the pros and cons of accrual basis v. cash basis,
  • how the accounting cycle works, and
  • how it could benefit Idris.