BAB1014 FINANCIAL ACCOUNTING FOR MANAGERS
Trimester 1, 2014/2015
Ayamas Shoppe Sdn Bhd
Submission date: 15/8/2014
Lecturer: Surenthiran A/L Panneerselvam
Prepared by:
Student ID Student Name1131121231 Fausia Dhea Marvitaayu Syamsir1132702478 Jasmeen Chan1141123385 Lai Su Yi1141124661 Lee Min Wei1141124663 Siah Soon Heng
Declaration by group leader
(This section is to be filled in the student’s own handwriting.)
I hereby declare that all group members’ names are correctly included in the above section. I hold a copy of this assignment which I can produce if the original is lost or damaged. I certify that no part of this assignment has been copied from any other student’s work or from any other source except where due acknowledgement is made in the assignment.
Group leader’s signature : _____________________________
Group leader’s name : _____________________________
Group leader’s student ID : _____________________________
Date : ____________________________
CONTENTS
1. Introduction.................................................................................................................3
a. Background of the company...................................................................................3
b. Organization structure............................................................................................4
2. Procedure to set up an account....................................................................................5
a. Company registration..............................................................................................5
b. Documentation
preparation....................................................................................6
c. Legal procedure.......................................................................................................6
d. Software/Hardware needed....................................................................................7
3. Accounting process.......................................................................................................8
a. Financing activities..................................................................................................9
b. Investing activities...................................................................................................9
c. Operating activities...............................................................................................10
4. Accounting information..............................................................................................11
a. Characteristics of accounting information............................................................11
b. Users of accounting information...........................................................................13
c. Decisions making...................................................................................................13
5. Challenges..................................................................................................................14
6. Recommendations......................................................................................................16
7. Conclusions................................................................................................................18
8. References..................................................................................................................19
9. Appendix....................................................................................................................21
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Introduction a. Background of The Company
According to the Assistant of Ayamas Manager Trainee, he has given us few of
information about The Story of Ayamas. The information that he shown which is the Ayamas
Conveniese Stock was introduced under the flagship of KFC Holding (Malaysia) Bhd , the
franchise holder for KFC Family Restaurants in year 1988. The first in Malaysia to sell
branded fresh chicken and chicken product, Ayamas now offers the No.1 branded chicken
range in Malaysia.
Ayamas have established a popular reputation among Malaysians for the high
quality of our products. Furthermore, the business keeps growing to include an ever-
increasing range of product in every year.
Behind Ayamas, there is a support of a huge network. With its own breeder or
hatchery farm, broiler farm, feed mill plant, processing plant retail chain and restaurant
chain. Ayamas Company has to ensure strict standards of quality every step of the way.
Providing customers with Ayamas chickens of the finest quality and freshness: with strict
adherence to the Jabatan Haiwan Malaysia (JBH) and Jabatan Kemajuan Islam Malaysia
(JAKIM), all Ayamas products are 100% halal.
Ayamas is also the main supplier of chicken product to fast food chains in Malaysia
like KFC and Pizza Hut. The company had also sales network extends to supermarket and
hypermarket shelves all over Malaysia.
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b. Organizational Structure
Ayamas Career Advancement Program Retail and Restaurant Operations
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Restaurant Manager
Mr Sadul B. Ibrahim
Shift Restaurant Manager
Mr Isham Ibrahim
Assistant Restaurant Manager
Miss Nor Robiah Osman
Assistant Manager Trainee
Mr Mohd Risham Tompang
Staff
Shahrul Fizam Zulkirel Mohamad Alim Siti Hawa Mausor
Procedure to Set Up an Accounta. Company registration
According to Mr Mohd Risham, the Assistant of Ayamas Manager Trainee, this
Ayamas company secretary completes the company registration process in around 10 days.
