Developing an Accounting System for your VE firm - PowerPoint Presentation

1. Developing an Accounting System for your VE firmTuesday, July 11, 11:00 AMPresented by: Teri Jones & Chi Zhang

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4. AgendaAccounting Journals (Reference Files, Accounting Journals)Cash Budget (Task 1 & 2)Making Projections  Income StatementFinancing the Business  Balance SheetCash vs. Accrual BasisBeginning of the Year Financing

5. JournalsWHY? To keep more accurate recordsWHAT? A system with checks and balances to help avoid mistakesCash Receipts and Payments JournalSales JournalPurchases JournalInventory RecordPayroll RegisterLoan Payment TableFound on the Portal / Accounting & Finance / Reference Files

6. Cash Journal

7. CashTask: Cash Receipts and PaymentsPrepare a record of all money coming in and going out of the bank accountItemized by type (See “Cash Budget”)WHY? To determine if cash balance is sufficient for operations. WHAT? Basic Sections of Financial Statement are: Beginning Balance, cash in, cash out, ending balance

8. Cash BudgetDescriptionFY 2016-2017 TOTALSCash balance at beginning of period:  Receipts of cash: Sales  Receipts of accounts receivable Loan proceeds Other  Total receipts0Beginning balance + cash receipts0Payments:  Cost of merchandise (wholesale marketplace)Salaries (net pay on payroll register)Accounts payable Rent (regional office)Advertising/ promotion (other VEI firms)Payroll tax (from payroll register & 941 form)Insurance  (other VEI firms or regional office)Accounting and legal fees (other VEI firms or regional office)Utilities (other VEI firms or regional office)Loan Payment (loan payment table)Pension, 401(k) (from payroll register + emp. cont.)Freight out  (have you researched shipping fees?)Sales tax VEI Sales Tax is 7% of sales (Nationally)Other or miscellaneous  Corporate tax (paid at the end of the year)Total payments 0Cash balance at end of period0Net increase or decrease in cash0

9. ProjectionsBudget/ExpensesMonthly Expenses – Rent/Payroll/UtilitiesOne-time expenses – Furniture/Equipment/Initial InventorySales Projections (Sales & Marketing/Reference Files)Break-Even AnalysisCOGSProfit/Loss (Income Statement)WHY? To estimate profit, cash needsWHAT? A realistic, researched, educated guess

10. Income StatementFor the period May 1, 2016 – April 30, 2017 Revenue - Cost of Goods Sold Gross Profit - Total Operating ExpensesProvide details Income from Operations - Corporate Tax Net Income After tax“Statement of Earnings”What is your projected revenue?Projected operating expenses?How much profit or loss does your firm project to have this year?GROSS MARGIN %:Gross Profit/ Revenue = Gross MarginThe % of revenue that you keep after COGS.PROFIT MARGIN %:Net Income/Revenue = Profit MarginThe % of revenue that you keep after all expenses and taxes.

11. Income Statements “Fiscal Year by Month” = Year End & Projections

12. Use P&L Projections to assist with Pro-forma Cash Flow

13. Financing the EnterpriseDebt vs. Equity FinancingNon-VE SalesThe Balance SheetCOMPLETE THE BUSINESS REGISTRATION FORM TO APPLY FOR STARTUP FUNDINGVE PORTAL / SUBMITTAL FORMSWHY? To assure enough cash is on hand for successful operationsWHAT? Borrowing money or increasing owner’s equity (or out-of-network sales for VE)

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15. Finance  Beginning of the YearBusiness Registration FormStartup Budget WorksheetMonthly expenses & One-time expensesSeed MoneyAll new firms receive $20,000 in seed funding from the VE National Office in exchange for 2,000 shares of company stock ($10 par value per share).Create Initial Balance SheetAdditional Cash to Support OperationsUse Capital Needs Flowchart & Fulfill requirements and Submit requestAs the Year Continues:Update Balance SheetManage the Bank AccountMonitor and Record Cash ReceivedMake and Record Cash Payments

16. Balance SheetWHY? To Show Owner’s EquityWHAT? Uses the Accounting Equation: Assets = Liabilities + Shareholders’ EquityASSETSLIABILITIESSHAREHOLDER’SEQUITY=+http://prezi.com/4b0mpbgw-ccx/the-balance-sheet/?utm_campaign=share&utm_medium=copy

17. How Does Equity Grow (or shrink)?What will happen to your assets (cash, inventory, equipment) over the course of the year?How to show changes in equity?Retained EarningsAssets = Liabilities + (Shareholders’ Equity + Retained Earnings)Retained Earnings = Assets - Liabilities - Shareholders’ Equity

18. Balance Sheet:Accounting & Finance/Reference Files/Financial Statement Templates with Explanations

19. Cash vs. Accrual AccountingWHAT? Using accounting that will either log records according to when the cash is spent or received (CASH BASIS) or According to when the expense/income was incurred (ACCRUAL BASIS).WHY? One is easier (Cash) and one more accurate for the time period (Accrual)Once a company chooses either Cash or Accrual system, there is no changing.

20. Cash vs. AccrualCash – Cash BudgetMonth 123ReceiptsCash Receipts1,50003,500PaymentsInsurance1,00000Utilities4,750/84,750/8…Accrual – Income StatementMonth 123RevenuesInternetSales2,0002,0002,000ExpensesInsurance1,000/121,000/12…Utilities4,750/124,750/12…For another explanation, visit the Khan Academy:https://www.khanacademy.org/economics-finance-domain/core-finance/accounting-and-financial-statemeWhen the money is received or paidWhen the transaction takes place or when a service is usedUtilities= $4,750 for 12 months of use, payable in 8 monthly installments

21. Review: General accounting practices in VEPrepare a budgetKeep records of all transactionsUsing the accounting journalsOversight & Internal ControlsUsing the WebinarsUsing the journals to prepare & Update financial statementsCash BudgetIncome StatementBalance SheetYear-end reporting in the Annual Report

22. ACTIVITY: Using the Accounting JournalsGo to:portal.veinternational.orgAccounting & Finance/task 1 & 2Reference Files/Payroll Register (or with instructions)Videos/Basics of the Accounting Journals/Reference Files/Payroll #1

23. Engage Various Company Departments:Cash Payments and Receipts Journal (Finance Dept.)Payroll Register (w/ HR Dept.)Sales Journal (w/ Sales & Marketing)Keep Good Records:Purchases Journal Inventory Log Asset LogLoan Payment Table

24. Go to veinternational.org to join the transformation.

25. Financial StatementsCash Flow StatementIncome StatementBalance SheetBreak-Even Analysis (for Business Plan)