Lemonade stand and temporarily restricted assets

Seraphina, a CMW violist, usually supplements her summer income by busking on Westminster Street. This year, she decides to create and operate a lemonade stand...

• She borrows her roommate’s desk to use as a table, promising that “You can use my smaller desk instead and I’ll buy three weeks of groceries to compensate your inconvenience.” She also borrows a pitcher, a dozen lemons, a package of paper cups, and a cup of sugar from her mother. 

• The first day she sells one glass of lemonade for $2 and one passerby leaves $1 without taking a glass of lemonade.

• Liz suggests that a good sign would help attract business, agrees to make one for $50, delivers the sign the next morning, and says Seraphina can pay her from profits. 

• Business picks up. 12 people buy lemonade, 5 others leave a total of $6 without taking lemonade. While pouring lemonade, Seraphina drops the pitcher and has to buy one from a junk store for $12, which empties her wallet.

• She stops in a convenience store where the storeowner urges her to “invest in your future” by buying a bag of lemons ($23), 10lb. of sugar ($8.25), and a carton of paper cups ($11.65). The prices are higher than at a supermarket, but the convenience store extends her credit.

• Susanna notices the lemonade stand, orders 10 cups for her Italian Club to be delivered one evening a week later, and pays $18 in advance.

• The next day 10 people buy lemonade, 4 people leave $1 each without taking lemonade, and 5 CMW colleagues take lemonade, saying, “I’m out of change, but I’ll catch up with you later.”

• Seraphina’s mother says she needs her pitcher back for her book club. A replacement for her mother’s (broken) pitcher at Williams & Sonoma is $46. Seraphina puts it on her credit card.

• David, CMW’s board chair, stops by and gives Seraphina $50 on the condition that she serve free lemonade to 50 school children. She serves 11 free glasses to kids that day.

• While practicing, Seraphina breaks a string on her viola. A replacement costs $7.85. 

Prepare Seraphina’s financial report. The format is up to you. 

How will you convey the cash and accrued income and expenses? What business decisions could be made from the information? Should Seraphina continue the lemonade stand or return to busking? 

Many thanks to Ronald Florence for providing this fun and useful exercise. An important piece of start-up advice: find an inspired and dedicated volunteer who can "speak money" and help you navigate the world of nonprofit accounting. Ronald's experience with budgets and financial reporting, along with his willingness to help us learn, was--and continues to be--a huge benefit to the CMW staff and board.