1. Account for Profits Understand how to account for profits using basic accounting methods.

2. Accounting Basics

3. Essential Financial Records  Types of Accounts include Accounts Receivable – money owed to a business by its customers Accounts Payable – money owed to a vendor for merchandise, equipment, or other supplies  Purchase Order – a written form authorizing vendors to ship products at a specified price Cash Receipts – any cash brought into the business Cash Disbursements – any cash paid out by the business

4.  To maintain accurate records, a business should record all financial activities of a business in a ledger or journal.

5. Financial Statements  Income Statement – summarizes the business’s income and expenses during a specified time period. Basic calculations for an income statement are  Net Sales = Total Sales – Sales Returns and Allowances  Gross Profit = Net Sales – Cost of Goods Sold  Net Income before Taxes = Gross Profit – Operating Expenses  Net Income = Net Income before Taxes – Taxes Total Sales – Total amount received from the sales for a business Sales Returns and Allowances – the credit granted to customers who have returned a damaged or unwanted good Cost of Goods Sold – the cost to either manufacture or buy the merchandise to be sold Operating Expenses – the costs incurred from operating the business which can include wages or rent  Variable expenses – change monthly  Fixed expenses – stay the same no matter the level of production Income Taxes Net Income – income earned after deducting sales returns and allowances, cost of goods sold, operating expenses, and income taxes from sales

6.  Balance Sheet – the summary of a business’s assets and liabilities. Indicates the financial condition of the business. Asset – anything of value that the business owns Liability – the amount of money the business owes  Net Worth = Assets - Liabilities

7. Manage Your Cash Flow

8. Daily Transactions  Sales Tally – a calculation of the daily sales Can be used to compare a store’s performance from year to year Provides up-to-date information about what is selling and not selling Allows the business to catch any discrepancies on a daily basis  Deposits should be made daily to ensure that large sums of money are not left in the store

9. Sales Reports  Uses of Sales Reports is important to a business in the following decisions Merchandising Decisions Pricing Decisions Purchasing Decisions Sales Quotas – a sales goal Scheduling of employees

10.  Data from Sales Reports can include Total Sales Department Sales Product Sales Average Dollar Sale Average Units per Transaction Hourly Sales Goals

11. Auditing  Auditing – the process that ensures the accuracy of a business’s finances Identifying Discrepancies – identifies errors Protecting the Business – from dishonest employees Verifying Accuracy

12. Computerized Accounting Systems

13. Point-of-Sale Systems  Some features of a POS system includes Tracking Inventory Tracking Purchasing Patterns Reordering Merchandise Printing Financial Statements Identifying Sales Trends Tracking Employee Productivity Tracking Customers

14.  Advantages of POS Systems include Quick Accurate Up-to-Date Information