THE E-STORE

The E-Store is a very successful web-sales corporation set up by Puru, an ambitious student entrepreneur living
in Pune. As the market has been promising, as a partner of the firm, Puru has decided to hire an accountant to
keep track of the corporation01’s finances. You have recently been hired as that accountant. Your job is to keep
track of all transactions that financially impact the business, and keep Puru updated with proper financial
information to enable him to take proper business decisions and plan future expansion and cash flows.

December Transactions (Enter the following transactions into the appropriate T accounts)

1. On 12th Jan, Mr. Puru borrowed Rs.4,000 cash from his father to invest in the business. He has some
pocket money of Rs 2000/- saved which is invested in the business as his own equity.
2. Initial designs made by Puru’s friend Savitri Devi. Puru promised to pay her Rs.500/- after a month.
Savitry Devi gave her invoice to Puru on 16th Jan.
3. On 17th Puru went to Boriali and ended up spending Rs.650/- on trials and sampling. Unfortunately most
of the things he bought ended up not being used in the final product.
4. Finally, on 21st Jan he decided the material and purchased 50 units of Acrylic for Rs.2000
5. His friend Hatim has a box manufacturing factory and he convinced Puru to purchase 100 boxes
(minimum order quantity) for Rs.1500/-. This was on 22nd Jan.
6. Purchased stationery worth total Rs.250 on 23rd.
7. After much discussion and debate with friends and family it was decided to name the product Tango to
and sell it for an MRP of Rs.200/- per unit.
8. Spent Rs.1200 for Laser cutting for 30 units of Tango on 25th.. Packed and kept 30 pieces units of Tango
in the Finished Goods stock cupboard.
9. On 27th, Puru and his friends got together at the Enterprise space and started making calls to their inner
circle to try and get orders for Tango. After several rounds of calling, many packets of popcorn, many
rejections, and almost giving up, they finally received their first order! Hooray!!
10. One of Puru’s friends (who had volunteered to be a part of the ‘sales party’) Mami who lives in PCMC
ordered 8 units of Tango @Rs.150/-. She was excited about the student venture and immediately made a
payment by G-Pay.
11. One the same day 2 Units were sold to Mrs. Lunavat on phone order for Rs.140/-. She promised to pay
by PayTM.
12. On 29th, Puru’s parents introduced him to one of their neighbors who ran a school, and so Puru decided
to give two units of Tango as gifts / demo
February Transactions (Enter the following transactions into the appropriate T accounts)

