An Thai Coffee Processing Plant’s Accounting

Introduction

Thai coffee is a registered coffee processing plant that is located in Vietnam. The company is specialized in the manufacture of roasted coffee, ground coffee, instant coffee, and 3 in 1 milk coffee (Farag 34). The company was established in 1996 and is located in Tieng Hoang and employs up to 1000 workers (Oldroyd 13). The company is wholly owned by Nguyen Xuan Hung. The company mainly sells its coffee products in Asia but has several other markets outside the Asia block. This business report is prepared to identify and address the challenges that the An Thai is facing and determine ways through which improvements can be achieved in order to increase profitability.

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Problem identification

For the past year now, An Thai has been experiencing increasing inventory costs, declining profitability, and declining customer service quality (Oldroyd 90). As a result, an evaluation was conducted to identify ways through which this trend could be reversed. A thorough study was carried out in the crucial areas of its operations. The following areas were considered: the supply channel, quality of products, communication among the employees, customer satisfaction among other areas.

That has also been greatly affected by the failing international coffee prices. Initial results pointed towards poor product management and a lack of a clear picture of the market trends. The declining profits could also be partially blamed on the reduction in market size due to the entry of other players in the industry (Rathbone 76).

This report is thus prepared to identify ways through which a systems overhaul can be achieved to ensure that the coffee processing plant incorporates the best management practices to return to profitability.

Assumptions

In this report, the following accounting assumptions will be used: the accounting entity assumption will be used in the sense that An Thai coffee processing plant affairs will be separated from its owner and other entities that may be in his possession. Thus the company will be considered as a separate entity that has its own transactions (Farag 12). This accounting assumption is important in order to enable the separation of the financial and management problems of the business from the owner or any other business he operates. The profit and loss accounts will show only revenues and expenses related to this business. Any financial input from the owner will be treated as the company’s liability to the owner (Rathbone 159).

The second assumption is that all the business transactions are carried out in US dollars due to the fact that the business mainly carries out international transactions. Thus the US dollar is used as a unit of measurement for all the assets and liabilities. Other items that cannot be quantified in terms of money such as the contribution from a specific work will be left out of the analysis.

The financial statement will also be prepared by the assumption that An Thai coffee processing plant is an ongoing business that has an indefinite life. With no future prospects of liquidation, An Thai financial analysis indicates projections in the foreseeable future. From this, “a clear distinction between fixed assets and current assets, short term and long term liabilities, capital and revenue expenditure will be drawn” (Elliot 78, pp. 3).

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The financial analysis is based on the annual periodicity assumption. There is a clear distinction between the expenditures that were incurred or consumed in the past year and those that are projected to occur in the coming year.

Planning

In order to return to profitability, the management of An Thai has carried out the following activities: A comprehensive reassessment of the current market size and the projected future growth was undertaken. This included a complete trend analysis to identify the precise impact of the entry of new coffee processing plants in the region and particularly Vietnam.

An analysis of the key operational activities and their impact on profit margins was completed. The company decided to carry out a reassessment of the size of the market so as to have a real picture of what be able to plan well for the future.

Based on the above analysis a strategy was formulated to ensure that all areas of concern are addressed to return the company to growth (Oldroyd 80).

Detailed balance sheet

Balance Sheet
2008 2009 2010
Assets
Current Assets
Cash $20,000 $40,000 $55,000
Inventory $15,000 $39,000 $47,000
Other Current Assets $0 $0 $0
Total Current Assets $35,000 $79,000 $102,000
Long-term Assets
Long-term Assets $100,250 $150,950 $109,943
Accumulated Depreciation $20,785 $35,695 $90,790
Total Long-term Assets $121,025 $186,545 $210,733
Total Assets $156,025 $265,545 $312,733
Liabilities and Capital FY 2005 FY 2006 FY 2007
Current Liabilities
Accounts Payable $49,000 $75,000 $100,456
Current Borrowing $7,000 $6,000 $6,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $56,000 $81,000 $106,456
Long-term Liabilities $100,000 $150,364 $170,356
Total Liabilities $156,000 $231,364 $276,812
Net worth $,025 $34,019 $35,076

Source: Farag, Shawki. The accounting profession in Egypt: Its origin and development. Illinois: University of Illinois, 2009.

Anticipated Challenges and Solutions

The company anticipates an increase in the level of competition in the future. It believes that the entry of new players in the industry will lead to a further diminished market share. To address this challenge the company intends to ensure that it utilizes a quality strategy to ensure that it attracts and retains customers. The company also seeks to diversify its coffee products for survival. A major challenge is the ever-changing global climate that makes some areas to be unsuitable for the growth of the plant. Other issues are related to poor pre and post-harvesting practices, especially from small-scale coffee farmers who do not have the necessary skills (Rathbone 100).

To address this challenge, An Thai will ensure that there is a unit that will educate farmers on the best practices. This will include an offering of incentives to farmers to encourage them to produce good coffee. The company will also set up stringent measures to ensure that coffee of poor quality is not allowed into its promises. To address the challenge of falling global prices, the company will seek to increase the volume of sales, especially in the emerging markets.

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Best Managerial Practices Related to the Business

Thai coffee seeks to redeem itself and become a leading coffee exporter in Vietnam and the larger Asia. This can be achieved by the adoption of best management practices. This requires a clear strategy to enable the company to move up the ladder of top performers. Due to the problem of unsatisfactory employee productivity, the management of the An Thai consulted another firm that carries employee appraisal to identify areas of improvement (Farag 67).

A Thai was advised to ensure that it builds a reliable workforce that can deliver quality services. Specific activities to be carried out include coaching, training, and the provision of more resources (Elliot 120). A Thai will ensure that its clients are treated to quality efficient services that will make them come back.

In regard to the declining coffee prices, An Thai will carry out the following activities to ensure its survival. The company will try to liaise with other players in the industry to come up with favorable price modeling. In order to achieve this, the company will develop an efficient geographic versus industry or client segment reporting system(Farag 106). Sales management scorecards, cost analysis, and cost volume analysis will be strategically implemented to ensure that the company does spend a lot of money on raw materials.

Works Cited

Elliot, Barry. Financial accounting and reporting. London: Prentice Hall, 2004.

Farag, Shawki. The accounting profession in Egypt: Its origin and development. Illinois: University of Illinois, 2009.

Rathbone, Dominic: Economic Rationalism and Rural Society in Third-Century AD Egypt: The Heroninos Archive and the Appianus Estate. Cambridge: Cambridge University Press, 1991.

Oldroyd, David. “The role of accounting in public expenditure and monetary policy in the first century AD Roman Empire.”Accounting Historians Journal, 22(2005): 345-440.

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StudyCorgi. (2021, January 26). An Thai Coffee Processing Plant's Accounting. Retrieved from https://studycorgi.com/an-thai-coffee-processing-plants-accounting/

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