1. RECORD-KEEPING AND ACCOUNTING
Entrepreneurship
4/26/2017
Chapter 11
RECORD-KEEPING AND ACCOUNTING
11.1 Set Up a Record-Keeping System
11.2 Understand Basic Accounting
11.3 Track Your Inventory
Chapter 11

2. Lesson 11.1 SET UP A RECORD-KEEPING SYSTEM
Chapter 11
Lesson 11.1 SET UP A RECORD-KEEPING SYSTEM
GOALS
Keep journals, ledgers, and other types of important business records.
Learn about electronic record-keeping.

3. Then it starts over again
Then the cycle begins again for the new period of time. Usually a month, but could be for a quarter (three months) or a year.

4. Step 1 Collect and Verify Source Documents
Source documents are the evidence that a transaction or event happened in the business
Types:
Invoice
Check Stub
Receipt
Memorandum
Source documents are the evidence that a transaction or event happened in the business. The types of sources documents are Invoices, Check stubs, Receipts, Memonrandom

5. Analyze each transaction
Step 2
Analyze each transaction
1. Determine accounts effected
2. Determine account type
3. Determine increase or decrease
4. Determine debit(s) and credit(s)
The four steps involved in analyzing the transaction are :
Determine accounts effected (cash, supplies, accounts payable, etc)
Determine account type (asset, liability, or owner’s equity) **good spot to ask what they have written down for the definition of these on their index card.
For each account ask is it increasing or decreasing
Based on the type and whether it is increased or decreased: determine which accounts are increased or decreased

6. Part of step 2 Debits and credits
Here's a Tip-- Debit means left Credit means right
Generally these types of accounts are increased with a debit:
Dividends (Draws) Expenses Assets Losses
Generally these types of accounts are increased with a credit:
Gains Income Revenues Liabilities Stockholders' (Owner's) Equity

7. Step 3 Journalize each transaction
businesses record all activity that happens in their business each day in a journal.
1.Date
2.Account Debited
3.Amount Debited
4.Account Credited (indent slightly)
5.Amount credited
The journal is like a diary of the business’ activities. Just like you would record everything that happens to you in your diary for the day, businesses record all activity that happens in their business each day in a journal.

8. Sample of Journal

9. Step 4 Post to the ledger Record for each individual account.
Each account has it’s own ledger. That is just an individual record for that account. So all the transactions that effect the Cash account would be posted (recorded) into the Cash account.
Each account has it’s own ledger. That is just an individual record for that account. So all the transactions that effect the Cash account would be posted (recorded) into the Cash account.

10. Sample of Ledger

11. Step 5 Prepare a Trial Balance
This is to ensure that the accounting equation is still in balance. It is a listing of all the accounts and their balances.
You add the debit balances, then the credit balances, and then check to make sure that they are equal. It is completed in the first columns of the worksheet, but must balance before the rest of the worksheet is completed.
Next you prepare a trial balance. This is to ensure that the accounting equation is still in balance. It is a listing of all the accounts and their balances. You add the debit balances, then the credit balances, and then check to make sure that they are equal. It is completed in the first columns of the worksheet, but must balance before the rest of the worksheet is completed.

12. Sample trial Balance

13. Step 6 Prepare a Worksheet
The worksheet is where you gather all the information needed to prepare the financial statements.
Some accounts need to be adjusted to bring their balances current before the financial statements are completed.
The worksheet is where you gather all the information needed to prepare the financial statements like the one we looked at when we started this unit. Some accounts need to be adjusted to bring their balances current before the financial statements are completed.

14. Sample worksheet

15. Step 7 Prepare the financial statements
The Income Statement - shows how much money the business has made (or lost) during a period of time.
2. The Statement of Owner’s Equity - a report for the owner of the business to show how the business operations have effected his/her investment during a time period.
3. The Balance Sheet makes sure that the debits equal the credits at a point in time.
Once the worksheet is complete you are ready to prepare the financial statements. These include the Income statement, a Statement of Owner’s Equity, and a Balance Sheet.
The Income Statement show how much money the business has made (or lost) during a period of time.
The Statement of Owner’s Equity is a report for the owner of the business to show how the business operations have effected his/her investment during a time period.
The Balance Sheet makes sure that the debits equal the credits at a point in time. Checks to make sure the accounting equation is still in balance.

16. Step 8 Journalize and Post the closing entries
During the accounting period the revenue, expense, and drawing accounts are used to itemize those transactions to assist management in making decisions on how the business is running. At the end of the accounting period these accounts which are classified as temporary accounts are closed and their balances are transferred (moved) into the owner’s capital account (where the equity is tracked).

17. Step 9
Prepare a Post-Closing Trial Balance This is just to make sure that all the debits equal all the credits are still equal and that the accounting equation is in balance before the next time period begins.
The last step is to prepare a Post-Closing Trial Balance. This is just to make sure that all the debits equal all the credits are still equal and that the accounting equation is in balance before the next time period begins.

18. TYPES OF RECORDS Journals Ledgers Bank statements Payroll records
Chapter 11
TYPES OF RECORDS
Journals
Ledgers
Bank statements
Payroll records
Tax records

19. TYPES OF RECORDS Journals Ledgers Bank statements Payroll records
Chapter 11
TYPES OF RECORDS
Journals
Ledgers
Bank statements
Payroll records
Tax records

20. Chapter 11
JOURNALS
Are accounting record of the transactions you make. Journals separate business transactions by account
Sales journal
Used to record only sales of merchandise on account. Get now pay later.
Cash payments journal
Used to record any Cash or check payments that a business makes.
Cash receipts journal
Used to record all cash receipts transactions.
Purchases journal
Used to record purchases of merchandise on account.
General journal
This is used to record any kind of transactions. Some busineeses use only GL.

