PROJECT REPORT

[COMPANY NAME] | [Company address]

COST ACCOUNTING

COST ACCOUNTING
PROJECT REPORT
SUBMITTED TO:
SIR AHMED FARAZ

SUBMITTED BY:
MAHNOOR NASEER KHAN

ACKNOWLEDGEMENTS

I have taken efforts in this project. However, it would not have been possible without the
kind support and help of many individuals.
On the very outset of this report, I would like to extend my sincere & heartfelt obligation
towards all the personages who have helped me in this endeavor. Without their active
guidance, help, cooperation & encouragement, I would not have made headway in the
project.
I would like to thank Islamic International University Islamabad for providing me with
the opportunity of doing such projects which increases our abilities and confidence.
I am highly indebted to Sir, Ahmed Faraz my Cost Accounting subject teacher for his
guidance and constant supervision as well as for providing necessary information
regarding the project & also for her support in completing the project.
Without his support and guidelines this project completion would not have been possible.
I would like to express my gratitude towards my parents & member of family for their
kind co-operation and encouragement which helped me in completion of this project.
At last but not least gratitude goes to all of my friends who directly or indirectly helped
me to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude

EXECUTIVE SUMMARY

This feasibility report shows that the Internet cafe is

proposed to be located in a commercial area which is in
close proximity of students and business people of middle
income groups. A range of services are to be provided
including but not limited to internet surfing, audio/video
chat, printing, scanning and fax services. Furthermore,
projected workings of the business have been based on 15
hours of operations per day.
The total initial cost for setting up an internet cafe is
estimated at Rs. 1.54 million out of which capital cost is
Rs. 1.24 million along with working capital of Rs. 0.30
million. The project will be financed through 90% debt and
10% equity. The legal business status of this project is
proposed as sole proprietorship. All the financial details
and costing is provided in the report along with the target
customers and swot analysis and other aspects are
covered.

EASE NET CAFE

INTRODUCTI
ON

The internet is becoming more and more important in the lives of people all
over the world. Even in remote corners of the world where you wouldnt
imagine people to own laptops or have internet set up in the home, the
need for internet access is still huge. For those types of internet users and
all other types of people, an internet caf business can be a lifesaver, not to
mention a great source of income for the owner. An internet caf can
present a unique set of problems and things to consider though that you
might not experience in running other types of businesses.
Thus I have introduced the project of opening an internet caf. Ease internet
caf will provide customer with a quality level internet connections in a cozy
and free environment and will allow all those who do not have the facility of
internet connections or due to some reasons cannot avail the internet
elsewhere they are more than welcome to visit the caf and avail the
internet facility at very low costs and in a peaceful and relaxing
environment.

Vision of the business:

To facilitate people and providing
Quality services.

Mission:
My mission is to make the lives of people easier and
to provide
Them with the best internet services
And a relaxing environment
To ease customers off their
Problems of using internet.

Values:

The following list of core values reflects what is truly important. These
values are the basis of the project and while working on these values we will
be able to achieve what we have set out to achieve
These core values are the primary reasons for this feeling, and they exceed
our size and our growth rate. These core values are the soul of my company.
Satisfying and Delighting Our Customers
Fulfilling the needs of every Customer
Creating Wealth through Profits & Growth
Making no compromise on the quality of the service

SWOT ANALYSIS
STRENGTHS:
Best quality services
High speed internet connections
Availability of the facility near homes

WEAKNESSES:
Quality might get low if the prices or sales are not good enough.
Accommodations might not be enough if customers increased.

OPPORTUNITIES:
Use of internet is increasing day by day
People are getting more addicted to the use of internet.
University students need internet for their studies.

THREATS:
Competitors

 Availability of internet connection in almost every home.

Quality and speed of connection might not be up to the mark.
More cost than returns.

