The book Movies Door to Door.com ties in very well to the content we are currently learning in class. For example, in Chapter One of our textbook, we are learning about basic accounting principles. We are learning about business organizations styles, business activities, and financial statements.
The four organizational styles of business are pictured on the chart below:
(Taken from Jessica Kelsheimer's Power Point for LP1 with information from Survey of Accounting, Pages 2-3)
In the book, Movies Door to Door.com, the business partners decide to enter into business together and realize that there is much more to starting a business than they originally thought. At first they thought about what they wanted to offer and how they were going to get the money together in order to be able to start the venture. As they went through the numbers, it looked more and more dismal. They really hadn't taken all the things they would need into account. In chapter two, the group starts to figure out numbers. Brad gives the others a run-down on the costs and what they would need to get started as far as the movie rentals were concerned. This was important because they needed to decide on their financing activities and how they would raise the funds to start. They also knew that they were going to need money to cover the first several months as they would probably not cover all of their expenses right away. (Beasley, Buckless pgs 13-19)
At this point, the business partners are engaging in financing and investing activites. Below is information about the different kinds of business activites.
They decide that they are going to try to finance by borrowing money from their parents. When they called their parents, each set had a different idea of how they wanted to contribute and what level of participation or control they wanted to have with regard to their investment. (Beasley, Buckless chp 3). They realize that their financing activities have become more complicated. Brad is able to make a direct investment into the company and buy his own shares. John's mother wants a return on her investment and so John's start-up money is really his mother's shares of the company. Courtney's parents were willing to loan her the money, but wanted repayment with interest within a certain time period. In this sense, Courtney's share of the start-up costs were a loan from a creditor. (Beasley, Buckless page 27).
These different financial decisions affected how much ownership each of the partners would have in the business. They needed to form a corporation and follow the rules for issuing stock. This is a financing and investing activity. Their parents all invested- either in the futures of their children or in the business directly. In turn, each of the business partner's had to follow the agreements with their parents, which determined ownership.
These chapters tie in very nicely to Chapter One as they outline the complexity of the formation of their corporation, which is not something that they originally foresaw. They also had to think about investing and financing activities, which was also something they did not knwo much about. It was fortunate that they had outside help from lawyers, accountants, and mentors like Brad's father.
Once the financing was complete and they had obtained the funds they needed to start building the business, they appointed John to handle the financial records. John underestimated the importance of this task and he procrastinated as he did not enjoy it. He also decided to use software that was designed for personal use and not for business. Because of this, he did not have an accurate picture of their business's financial state. Before long, they were short on money and realized they had spent almost all of the funds, including the cushion they had reserved in case they needed it. (Beasley, Buckless pgs 37-42)
The textbook introduces the financial statements that are pertinent to business. Below is a table that outlines the major financial statements used in business (so that mistakes like Brad's don't happen!)
(Taken from Jessica Kelsheimer's Power Point for LP1 with information from Survey of Accounting, Pages 10-17)
Because of the initial failure to accurately record the expenses, the group had to revisit the way they viewed their finances and sat down with John to go over a better and more detailed system for recording and itemizing expenses. This way they could make important business decisions. (Beasley, Buckless pgs 39-42)
The book Movies Door to Door.com really brought life to the concepts that were introduced in Chapter One of our tecxt. They used real life examples to show what business ownership and organizational options are and how they would be important to the formation, operation, and financing of the business. They also showed how important it was to look at all of the activities of the business- not just the eventual operating activities. And lastly (for this chapter), they illustrated very clearly how important it is to keep accurate and detailed accounting records and what happens if those records are not kept. Sometimes seeing what NOT to do can really help demonstrate the necessity of doing things the right way. Even if they are tedious!
Beasley, M., & Buckless, F. (2002). Movies door to door.com: how accounting helped make the difference. (1st ed., pp. 1-42). Saddle River, NJ: Prentice Hall.
Warren, C. (2012). Survey of accounting. (6th ed.). Mason, OH: Cengage Learning.
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MOVIES
DOOR TO DOOR SCORING RUBRIC
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