The company has been licensed by the Company Commission of Malaysia (CCM). The
disbursement and total fee for registration and setting up a new company with CCM is
around RM2000. The main activity of CCM Malaysia is to serve as an agency to register
businesses and incorporate company as well as to provide business and company
information to public. Manager provide the documents and information to the secretary in
order to proceed the company registration process such as new company’s business
activities, new company’s name, identity card (Malaysia) of 2 director and 2 shareholders,
residential address of all directors and shareholding structure and shareholders. After
receiving the documents, the company secretary will submit the Form 13A (Company Name
Search Application Form) to CCM Malaysia for their approval of using the name in new
company. After the approval for new company’s name has been received from CCM, the
company secretary will prepare the registration documents. Therefore, the manager will
sign all the registration documents at company secretary’s office as well as pay the full
payments before the secretary proceed to the next action. The company secretary will
arrange the Form 48A to be attested by the commissioners for Oaths and stamping on the
M&A (Memorandum & Articles of Association) by the Stamping Office after receiving the
payments.CCM Malaysia will issue the Form 9 (Certificate of Incorporation) for new
company. The issuance of Form 9 indicates that new company has been successfully
incorporated with CCM Malaysia.
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b. Documentation preparation
There are several basic documentation required for Registrar of Franchise (ROF)
application. The intention should include the following information in the letter such as date
of incorporation, commencement of business, Ayamas Shoppe Sdn Bhd concept and
background, franchise experience, and the identity of proposed Malaysia master franchisee.
It also required certified true copy of incorporation from the relevant agencies in the
country of origin and the proof of trademark or intellectual property mark registration. The
company annual report and brochure with photograph of the outlets is very vital and need
to submit it (Tompang, personal communication, July 16, 2014).
c. Legal procedure
As a report by the Assistant of Ayamas manager trainee, Ayamas Shoope Sdn Bhd
registers their business and obtain the necessary licenses and permits. The business is
registered under the Registration of Business Act 1956 at the Commission of Companies
Malaysia (CCM). It is partnership with KFC holdings. “Partnership is the relation which
subsists between persons carrying on business in common with a view of profit” (The
National Archive, n. d). Partnership doesn’t pay tax on its income but share any profits or
losses to the individual partners. Partnership must file a tax return (Form 1065) that reports
its income and loss to the IRS. In addition, each partner reports share of income and loss on
schedule K-1 of form 1065. General partners are personally liable for the partnership’s debts
and obligation. Each general partner can act on behalf of the partners but need the
partnership agreement permits. Ayamas company disclose everything to their lawyer about
the planning of the business. The company also discuss with their lawyer the details needed
for any partnership contacts, employee handbooks, employee consent or agreement forms,
non-compete agreement and so on. Lastly, it must obtain a federal tax identification
number and speak with a tax professional and set up a plan to control their taxes.
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d. Software or hardware needed
Ayamas has selected Zap Business Intelligence software to improve corporate
performance with KFC and gain operational efficiencies. Zap Business Intelligence will
empower Ayamas and KFC employees to report on and analyze information across systems
including inventory, payroll, finance, mobile delivery, and human resources. They will create
“reports, scorecards, dashboards, Key Performance Indicators and ad-hoc analysis” to gain a
shared understanding of performance and meet reporting requirements efficiently (Zap,
n.d). Zap Business Intelligent is a Microsoft-based business intelligence (BI) solution that
delivers corporate information anytime, anywhere through a web browser (Tompang,
personal communication, July 16, 2014).
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Accounting Process Accounting is a technical business function that responsible for recording,
reporting and analyzing financial information. The purpose of accounting is recording all the
transaction accurately into “Books of Accounts”. The accounting process also commonly
referred to accounting cycle, is the process that begins when the transaction takes place and
ends when the transaction is recorded in the books of accounts. It includes a several steps
that are used to analyze and record the business transactions for a particular period. First,
identifying and analyzing business transactions. Second, make journal entries. Third, post to
ledger accounts. Fourth, adjusted the trial balance. Fifth, make an adjusting entry. Sixth,
adjusted trial balance. Seventh, preparing the financial statements. Next, closing the books
or accounts. Last, post-closing trial balance (Deeptee, 2013).
At the seventh step, preparing the financial statements, the financial statements
are the end-products of an accounting system. The financial statements include Statement
of Comprehensive Income, Statement of Financial Position or Balance Sheet, Notes to
Financial Statement, Statement of Changes in Equity and Statement of Cash flows (Deeptee,
2013). A statement of cash flows is a financial statement which summarizes cash
transactions of a business during an accounting period and classifies them into three
sections, namely, cash flows from financing, investing and operating activities.