BRIEF DESCRIPTION OF PROJECT & PRODUCT

In order to set-up an internet cafe, the entrepreneur needs to get a high
bandwidth internet connection from a renowned service provider. The
internet caf is proposed to be established in a location that ensures high
visibility and easy access to students and people belonging to the business
community. The business can be established in any of the major cities of the
country. In this pre-feasibility study, the internet caf will be established in
rented premises with an area of around 600 sq. ft., having good speed
internet connection along with electricity & telephone connections with
proposed investment of Rs. 1.54 million. The business is to provide internet,
audio / video chat, printing, scanning, fax and value added services to its
clients primarily in middle income group. The internet cafe will remain
operational for 15 hours a day. Initial sales volume is calculated at Rs. 2.14
million in the first year, with an annual growth of 10%, providing
employment to about 3 -4 individuals.
Having proper location choice is important.
Uninterrupted power supply with high speed internet.

INSTALLED & OPERATIONAL CAPACITIES

The proposed project is based on 10 new computers installed in individual
cabins along with provision of printer, scanner and fax machine to fulfill the
requirement of the users. Additionally, two ACs will be installed in order to
keep the environment comfortable for users so that they can stay for
extended hours, as required, and spend time at the internet caf.
Entrepreneur involved in this business would fare better if adequately
familiar with software / hardware installation, computer networking, and
trouble shooting and internet usage.

TARGET MARKET AND CUSTOMERS

An internet caf should be easily accessible and should be near or in a
commercial area, preferably in close proximity of student hostels and
business people belonging primarily to middle income groups. The proposed
business can be opened in any of the cities across Pakistan.
Here is a brief list of typical internet cafe users, in order of their typical
spend at an internet cafe:

backpackers
tourists and travelers
business men and women
school children, young kids and teenagers
local residents without a home PC
workers from near-by businesses on their lunch break

Statistics and Demographics

There is little reliable statistical information on typical internet cafe user
demographics in Australia. However, our surveys indicate the following
insights:
users are predominantly aged between 15 and 45
the highest usage is by 19 to 30 year olds
most internet cafe users have broadband internet at home (yes, it may
be surprising to some people, but most internet cafe users have
internet at home but still need to use an internet cafe or wireless
hotspot when away from home)
a large proportion of internet cafe users are students, travelers or
unemployed
the peak demand is usually at night, from about 6pm through to 10pm
most internet cafe users are one-off or irregular users, whereas most
gaming cafe users are regulars
the top 3 reasons for using an internet cafe are: 1) email, 2) surfing
the internet, 3) chat/social networking
a large majority of users indicate that internet cafe services such as
printing, burning CDs, accessing their digital camera, and accessing
USB memory sticks are highly desirable

Most highly-demanded features

Customers want a system that is easy to use, and packed full of features.
Our Surf Easy internet cafe software is designed to allow users to do
everything they want to, while also ensuring maximum security and
protection of your setup.
Here is a list of what most people will want in an internet cafe business:
High-speed internet access
Access to popular websites such as YouTube, Facebook, Twitter,
Myspace, Google, etc.
Access to webmail services like Hotmail, Live, Gmail, Yahoo Mail, and
others
Chat programs like Live Messenger, Skype, ICQ, AIM, and others
Office products like word processing, spreadsheets, and picture
editing
Printing
Headphones with microphone USB access for memory sticks, digital
cameras, iPods, etc.
Games and links to online gaming web sites
Photocopying and scanning CD and DVD reader and burner
Faxing
Food and beverages

BILLING METHODS
A range of methods to accept and process payments from customers is
available. There are also many options for allowing customers to retain and
transfer credit.
Payment Methods
There are many methods available for accepting payments from customers,
including:
Coin or note acceptor on each internet cafe user terminal

A self-serve payment station with coin or note acceptor

Online credit card billing
Manually at a cashier or point-of-sale device for cash
Free internet access using access codes manually issued to customers

PROJECT COST SUMMARY

The projects cost analysis is given with its projected income statement,
cashflow statement and balance sheet attached as anextures.

PROJECT FINANCING
Below table shows the financing aspect of the project showing the
percentage of equity and loan
DESCRIPTIONS
DETAILS
Total Equity (10% )
154,500
Bank Loan (90 %.)
1,390,500
Markup to the Borrower (%age/annum )

Rs.
Rs.
8%

Tenure of the Loan (Years)

Grace Period (Year)

PROJECT COSTS
Below are some requirements identified which are needed as the capital investment of the
project.
CAPITAL INVESTMENT FOR THE PROJECT
Capital Investment Amount
(Rs.)
Furniture & Fixtures
361,000
Internet Cafe Equipment
809,000
Pre-operating Cost
75,000
Total Capital Cost
1,245,000
Initial Working Capital
300,000
Total Project Cost
1,545,000

SPACE REQUIREMENTS
Approximately 600 sq. ft. will be required for the Internet Cafe. It is thought
that the area should be acquired on rent. Rent cost for the proposed areas
will be ranging between Rs. 20,000 to Rs. 30,000. Rent cost incorporated for
financial analysis is Rs. 25,000 per month.