21. Chapter 11
LEDGERS
Businesses use general ledgers to which they post the items that they record in their journals. Ledgers separate transactions by account. Ex. Expenses (rent, utilities)
Subsidiary ledgers
Is a ledger that is summarized in a single general ledger account.
Aging tables
Is a record-keeping tool for tracking accounts receivable accounts. Ex. p273

22. Chapter 11
BANK STATEMENTS
A check register is a book in which you record the dates, amounts, and names of people or businesses to whom you have written checks.

23. Chapter 11
PAYROLL RECORDS
A payroll is a list of people who receive salary or wage payments from a business.
A payroll register includes the following information:
Employee’s name
Number of hours worked
Regular and overtime earnings
Federal, state, and local taxes deducted
Social security and Medicare contributions deducted
Other deductions

24. TAX RECORDS Income tax Payroll deductions Sales tax
Chapter 11
TAX RECORDS
Income tax
Business that earn profit must pay income tax. These taxes are paid quarterly ( every 3 months)
Payroll deductions
Sales tax

25. COMPUTERIZED RECORD-KEEPING
Chapter 11
COMPUTERIZED RECORD-KEEPING
Advantages of computerized record-keeping
Store and analyze data
Link records - sale, Income statement and Inventory
Reduce errors -
Correct errors
Disadvantages of computerized record-keeping
Staff resistance
Unauthorized access
Computer problems

26. Lesson 11.2 UNDERSTAND BASIC ACCOUNTING
Chapter 11
Lesson 11.2 UNDERSTAND BASIC ACCOUNTING
GOALS
Demonstrate understanding of balance sheets, income statements, and cash flow statements.
Determine whether you need a professional to help you with your record-keeping and accounting.

27. TYPES OF FINANCIAL STATEMENTS
Chapter 11
TYPES OF FINANCIAL STATEMENTS
The balance sheet
The income statement
The cash flow statement

28. Balance Sheet What is a Balance Sheet? A statement that shows
(1) How much money a company has
(2) How much money a company owes
(3) How much the company is worth (value of company)
Follows the accounting equation
Assets = Liabilities + Owner’s Equity

29. Sample Balance Sheet

30. Label the Balance Sheet

31. Label the Balance Sheet
1. Company Name
Balance Sheet
Date

32. Label the Balance Sheet
1. Company Name
Balance Sheet
Date
2. Total Assets – how much you have

33. Label the Balance Sheet
1. Company Name
Balance Sheet
Date
3. Total Liabilities – how much you owe
2. Total Assets – how much you have

34. Label the Balance Sheet
1. Company Name
Balance Sheet
Date
3. Total Liabilities – how much you owe
4. Owner’s Equity– how much you are worth
2. Total Assets – how much you have

35. C heck Point….
You make $400 (after taxes) and you owe $275 in bills. What is your worth?
$400 (asset) - $275 (liability)= $125 (worth)

36. Income Statement What is an Income Statement?
A statement that shows a company’s profit.
How much was sold or made? ( revenue)
How much was spent? (expense)
How much is left over? (net income/profit)
Revenue – Expenses = Net Income/Loss

37. Sample Income Statement

38. Sample Income Statement
1. Company Name
Income Statement
Date
2. Total Revenue - how much was sold
3. Total Expenses - how much was spent
4. Net Income/Loss- how much profit

39. Label the Income Statement
1. Company Name
Income Statement
Date

40. Sample Income Statement
1. Company Name
Income Statement
Date
2. Total Revenue - how much was sold

41. Sample Income Statement
1. Company Name
Income Statement
Date
2. Total Revenue - how much was sold
3. Total Expenses - how much was spent

42. C heck Point…. You have $5000 in sales
Your company had $1200 in expenses
Did you have a Net Income or Loss? What was the amount?
Revenue $5000 – Expenses $1200 = Net Income $3800

43. THE CASH FLOW STATEMENT
Chapter 11
THE CASH FLOW STATEMENT
Net cash flow is the an accounting report that describes the cash flow in and out of business.
Difference between cash receipts and disbursements.
Cash receipts – Disbursements = Net cash flow
Positive or negative cash flow
Positive- Cash receipts total is larger than disbursements.
Negative Disbursements are larger than cash receipts.
Economic effects on cash flow – ex sept 11, 2011

44. Cash flow statement vs income statement
Chapter 11
Cash flow statement vs income statement
Income deals with Expenses and Revenues while cash flow statement deals with money coming in and out.

45. USE PROFESSIONALS Accounting assistants Certified public accountant
Chapter 11
USE PROFESSIONALS
Accounting assistants
Records business transactions.
Certified public accountant
Accounts that have passed

46. Lesson 11.3 TRACK YOUR INVENTORY
Chapter 11
Lesson 11.3 TRACK YOUR INVENTORY
GOALS
Track your inventory using a perpetual inventory method and a periodic inventory method.
Determine how much inventory to keep in stock.

47. TRACK YOUR INVENTORY Perpetual inventory method
Chapter 11
TRACK YOUR INVENTORY
Perpetual inventory method
Take a physical inventory
Periodic inventory method

48. MANAGE YOUR INVENTORY Costs of carrying inventory
Chapter 11
MANAGE YOUR INVENTORY
Costs of carrying inventory
Obsolescence
Deterioration
Interest fees
Insurance
Storage
Costs of being out of stock
Turnover rates

49. Review…. What accounts would you find listed on the balance sheet?
Assets
Liabilities
Owner’s Equity

50. Review….
What is the term used for how much you owe?
Liability

51. Review…. How do you calculate how much you are worth?
Assets – Liabilities = Owner’s Equity (worth)

52. Review….
What financial statement shows how much profit you made and how is this calculated?
Income Statement
Revenue - Expenses