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a. Financing Activities – Capital Contribution (Equity & Liability)
At the beginning of a company’s life cycle, a person or group of people come up
with an idea for a new company. The initial money or initial fund comes from the owners or
it borrowed by the owners. For example, borrow from a bank, friends or family. This is how
the new company is “finances.” The money that the owners put in the company is classified
as a financing activity. The financing activities section is one of three sections on a
company's statement of cash flows, the other two are operating and investing activities
(Basu, 2014).
From the interviewee, Mr Mohd Risham who has mentioned that the initial money
that the owners of the company, Mr Sadul bin Ibrahim uses to start up the business is
RM150, 000. Mr Sadul borrowed this initial money from bank. Furthermore, the owners also
get loans from bank since the amount of initial money cannot cover up all the cost. The cost
includes salary paid, utility, rental, government tax, insurance, repurchasing stock, pay
dividends to shareholders, purchased the equipment and other assets. Besides, the owners
also take a long-term loan for business operation and paid a higher interest from loan.
b. investing Activities – Asset (Current and Non–Current)
In general, investing activities involved in the purchasing and disposing assets
necessary for business operations (Simplestudies, 2012). The owners or managers of the
business use the initial fund to buy equipment, and other assets they need to run the
business. In other words, they invest asset to their business in order to gain profit (Jan,
2013).
For this company, Ayamas Shoppe Sdn Bhd is involve more in the cash outflows for
a business. According to Mr Mohd Risham, he said that the owners of the company use this
amount of money or initial money do the investment. He invested in the tangible assets. For
example, cash payment to purchase tangible assets such as building, equipment, land or
property and so on. He also involved in the purchasing motor vehicles in order to deliver the
products to the customer. Besides, he has invested in the intangible assets such as
copyright. The owners of the company also purchase assets to replace the old and obsolete
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assets. For instance, chair, desk and motor vehicles. In addition, he also purchases of other
investments such as share. He has done the cash payments to purchase of shares of other
companies.
Moreover, Mr Mohd Risham has mentioned that the owners also involved in the
cash inflows from investing activities. The cash inflows from investing activities are cash
receipts from sales of tangible and intangible assets such as copyrights, disposal of property
and equipment, and cash receipts from sale of shares of other companies.
c. Operating Activities – Operation (Revenue, Expenses etc)
Operating activities is day-to-day business activities of a company which determine
the company’s net income or loss (Simplestudies, 2012). The company starts to sell
merchandise or services and make payments for rent, suppliers and all of the company was
established would be classified as operating activities.
As a report by this company, Mr Mohd Risham states that the yearly budget for this
year is RM259, 702. The owners of the Ayamas Shoppe Sdn Bhd, Mr Sadul operates the
business by allocating some of this money to pay for employee salary. They have 5 staffs
and 2 managers in the company. Furthermore, Mr Sadul also allocates the money to make
payments for suppliers, government taxes, insurance premiums, rental, utilities and all of
other costs of doing business. Mr Sadul also uses some of the money to pay for debt
monthly rather than pay for debt fully. In addition, he also allocates the money to do the
promotion and advertising the company’s product. They advertise their product through
local paper, magazine, internet and so on. He also spends for franchise fees around RM5000
to RM7000. These all is involved in cash outflows from operating activities.
In terms of the cash inflows from operating activities, it included revenue from
sales of goods and services. For example, the staffs sell the products to the customer and
deliver the product to the customer’s home. The revenue that receives by the company is
around RM115, 860.
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4. Accounting InformationAccounting information is a piece of financial data indicating an organization's
resources, debts, revenues or expenses. Accounting information is essential to business
operations. Below are some of the key characteristics, user, and decision making of
accounting information in Ayamas Shoppe Sdn Bhd.
a. Characteristics of Accounting Information
Accounting information helps users to make better financial decisions. Accounting
information should satisfy the following criteria or can be called as the key characteristics of
accounting information which are understand ability, relevance, consistency, comparability,
and reliability (Bragg, 2012). Before it can be regarded as considered as beneficial in
satisfying the needs of different user groups, there is general agreement. Below are the key
characteristic of accounting information in Ayamas Shoppe Sdn Bhd:
i. Understandability
In Ayamas Shoppe Sdn Bhd, the accounting information must be in the
understandable form in a way that it gives expression with clarity of accounting
information to users who are have a reasonable knowledge of business and
economic activities in the company. Accounting information and financial statements
have prepared in such a way as to facilitate understanding of the user of the financial
statements. Information about complex matters also has presented (Tompang,
personal communication, July 16, 2014).