OFFICE EQUIPMENT DETAILS

Following are the equipment needed for the office in the project.
Equipment
Total Cost Rs.

Quantity

Cost per Unit Rs.

Computer
550,000

11

50,000

8,000

Hub
8,000
Computer Camera
22,000

11

Head Phones
11,000

11

2,000
1,000

UPS
150,000

150,000

Printer
40,000

20,000

Scanner
10,000

10,000

DSL Modem
8,000
Networking Cable (ft.)
10,000

1
500

8,000
20

Total Equipment
809,000

FURNITURE AND FIXTURES

Following is the detailed state of the furniture and fixtures needed for the
project.
Description
Total Cost (Rs)
Computer Tables and Cabins
110,000
Computer Chairs
55,000
Telephone sets
3,000

Quantity

11

Unit Cost (Rs)

10,000

11

5,000

1,500

Fax machine
15,000

Sign Board
25,000

15,000
25,000

Ceramic Tiles ( Sq. Ft)

33,000

550

Air Conditioners
120,000

60

60,000

Total Furniture & Fixture Cost

361,000

HUMAN RESOURCE REQUIREMENTS

Internet caf will run for 15 hours a day in two shifts.
Shift 1

9:00 am to 5:00 pm

Shift 2

5:00 pm to 11:00 pm

Human Resource requirements of the project the number of employees

needed, their positions all is given in detail in the next table. Their salary
cost id expressed in the given table.

Positions
(Rs.)

Number
Annual Salary (Rs.)

Network Administrator
240,000
Lab Assistant
360,000
Cashier
120,000
Total

Salary/Month

20,000
2
1
4

15,000
10,000

720,000

REVENUE GENERATION
The revenue generation from the internet cafe is given in the tale below for
the first year.

Service Category
Amount (Rs.)

Internet Rate per Hour

Sales from Internet Usage
Sales from Printing

Expected Sales

50
1,872,000
180,000

Sales from Scanning

54,000

Sales from Faxes

36,000

Total Sales for the first year

2,142,000

Annual growth rate is estimated at 10%.

ANNEXTURE

Projected income statement

Year
8 Rs.

1 Rs.
10 Rs.

9 Rs.

2 Rs.

Total Sales
2,142,000
2,514,600
6,138,459 6,752,305 7,427,53
cost of sales
424,800
467,280
827,815
910,597 1,001,656
Gross Profit
1,717,200
2,047,320
5,310,644 5,841,708 6,425,879

3 Rs.

4 Rs.

5 Rs.

2,940,300

3,425,994

3,979,424

514,008

565,409

621,950

2,426,292

2,860,585

3,357,474

6 Rs.
4,609,280

7 Rs.
5,325,312

684,145
3,925,135

752,559
4,572,753

General administration &

selling expenses
Administration
720,000
792,000
871,200
958,320
1,054,152 1,159,567 1,275,524
1,403,076 1,543,384 1,697,722 Rent expense
300,000
330,000
363,000
399,300
439,230
483,153
531,468
584,615
643,077
707,384
Printing & Stationary 60,000
63,000
66,150
69,458
72,930
76,577
80,406
84,426
88,647
930,080
Entertainment
18,000
18,900
19,845
20,837
21,879
22,973
24,122
25,328
26,594
27,924
Promotional
25,000
22,500
20,250
18,225
16,403
14,762
13,286
11,957
10,762
9,686
Depreciation
341,867
341,867
341,867
384,373
384,373
404,320
453,527
453,527
453,527
510,489 Amortization
15,000
15,000
15,000
15,000
15,000
- Janitorial Expenses
60,000
66,000
72,600
79,860
87,846
96,631
106,294
116,923
128,615
141,477 Miscellaneous
36,000
39,600
43,560
47,916
52,708
57,978
63,776
70,154
77,169
84,886
Subtotal
2,750,006
1,212,954

