1. Managing Finance and Budgets
Seminar 2

2. Seminar 2 - Activities During this seminar we will:
Review the three types of financial statement
Discuss the three statements for Day 3 of the ‘lemonade’ stall.
Review the Cash Book Activity
Discuss how the February transactions for should be recorded in the Cash Book.

3. Some Starting Points
Explain, and if possible elaborate on the following terms:
Assets
Claims
Creditors
Debtors
Name the three main types of financial statement, what you think they might be used for, and some of the things you might find on each of them .

4. Financial Statements Statement Purpose Terms used Balance Sheet
To assess the financial position of the business at one moment in time
Assets, claims, liabilities, capital, retained profit etc.
Profit & Loss Account
To measure & report on how much wealth the business has created over a period.
Sales, Turnover, Cost of Sales, Operating Costs, Overheads, net profit etc.
Cash Flow Statement
A summary of all cash transactions over a period
Cash inflow, Taxation, expenditure, dividends, net increase in cash

5. Profit and loss account
Relationship between the balance sheet, profit and loss account and cash flow statement
Profit and loss account
Cash flow statement
Balance sheet

6. Seminar Preparation Activity
On the third car boot sale that you attend, you decide to pay your friend back entirely. In addition you purchase another 250 cans of lemonade at 20p per can. This time the entry fee is £10, but it rains and you only sell 50 of your cans at 50p each.
Construct a cash flow statement, profit & loss account and a balance sheet. for the third day.

7. The Cash Flow Statement – end of Day 2
Opening Balance: £ 80
Loan from friend: £ 30- (paid back)
Goods purchased: £ 30- (150 x 20p)
Entry Fee: £ 5-
Cash received: £ 50+ (100 x 50p)
Closing Balance: £ 65

8. Seminar Activity Cash Flow Statement Day 3
Opening Balance: £ 65
Loan from friend: £ 20- (now paid back)
Goods purchased: £ 50- (250 x 20p)
Entry Fee: £ 10-
Cash received: £ 25+ (50 x 50p)
Closing Balance: £ 10
NOTE:
This could not have happened in this sequence, as the business did not have enough cash after paying back the loan!

9. The Profit & Loss Account – End of Day 2
Sales: £ 50 (100 x 50p)
Cost of Sales: -£ 20 (100 x 20p)
Entry Fee: -£ 5
Net Profit: £ 25

10. Seminar Activity Profit & Loss Account – Day 3
Sales: £ 25 (50 x 50p)
Cost of Sales: £ 10 (50 x 20p)
Gross Profit: £ 15
Entry Fee: £ 10
Net Profit: £ 5

11. The Balance Sheet – End of Day 2
Assets:
Cash: £ 65
Stock: £ 20 (100 x 20p)
Total: £ 85
Liabilities:
Loan outstanding: £ 20
Retained profits: £ 65
Total: £ 85

12. Seminar Activity Balance Sheet Day 3
Assets:
Cash: £ 10
Stock: £ 60 (300 x 20p)
Total: £ 70
* Opening Stock: cans
Stock Purchased cans
Stock Sold cans
Closing Stock: cans
Liabilities:
Loan outstanding: £ 0
Retained profits: £ 70
Total: £ 70

13. The Cash Book Spreadsheet
This side shows you what money has gone out of the account, and where it has gone to.
This side shows you what money has come into the account, and where it has come from

14. The Cash Book Spreadsheet
Can you explain (1) what these transactions were, and (2) where their partner entries have been recorded?

15. Cash Book Transactions - February
Feb 2 £1200 of Cash sales. These goods originally cost us £500
Feb 3 £800 of stock bought from warehouse on credit.
Feb 4 £400 of shelving fixtures bought for cash.
Feb 6 £200 of stock bought on Feb 8 returned to warehouse
Feb 8 £600 of stock sold on credit for £900
Feb 10 Refund of £100 on unused shelving fixtures
Feb 11 £250 cash received from Trade Debtors
Feb 14 Paid £150 to Trade Creditors.
Feb 18 Wages bill for the week £400 paid in cash.
Feb 19 £1000 repaid to the Commercial Finance Company
Feb 20 Paid rent of £250 in cash.
Feb 21 £500 Cash sales. These goods originally cost £350
Feb 22 £100 received from trade Debtors
Feb 23 £100 Cash sales. Goods originally cost £50.
Feb 25 Owner withdraws £250 from the day’s takings

16. Entering Transactions
On the SALES page, we credit CASH with the £1200
2nd February Sell goods for £1200 cash
These were originally bought for £500

17. Entering Transactions
On the CASH page we show where this money has come from; we debit £1200 from Sales.
2nd February Sell goods for £1200 cash
These were originally bought for £500

18. Entering Transactions
On the STOCK page we show that £500 worth of stock has gone. This goes to Cost of Sales.
2nd February Sell goods for £1200 cash
These were originally bought for £500

19. Entering Transactions
On the COST OF SALES page we show that Stock has now been reduced by £500.
2nd February Sell goods for £1200 cash
These were originally bought for £500

20. Final Cash page for February

21. Trial Balance for February

22. Balance Sheet for February

23. Balance Sheet for February