1. On 2nd Feb, Puru paid Rs.750 for the December in cash for the student incubator which has been guiding
Puru.
2. Purchased marker pens for Rs.150/- bought on 2nd Feb, for marking the names on boxes for delivery
3. One of the Puru’s friends father really like the product and wanted to consider giving them as gifts to his
loyal customers. But he wanted a custom logo to be printed on the box. Puru’s friend Neha is into design
and so she took on the task. Samples were developed for Mr Rajiv Tulpule with custom logo and it cost
Rs.225/- to get them printed. Neha didn’t charge any money as she was also a part of the team working
on the project.
4. They were using Neha’s bike and they refilled Petrol worth Rs.120/- on 4th Feb.
5. Mrs Lunawat paid Rs.280/- on 4th Feb.
6. On 6th Feb there was a piece of good news. They Received and order for 30 pieces To Mrs KK for
birthday party for Rs.125/- each. Received 50% Cash and balance was to be paid up on delivery.
7. Now they needed to make more Tango’s. So on 7th Feb Laser Cutting was done for 40 units of Tango.
8. This time 3 Units were rejected because of scratches on the acrylic sheet but Laser vendor refused to
accept his mistake. He kept saying the raw material was bag. They learnt a valuable lesson to check the
sheets before giving to the laser vendor.
9. They now needed someone to help them with manufacturing. Purus parents suggested talking to their
watchman Thapa Bahadur who has a 14 year old son. After meet him they felt he could do the job to the
required level of quality and so they hired the Watchman’s son, Goondaraj as part time employee. They
agreed to pay him Rs.1100/- per month starting this month. He started work on 10th Feb and would be
paid on pro-rata basis on the 3rd of the next month. His work will be to keep the stores, and pack the
Tangram boxed after receiving from laser cutting vendor. The team showed him how to assemble the
boxes, put all the new stock in the FG cupboard.
10. After all this work Puru and friends wanted to have a little celebration and so they withdrew Rs.500/- for
a movie night. This was on 10th Feb. They took Goondaraj also for the movie.
11. Based on a suggestion from their mentor, they registered an account on Amazon on 11th Feb.
12. Finally after all the customisation work, they received an order along with Advance payment of Rs.1500/-
from Mr Rajiv Tulpule for 40 units of customer Tangram (@Rs.150/-) on 12th Feb.
13. Acrylic sheets were almost over so on 13th they purchased 100 units of acrylic. Managed to convince the
vendor to pay 50% of the amount after 1 month.
14. Their cash was running dry. Against all his best intentions Puru decided to take a loan of Rs.3000 from his
girlfriend Diya on 13th Feb. She was also not very happy about it, but Puru has promised to pay it back
within 1 month. This experienced encouraged Puru to discuss with his mentor to teach him a better way
of keeping accounting, the result of which is this case study!
15. Now they were getting serious about their business and in order to create better designs and
customisation they purchased 1 year subscription of Adobe Photoshop (software) for Rs.1,000, paid with
cash. This was also on 13th Feb.
16. They were advised to learn some fundamentals of digital marketing and paid Rs. 500/- on 14th Feb for a
marketing course on Udemy. Money was constantly flowing out.
17. On 15th they made a sale of 18 units during the last weekend of the month for Rs.200 each just by
making phone calls and WhatsApp messages. All the money was collected in cash and Gpay. At the end
of the day, business is about selling!
18. They asked Goodaraj to make all the deliveries on his bike. Paid him Rs.300/- for petrol expenses on the
last day of the month. They also remembered that they would have to pay him pro-rata salary on 3rd
March so they made a journal entry of the same and closed the accounts for the month.
March Transactions (Enter the following transactions into the appropriate T accounts)

1. Paid Gundu’s salary for last month on 3rd March as per their commitment.
2. They got an opportunity to set up a stall at St Helenas School fest. They bought material for Decorations
(supplies) for Rs.400 with cash on 10th March.
3. Delivered Mrs KK’s order and delivered the required units on 11th. Gave 2 units extra just in case.
Collected Balance payment.
4. Gundu has shaped up well. He got 80 pieces Laser cutting done from the vendor and negotiated a 10%
discount on laser cutting charges! This was on the 12th.
5. He also assembled and packed the 80 units, and added them to the FG cupboard. 2 units had to be
rejected because they broke while assembled.
6. Made the delivery and received balance payment from and Mr Tulpule on 16th.
7. Received order of 40 pieces from Mrs Hakim for @Rs.125/- per piece on 17th. No advance was received.
They had a discussion and the team was split about whether or not to take the order without any
advance but finally it was decided to go ahead because their cash reserves were good and they decided
to take the risk.
8. The idea of setting up a website and taking orders online had been brewing for a while. They paid
Rs.1000 ‘on account’ on 19th March to Aniket for website development. He was unwilling to give a
quotation, but said he will charge as per the work done. He estimated it would cost between Rs.2000 to
Rs.3000 to complete the website work.
9. 26 units were sold in cash at a farmers market at 10% discount on 20th March.
10. As a celebration, they printed business cards for themselves for Rs.400/- on 21st March
11. They Purchased 100 units of Boxes on 22nd march.
12. Paid the incubator charges for the month on the 22nd.
13. Gundu asked for an advance Rs.200/- on 26th to buy school textbooks. They felt bad and could not
refuse. Amount was to be deducted in salary for March.
14. Gundu was present on all days in March. They closed the accounts for the month.
April Transactions (Enter the following transactions into the appropriate T accounts)

