Sweet peas stitchery: A case of a start-up merchandiser-Part A

Case Description: The primary subject matter of this case concerns accounting. Secondary issues examined include entrepreneurship, marketing, retail management, and merchandising. The case is appropriate for freshman, sophomores, or juniors in a core course of financial accounting or marketing, entrepreneurship, retail management, and fashion merchandising. This case will take approximately one class hour. It will not require students to do any outside preparation. It will challenge their logical thinking skills, knowledge of basic accounting for merchandisers and require them to apply their basic business knowledge. Case Synopsis: Imagine quitting your secure job to open a new business on a mere $10,000 in a time of economic uncertainty. Neither you nor your partner has any experience in the industry or as entrepreneurs. You are running on blind faith that your initial capital investment will be enough for the business to survive and generate enough revenue to draw a paycheck within the first six months of operation. This case provides an overview of the operations of such a business that opened in 2011. Several things are considered in this case, including the risks of an inexperienced entrepreneur starting a new business during a time of high unemployment and difficult economic times. The odds of success are against the owner because of her limited funds, unemployment rates, and high failure rate, what the Small Business Administration calls death rate, of new businesses. With no experience in and little knowledge of accounting, it's easy for the owner to fail to recognize when her "accountant" and "CFO" submit financial statements that are incorrect and do not make sense, which happens in this case. It requires students to recognize the errors in the company's financial statement, analyze the statement, provide insight to the owner, and give recommendations.