ii. Consistency & Relevance
Consistency implies consistent treatment of similar items and application of
accounting policies. Ayamas Shoppe Sdn Bhd follows the Government policies in
preparing their accounting information. Government’s policies and legislations such
as imposition of control prices, changes in interest rates, methods of taxation or
introduction of new regulations. Ayamas in Malacca is considered as one of the
subsidiaries of the group company. Therefore, all of the accounting information has
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been sent to their headquarters in Kuala Lumpur. The process of all the reports will
be stand selected in there which make it easier to ensure that there is no imbalance
arises from all Ayamas spread throughout Malaysia and also to accelerate their form
of corporations. These actions include initiatives to further enhance the company's
debt and improving operational structuring (Tompang, personal communication, July
16, 2014).
iii. Comparability
Accounting information and financial statements should be equipped in such a way
as to assist assessment of entity information during time. Comparatives results when
different enterprises apply the same accounting management to similar occurence.
Obedience with International Accounting Standards helps to increasecomparability.
The accounting information in Ayamas Shoppe Sdn Bhd is in the comparative form
that implies the ability for users to be able to compare similar companies in the same
industry group and to make comparisons of accomplishment over time. The majority
of the work that goes into setting accounting standards is based around the need for
comparability (Bragg, 2012).
iv. Reliability
Reliability is the quality of information that authorized users to depend on it with
collateral. This means it is examined, has faithful presentment, and is reasonably free
of errors and bias. The accounting information in Ayamas Shoppe Sdn Bhd financial
statements is reliable and that is presented in truthful and accurate matter because
they have been prepared on accounting principles and bases consistent with those
previously adopted in the preparation of audited financial statement (Tompang,
personal communication, July 16, 2014).
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b. Users of Accounting Information
Accounting information is useful for several of parties. Accounting sets to satisfy
the needs of a wide range of users. Users of financial information may be both internal and
external to the organization (ACCOUNTINGVERSE FOR ALL THINGS ACCOUNTING, 2014). The
user accounting information of Ayamas Shoppe Sdn Bhd is presented to internal users and
usually in the form of management accounts, forecasts, budgets,and financial statements
which is their manager of every ayamas’s branches. Managers are the main internal users of
accounting information. Managers need the information for making various decisions.
Managers need the information to protect the property of business from fraud,
mismanagement, to plan for future, to make specific decision and to measure the
performance. Ayamas Shoppe Sdn Bhd never discloses the accounting information to the
external users (Tompang, personal communication, July 16, 2014).
c. Decision Making
Decision making is the process by which managers or top management respond to
opportunities and threats that confront them by analyzing options and making
determinations about specific organizational goals and courses of action. Accounting
information helps users to make better financial decisions. An experienced accountant will
prepare financial reports that provide the specific information needed by management to
reach a decision. That is, the accountant does not just issued the same boiler plate reports,
month after month. It may also be necessary to create new reports that deal with new
situations confronting a business (Bragg, 2012).
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ChallengesThere are sort of challenges that have met by the Ayamas Shoppe Sdn Bhd since
they have established. From the interview conducted, the challenges that Ayamas
encountered is the halal and non-halal issue (Tompang, personal communication, July 16,
2014). As the year before, Ayamas collaborated with Ayam A1 Company. In order to avoid
unnecessary conflict between the two companies, the food that Ayamas and Ayam A1
provided is the halal and non-halal poultry products respectively since the issue happened.
This challenge has caused these two companies to split and run their business operation in
their own system.
The other challenges that Ayamas Shoppe Sdn Bhd has overcame is the inventory
shortage during the special day from their customer (Tompang, personal communication,
July 16, 2014). When the company receives orders from the catering service order, the
company might face the problem when the supply of stock is not in time and limited
inventory. The ways to overcome this challenge is that they find other nearby outlets which
in the same area to supply more inventories in order to solve the problem. Hence, there is
adequate inventory to be sold to their customers.
