Financial of Brookside Dairy Limited

Cite this


Brookside Dairy Limited is a dairy products company based in South America. The gap in the provision of a wide range pasteurized dairy products created the need to form a dairy company in the area hence the formation of Brook Dairy Limited. The primary line of business of the company is the production and sale of daily products. Brookside Dairy Limited is a sole proprietorship entity owned by Brookston family. The owner raised capital from note payable, savings, and bonds payable.

Challenges small businesses face when preparing the face in maintaining accurate and timely financial statements

This small business lacks a well built structures and policies as in the case of large corporations. Besides, the company’s work is likely to be done haphazardly thus leading to loss of audit trail. Lack of structures in an organization creates disorganization in various internal processes. Inadequate documentation reduces the authenticity of the financial reports generated. A common challenge faced by small organization is lack of proper record keeping of various transactions carried out. Besides, there is likelihood that incomplete financial reports will be prepared. This also creates loss of audit trail. Considering the size of the businesses and the nature of how the businesses are run, application of the accounting standards is a key challenge when preparing the financial statements. There is a possibility of inconsistencies in applying the standards or application standards wrong. In addition, the challenge faced by this small business is that the owner does not have adequate skills and time to manage the businesses and maintain the books of accounts on a regular basis.

Chart of accounts

A chart of accounts is a summary of all general accounts maintained by a business. For instance, codes starting with ‘1’ are assigned to assets, ‘2’to liability accounts and capital, ‘4’ to operating revenue accounts, and so on until all classes of the general ledger accounts are coded. The tables below show the chart of accounts of the entity.

Asset accounts

Code General ledger account
1005 Cash
1010 Accounts Receivable
1015 Merchandise Inventory
1020 Supplies
1025 Prepaid Insurance
1030 Land
1035 Buildings
1040 Accumulated depreciation of plant and machinery
1050 Equipment

Liability accounts

Code General ledger account
2005 Notes Payable
2015 Accounts Payable
2025 Wages Payable
2035 Interest Payable
2045 Unearned Revenues
2055 Mortgage Loan Payable

Accounts for owner’s equity

Code General ledger account
2095 Brookston capital
2099 Brookston drawings

Operating revenue accounts

Code General ledger account
3015 Revenue from sale of company products and services

Operating expenses account

Code General ledger account
5010 Salaries Expense
5015 Wages Expense
5045 Supplies Expense
5065 Rent Expense
5070 Utilities Expense
5078 Telephone Expense
6005 Advertising Expense
7010 Depreciation Expense

Non operating losses, gains, revenue, and expenses

Code General ledger account
8015 Interest Revenues
9020 Gain on Sale of Assets
9050 Loss on Sale of Assets

The audit trail is improved through classification of the accounts into allocation codes and groups. Besides, it promotes analysis of the financial statements provided.

Opening entries to set up the accounts

Brookside Daily Limited

Balance sheet statement as at 1st February 2013:

ASSETS Amount ($)
Current Assets
Cash 105,000
Petty Cash 5,000
Temporary Investments 500,000
Inventory 1,505,000
Supplies 190,000
Prepaid Insurance 70,500
Total Current Assets 2,042,500
Investments 1,800,000
Property, Plant & Equipment
Land 270,500
Land Improvements 320,500
Buildings 900,000
Equipment 1,105,000
Total fixed assets 2,105,000
Intangible Assets
Goodwill 535,000
Trade Names 1,101,000
Total Intangible Assets 1,325,000
Other Assets 13,000
Total Assets 3,621,500
Long-term Liabilities
Notes Payable 120,000
Bonds Payable 1,900,000
Total Long-term Liabilities 2,201,000
Capital 1,637,500
Total Liab. & Stockholders’ Equity 3,754,500

The balance sheet is prepared based on the assumption that the business commences on 1st February 2013. To start up the business, the owner will require a total capital amounting to $3,754,500. The owner will raise $1,637,500 and the remaining will be obtained by using long term debt facilities amounting to $2,030,500.

Brookside Dairy Limited

Trial balance as at 1st February 2013:

Account Debit Credit
Cash 9,500
Petty Cash 600
Temporary Investments 51,000
Inventory 245,000
Supplies 21,000
Prepaid Insurance 9,600
Investments 170,000
Land 31,500
Land Improvements 35,300
Buildings 790,000
Equipment 1,100,000
Goodwill 355,000
Trade Names 1,150,000
Other Assets 19,000
Notes Payable 101,000
Bonds Payable 2,050,000
Capital 1,715,000
Total 3,716,000 3,716,000
Forecast Monthly Cash Flow Budget Statement for the Year 2013
Particulars Start up Feb March April
Estimated Sales Units 1000 2000 3000
Sales Revenue 25,500 51,000 76,500
Cash Inflow
Accounts Receivable 25,500 51,000 76,500
Initial capital 1,637,500
Total (A) 1,637,500 25,500 51,000 76,500
Cash outflow
Accounts Payable 11,200 22,400 27,500
Worker wages 13,300 13,300 13,300
Factory Rent 8,300 8,300 8,300
Electricity and Utilities 1,420 1,420 1,420
Other Admin expenses 1,020 1,020 1,020
Sales Promotion 4,120 4,120
Total (B) 447,600 39,360 46,440 69,010
Net cash (A) – (B) 240,400 -13,860 4,560 7,490
Opening balance 240,400 226,540 231,100
Closing Cash 240,400 226,540 231,100 238,590

Conclusively, the business is likely to breakeven within a year due to strong investment rationale that the owner of this business has formulated in the business actualization.

Cite this paper

Select style


BusinessEssay. (2022, November 21). Financial of Brookside Dairy Limited. Retrieved from


BusinessEssay. (2022, November 21). Financial of Brookside Dairy Limited.

Work Cited

"Financial of Brookside Dairy Limited." BusinessEssay, 21 Nov. 2022,


BusinessEssay. (2022) 'Financial of Brookside Dairy Limited'. 21 November.


BusinessEssay. 2022. "Financial of Brookside Dairy Limited." November 21, 2022.

1. BusinessEssay. "Financial of Brookside Dairy Limited." November 21, 2022.


BusinessEssay. "Financial of Brookside Dairy Limited." November 21, 2022.