1. On 1st Puru had to pay Rs.500/- to his father’s accountant to help him sort out his accounts and file his IT
returns.
2. His mobile bill for Jan and Feb was Rs.400/- and Rs.700/-. He has decided to account 50% of this towards
business communication expenses. This was paid on 4th April but booked on 31st March as it was for the
previous financial year.
3. Delivered 20 units of Mrs Hakim order and received payment for the same on 5th April.
4. Bought 50 units of acrylic on 10th April. The vendor asked for the balance amount from the previous
order. They paid it up and apologized for the delay.
5. Completed laser cutting of 40 units on 11th April. This time there was only 1 rejection. Assembled and
packed the remaining 39 into the FG cupboard.
6. There was a complaint received from Mrs KK as one of the pieces was not working. Puru sent Gundu to
her home with a free replacement on 12th April.
7. On the way, Gundu was caught by the traffic police for riding without a helmet and was fined Rs.250/-
8. Delivered the balance Karo order and received payment on 13th April.
9. Puru got a deal to print 2000 A5 size brochures for 30 paisa each (regular price is 50 paisa). He doesn't
have any use for them now, but thinks he can use them in the summer holidays to promote his product.
He went ahead and took on the deal and got the flyers printed. This was on 15th April.
10. Puru paid Rs.800 to participate in a Sunday flea market on 18th. He also spent Rs.600 for a promotional
standee, which can be reused.
11. He asked his girlfriend and her best friend to help them in the stall and offered to buy them coffee and
high tea at 3rd Wave cafe. They agreed. But Diya also reminded him about the loan he had taken. But he
didnt have all the cash available. He gave her back Rs.1500 and promised to the the remaining after the
flea market sale. No interested was charged.
12. The three of them had a great time and made a sale of 27 units at the flea market. On average they had
to give a 5% cash discount. This was on 22nd.
13. They were thrilled and celebrated at 3rd wave cafe. The bill came to Rs.670/-. He could also repay the
balance to Diya.
14. Puru received a birthday party order from one Mrs Shinde of 30 pieces on 25th. This time he took an
80% advance. The customer agreed but Puru had to give a discount of 20%.
15. Booked Gundu’s salary for the month and closed the accounts.
EXERCISE 1

1. What is the variable cost?

2. What is the fixed cost per month?
3. What is the BEP?
4. What is the cost of rejection?
5. Is the samples and gift fixed or variable cost?

EXERCISE 2

Puru attended a session on budgeting at the incubator. He felt very inspired to take the business forward and
has drawn up a budget for the upcoming financial year April 2020 to March 2021. Puru expects he can easily
increase his sales by 15% to 20% each month if he continues to dedicate 8 - 10 hours each week to his
project.

6. Create a budget for the remaining months of the business.

7. What is the BEP for the business?
8. Puru’s girlfriend is a product design student and came up with the idea of adding a 10 page tangram
challenges booklet along with every box. This will cost an additional Rs.10 per box. How will this affect
the BEP of the business?
9. Puru wants to withdraw some money each month so that he can reduce the pocket money he takes from
his parents. How much do you think the business can afford?
10. If Puru hires an intern to manage social media and manage the Amazon orders, he believes he can
increase the business. The intern will cost Rs.2000 per month. Is it worth it?

EXERCISE 3

11. The incubator fees has been increased to Rs.1800/- per month. After a round of discussion with his
mentors, they have decided to pay a Royalty of 10% per unit sold, instead of per month rental charges.
Do you think this makes sense?
12. It is proposed to reduce Gundu’s salary, and pay him a smaller base salary + commission per unit sold.
Can you work out and suggest what should be the base salary and the commission.
13. There is an opportunity to supply 200 tangrams each month to a distributor in Bangladesh. They will pay
upfront, but they are asking for a 50% discount. How will you analyse this?
 CASH BOOK

Sr Date Details Rec’d Paid Balance

 SALES REGISTER

Sr Date Party / Item Rate Qty Amount Payment

 JOURNAL

Sr Date Party / Item Rate Qty Amount Payment

 Beginning Changes Ending

Cash

Receivables

Payables

FG Stock

RM - Acrylic
Sheets

RM - Boxes