Ayamas Shoppe Sdn Bhd also has encountered their challenges when come to find
the poultry manufacturing industry suiting their business know-how and business format
(Tompang, personal communication, July 16, 2014). In other words, they need to consider
on the compatibility of the company with their supplier. To elaborate the problem in the
clearest manner, the Ayamas need more supply of poultry during the festive season, but
they need to ensure that the poultry manufacture industry possesses the same concept and
system in progressing their product to finalized product such as the process and method in
preparing, washing, cutting, marinate, package the chicken and distribute it. Mr Mohd
Risham, the assistant manager in this Ayamas outlet has also claimed that there is only two
major poultry manufacturing industry are the nearest to them. Hence, the choice made to
complement to the right poultry manufacturing industry is a matter in this scenario as they
cannot rely on any other industries other than in these two industries due to the geographic
factor.
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As mentioned in earlier section, the halal and non-halal product issue has brought
to a negative impact on the business of Ayamas. As the product focusing has been changed
and the company has split in isolation, the business of Ayamas has dropped and the profit is
relatively reduced as compared to previous days. To overcome this, the company has found
their way to promote the special offering and promotion to customer by distributing flyers,
publicize the poster at anywhere else. Besides, the carnival and promotional events like
‘Mega Jualan Hebat’ will be held where offering the discount price and product sales in
whole Malaysia for that product.
The Ayamas also found it challenging to compete with their rivalry. Every kind of
businesses must have their own competitors. In order to capture the target market and
potential customer, the key elements to consider is the strength and location of the
company (Roger, 2000). From the interview, Mr Mohd Risham stated that their competitors
not only are fast food restaurant such as Pizzahut but also the slow food restaurant as they
also have the similar product type to be sold such as Mori and Windmill Station. The other
factors cause this problem to be happening is also include the location of a business. The
location of the Ayamas is quite far from the residential area. Despite these drawbacks,
Ayamas has focused on product differentiation as they sell the fast food packages, frozen
food is distinctive to the usual restaurant do. Ayamas implement a ‘Fullmoon Set’ that
included a different bundle of food in each set to promote their set meal (shown in Figure
1.2 in Appendices). The Ayamas outlets also provide air-conditional space to offer their
customers have dine-in service and experience once they have done purchasing.
On the interviewers’ side, the challenges met are the time conflict between the
group members. The interview has been conducted successfully in spite of the difference of
schedule from different members have.
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6. RecommendationsAyamas Shoppe Sdn Bhd is more suitable to get the short-term loan. Short-term
loan have a maturity of one year or less. They should be repaying to the lender within one
year (Peavler, 2014). Short-term loan more frequently used for working capital
requirements or day-to-day operations of the business. For example, Mr Sadul, the owners
of the company make payments for employee salaries, suppliers, government taxes, rental
and etc. There are 4 main types of short-term debt which are overdraft, letter of credit,
short-term loan and bill of exchange. An overdraft is an extended of credit from a lending
institution. When a company has an overdraft agreement with a bank, it can draw down or
transmit cash from its account beyond the available balance. Moreover, a letter of credit is a
letter from bank guaranteeing a buyer’s payment to a seller, that a seller will receive the
amount in the credit period. Next, a short-term loan is a loan that must be repaid within a
year with interest. Furthermore, a bill of exchange is a document that binds one party to pay
a fixed sum of money to another party at a particular future date (Mitchell, 2013).
There have a several advantages of short-term loan. The advantage of short-term
loan is it is a quick way to get liquidity for the business, in particular SMEs, the person who
do not have large pool of reserve funds for emergency uses. Besides, the short-term loan is
usually easier to negotiate compare to long-term loan and equity financing, as the financier
faces quite lower credit risk. Due to easy of negotiation, short-term loan can be used to free
up funds in the business for good investment opportunities. Furthermore, most of the short-
term debt instruments can be obtained without having to vow a considerable amount of
collateral, as long as the borrowing company has comparatively stable operations and
turnover rate. Last but not least, the cost of servicing short-term credit is less taxing on the
company. Short-term loans typically offer lower interest charges and the majority of
suppliers do not charge interest at all until the credit allowance period is breached.
