1 / 31

Basic Bookkeeping Techniques

Module 9. Basic Bookkeeping Techniques. Contents of this Module:. Purpose of this module The Benefits of Accurate Bookkeeping Income Statements and Balance Sheets The Synoptic JOURNAL or Ledger.

nanji
Télécharger la présentation

Basic Bookkeeping Techniques

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Module 9 Basic Bookkeeping Techniques

  2. Contents of this Module: • Purpose of this module • The Benefits ofAccurate Bookkeeping • Income Statements andBalance Sheets • The Synoptic JOURNAL or Ledger What is Bookkeeping? Bookkeeping is defined as the recording and documentation of the financial transactions of a business.

  3. Purpose of this Bookkeeping Module: • To understand where Bookkeeping fits into the process of creating Financial Statements. • To understand how accurate records can be utilized as a management tool leading to sound business decisions. • To create an understanding of the mechanics of a maintaining a SYNOPTIC LEDGER. …Most retail, wholesale and service businesses make sales and receive and spend money every day. They should keep records like Daily Cash Sheets, Accounts Receivable, and Accounts Payable. A SYNOPTIC JOURNAL, or LEDGER, combines all of the aforementioned records into one comprehensive record keeping resource.

  4. Why Does a Business Keep Financial Records? • To manage the money of the business, particularly if there is a significant amount of cash flow on a day-to-day basis. • To track the daily, weekly and monthly financial performance of the business. Is the business making money? • To identify and address problems at an early stage. • To provide the bookkeeper or accountant for the business with all critical financial information. • To make INFORMED DECISIONS!

  5. Management by Numbers ‘Telephones, hotels, insurance – it’s all the same. If you know the numbers inside out, you know the company inside out.’ - Harold Geenen, CEO of ITT Corp

  6. Worksheet #1: Data-driven Decision-making • Review the information in worksheet #1 • How would you answer the questions, given the information available? • Make any additional calculations that you think might be helpful • What other information would you like to have in order to make a decision?

  7. Your Bookkeeping Friends • Tools you can use to make bookkeeping easier

  8. Keys to Effective Bookkeeping • Establish a system that is: • Uncomplicated, logical, and user-friendly • Thorough and accurate • Easily accessible • Consistent with the size and nature of your business • Integrated into your daily business routine

  9. Process

  10. Financial Statements: • The Income Statement and the Balance Sheet are the two principal documents that, together, are called the financial statements. • They are intertwined with the Cash Flow Statement and together complete the financial picture of the business. • They enable you to understand what is going on with the business and make decisions accordingly. • The information for all 3 documents begins with the Synoptic Ledger.

  11. Financial Statements: Key Financial Statements • INCOME STATEMENT: • Income • Expenses • Profit • BALANCE SHEET: • Assets • Liabilities • Equity • CASH FLOW STATEMENT: • Cash In • Cash Out • Cash Balance • SYNOPTIC LEDGER: • Transactions • Adjusting entries

  12. The Income Statement: • Identifies all Revenue and Expenses over a specified time (usually a month or year) to show Profit or Loss for the period. • Expenses are incurred to create revenue, and are not always cash expenditures. (Example: depreciation.) • Not every cash expenditure by the business is an expense, and those that are not expenses will not appear on the Income Statement. (Example: payment of loan principal to a bank.)

  13. Worksheet #2: The Income Statement Please go to Worksheet #2 … to review the Income Statement:

  14. The Balance Sheet: • Shows the exact financial position of the business at a specific date, usually the end of a month/year. • Identifies: • Assets - what the business owns • Liabilities - what the business owes • Owner’s Equity - the net capital available to the owner. • Represents the COST of the Assets, Liabilities and Equity, NOT their VALUE. • The Balance sheet must always balance: Assets = Liabilities + Owner‘s Equity

  15. The BALANCE Sheet Liabilities • Assets = liabilities + equity Assets Equity

  16. Worksheet #3: The Balance Sheet Look at the Worksheet #3 Balance Sheet:

  17. Double-Entry Bookkeeping • Each bookkeeping entry: • Involves a minimum of 2 accounts • DEBITSmust = CREDITS Credit Debit

  18. 5 Types of Accounts • ‘double-entry’ accounting: • 2 sides to every bookkeeping entry! • Increase in ‘Debit’ matched by increase in ‘Credit’ B.S. I.S.

  19. Debit & Credit Balances Revenue Expenses Credit balance Debit balance Liabilities Assets Equity

  20. The Synoptic Ledger: • Accounts across the top • Debit column on left, Credit column on right • Line by line recording of all business transactions. • Can be considered the ‘finished product’ of Bookkeeping. • May be turned over to an accountant to develop the Financial Statements.

  21. Using The Synoptic Ledger • The amount of every transaction is entered in the Synoptic Ledger TWICE. (Double Entry Bookkeeping.) • Each entry has a Debit [Dr] and a Credit[Cr]. • Sum of Debits = Sum of Credits

  22. Synoptic Ledger Transactions • ACCOUNTS COMMONLY INVOLVED IN LEDGER ENTRIES:

  23. Example: Asset <-> Asset • Moving assets from one account to another • Paying out cash is a CREDIT • Deposit in bank is a DEBIT

  24. Example: Asset <-> Revenue Revenue Asset • Receiving cash for sales of different products • Cash in is a DEBIT • Sales revenue in is a CREDIT

  25. Example: Asset <-> Liability Liability Asset • Purchasing materials on credit from supplier • Material in is a DEBIT • Increase in money owed is a CREDIT

  26. Example: Asset <-> Expense Expense Asset • Paying a supplier with a bank cheque • Money out is a CREDIT • Paying an expense is a DEBIT I understand!!

  27. Worksheet #4 & 5: Synoptic Journal – Jan-11 • Review the transactions listed in worksheet #4 • Add these transactions to the synoptic journal • Use either Worksheet #5 or electronic version

  28. Worksheets #6 & 7: Financial Statements – Jan-11 • How have financial statements changed as a result of synoptic ledger entries?

  29. Worksheet #8 & 9: Synoptic Journal – Feb-11 • For each transaction listed in worksheet #8: • Review the transaction description • Find the transaction on Worksheet #9: Synoptic Ledger. • Determine whether or not the transaction entry in the Synoptic Ledger is correct. • If it is incorrect, change it to a correct entry. • Hints: • Some entries are in the wrong accounts. • Some are the right accounts, but wrong numbers. • Some are wrong accounts and wrong numbers. • Some are correct.

  30. Worksheets #10 & 11: Financial Statements – Feb-11 • How have financial statements changed as a result of synoptic ledger entries? • What aspects of the business appear to require attention? • What decisions would you make based on the available information?

  31. Wrap Up: • Bookkeeping is a powerful tool for managing a business. • The owner/manager of a business should know how much money the business has, how much it is owed and how much it owes. Bookkeeping provides this information. • Keep records up to date and easily accessible. • Remember Bookkeeping is just simple arithmetic. Business owners/managers can do it by themselves without requiring the help of an accountant.

More Related