1,575,867 1,688,867 1,813,472

1,993,289
2,144,520 2,315,962 2,548,402
2,971,775 3,272,648 Operating Income 141,333
358,453
612,820
867,297
1,609,173 2,024,351
2,560,638 2,869,933 3,153,231

EBIT
141,333
358,453
2,560,638 2,869,933 3,153,231
Interest expense
10,928
EBT
2,549,710
Tax
359,927

115,411

105,660

92,844

867,297
78,964

1,212,954

1,609,173

2,024,351

63,932

47,652

30,022

1,149,022

1,561,521

1,994,329

25,923
252,794
2,869,933 3,153,231
439,983

612,820

510,808

NET PROFIT
25,923
252,794
2,189,783 2,429,950 2,642,424

519,977
11,998
507,979

788,333
40,750
747,583

94,853
1,054,169

159,804
1,401,717

246,366
1,747,964

BALANCE SHEET
balance sheet
year 0

year 1

year 2

year 3

year 4

year 5

assets
current assets
cash and bank
prepaid building rate
total current assets

275000

316250

363687.5

25000

28750

33062.5

418240.6
25
38021.87
5

300000

345000

396750

0
fixed assets

456262.5

480976.7
19
43725.15
63
524701.8
75

553123.2
27
50283.92
97
603407.1
56

0
631391.2
56
1414946.
06
2046337.
31

0
726099.9
45
1627187.
96
2353287.
91

furniture and fixtures

361000

415150

caf equipment

809000

930350

477422.5
1069902.
5

1170000

1345500

1547325

0
549035.8
75
1230387.
88
1779423.
75

375000

431250

1545000

1776750

495937.5
2043262.
5

570328.1
25
2349751.
88

655877.3
44
2702214.
66

754258.9
45
3107546.
85

1838936.
25

11998
2114776.
69

13797.7
2431993.
19

15867.35
5
2796792.
17

0
2114776.
69

0
2431993.
19

0
2796792.
17

270221.4
66
34283.16
75
270221.4
66
2702214.
66

310754.6
85
39425.64
26
310754.6
85
3107546.
85

total fixed assets

intangible assets
total intangible assets
total assets

liabilities and share holder

equity
current liabilities
total current liabilities
other liabilities
deferred tax
long term debt (project loan)
long term debt (working capital
loan

1390500

1599075

total long term liabilities

1390500

1599075

0
1838936.
25

shareholders equity
paid up capital and retained
earnings

154500

177675

204326.2
5

234975.1
88

25923
204326.2
5
2043262.
5

29811.45
234975.1
88
2349751.
88

retained earnings
total equity
total capital and liabilities

154500

177675

1545000

1776750

CASH FLOW STATEMENTS

cash flow

Column2

Column3

Column4

Column5

Column6

Column7

year 0

year 1

year 2

year 3

year 4

year 5

net profit

25923

29811.45

34283.16
75

39425.64
26

45339.48
9

add: depreciation expense

341867

393147.0
5

452119.1
08

519936.9
74

597927.5
2

amortization of pre operating cost

15000

17250

19837.5

22813.12
5

26235.09
38

0
4372.515
6

operating activities

deferred income tax

pre-paid building rent

-25000

-2500

-2875

-3306.25

3802.187
5

cash provided by operations

-25000

380289

437332.3
5

502932.2
03

578372.0
33

665127.8
38

additions to project loans

1390500

1599075

1838936.
25

2114776.
69

2431993.
19

2796792.
17

insurance of share

154500

177675

204326.2
5

234975.1
88

270221.4
66

310754.6
85

cash provided by/used for

fin.act

1545000

1776750

2043262.
5

2349751.
88

2702214.
66

3107546.
85

-1431750

1646512.
5

1893489.
4

2177512.
8

2504139.
7

1893489.
4

2177512.
8

2504139.
7

418240.6
25

480976.7
19

553123.2
27

financing activities
project loan principal repayment

investing activities

capital expenditure

-1245000

cash (used for)/provided by

inv.act

-1245000

-1431750

1646512.
5

NET CASH

275000

316250

363687.5

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