In addition, Ayamas Shoppe SdnBhd should select Enterprise Resource Planning
System (ERP) software to improve in their procedures. ERP software consists of multiple
application such as customer relationship management (CRM) software; accounting
application; sales software; order-tracking tools; invoicing software; project-management
and payroll programs. By using these software, business can dramatically cut maintenance
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and training costs, ensure all data is consistent and up-to-date and reduce software
expenses. ERP systems have more advantages compare with the disadvantages. The
advantage is ERP systems connect the necessary software in order for accurate forecasting
to be done. This system also can integrate among different functional areas in an
organization to ensure proper communication, productivity and efficiency. It orders
tracking, from acceptance through fulfilment. Reduce paper documents by providing on-line
formats for quickly entering and retrieve information is one of the advantages. It also can
improve timeliness of information by permitting, posting daily instead of monthly and have
greater accurateness of information with complete content, better presentation, fully
satisfactory for the auditors. It helps to achieve competitive advantage by improving its
business process. Besides that, the disadvantage is customization of the ERP software is
limited. Many of the integrated links need high exactly in other applications to work well.
ERP are often seen as too rigid and too difficult to adapt to the specific workflow.
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7. Conclusions In conclusion, this assignment has given students chance to understand and
analyze the procedure of business setup and the challenges they overcome. For Ayamas
Shoppe Sdn Bhd, they are considered as a stable accounting company as they maintain a
well-growth business though they have been challenged by the rivalry. From this assignment
experience, students have acquired the knowledge of maintain a good accounting process in
monitor well in finance, investment and operation besides the knowledge from chance to
conduct interview. In brief, this assignment has benefit students to be prepared on their
accounting knowledge in their career future.
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8. ReferencesA, D. (2013, August 9). Accounting Process. In Buzzle. Retrieved July 4, 2014, from
http://www.buzzle.com/articles/accounting-process.html
Basu, C. (2014). Examples of Financing Activities. In Small Business by Demand Media.
Retrieved June 24, 2014, from http://smallbusiness.chron.com/examples-financing-
activities-37342.html
Bragg, S. (2012, December 30). What are the characteristics of useful accounting
information? In Accounting Tool. Retrieved August 1, 2014, from
http://www.accountingtools.com/questions-and-answers/what-are-the-
characteristics-of- useful-accounting-informatio.html
Jan, O. (2013). Cash Flows From Investing Activities. In AccountingExplained. Retrieved June
24, 2014, from http://accountingexplained.com/financial/statements/cash-flow-
investing-activities
Mitchell, B. (2013, January 30). Short-term vs. Long-term Loans. In The Small Business Fund
Secured Debt Financing for Small Business. Retrieved July 5, 2014, from
http://www.thesmallbusinessfund.com/blog/2013/1/30/short-term-vs-long-term-
loans.html
No.1 Company Registration Firm in Malaysia. (n.d.). In NBC Group of Companies. Retrieved
August 1, 2014, from http://www.nbc.com.my/
Peavler, R. (2014). Short-Term Business Loans. In About.com Business Finance. Retrieved
July 5, 2014, from http://bizfinance.about.com/od/businessloans/qt/short-term-
small-business-loans.htm
Roger, C. R. (2000).10 Common Mistakes for Prospective Franchisees. Retrieved July 13,
2014, from http://www.inc.com/articles/2000/01/14880.html
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The National Archive. (n. d). Retrieved August 2, 2014, from HM Revenue and Custom:
http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/manuals/bim
manual/bim72505.htm
Users of Financial Statements. (2014). In ACCOUNTINGVERSE FOR ALL THINGS
ACCOUNTING. Retrieved August 1, 2014, from
http://www.accountingverse.com/accounting-basics/users-of-financial-
statements.html
What are operating activities in accounting?. (2012, July 31). In Simplestudies. Retrieved
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accounting.html
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Simplestudies. Retrieved June 24, 2014, from http://simplestudies.com/what-is-the-
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Zap. (n. d). Zap Business Intelligent. Retrieved August 2, 2014, from
http://www.zaptechnologyafrica.com/Products/ZapBusinessIntelligence.aspx
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9. Appendix Figure 1.1 The ‘Fullmoon Set’ Gift Pack that presented by Ayamas
Figure 1.2 The coupon for discounted set meal shown
Figure 1.3 The picture taken for interview to Ayamas
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