my small business theory, book keeping and financial reporting presentation by mr boye sodeke, 3 may...

My Small Business

Theory, Book keeping and Financial reporting

Presentation by Mr Boye Sodeke, 3 May 2014

My Small Business

My Small Business

SECTIONS

1.THEORY OF ACCOUNTING

2.BOOK KEEPING

3.FINANCIAL REPORTING

My Small BusinessSection 1:Theory of Accounting

• Accounting defined The systematic recording, reporting, and analysis of financial

transactions of a business

• Book keeping defined: The recording of financial transactions through books of primary entry

or "day books" (journals). It forms part of the accounting process.

• Importance of Accounting/Book keepingGives a structured, standardised, easy to understand, and timely

information on the performance and state of business, which provides basis for good decision making by Management, lenders, tax authorities, suppliers and other stakeholders

My Small BusinessSection 1:Theory of Accounting (Cont’d)• Specific Accounting disciplines/fields

1)Financial Accounting, 2)Management (and or Cost) Accounting, 3)Auditing, 4)Taxation, 5)Special (Reporting Acctg to public offers, Fin. Due

Diligence to M&A, etc) • Fundamental accounting concepts

1) Entity; 2) going concern;3) Prudence/ Conservatism 4 )Accruals, Matching & Amortisation; 5) Periodicity;6)Materiality;7)Economic substance over legal form, etc

My Small BusinessSection 1:Theory of Accounting (Cont’d)• Accounting policies. Specific relevnt examples

1)Depreciation: Straight-line versus Reducing line method; 2) Stock valuation: Average cost method, Last-In-First-Out (LIFO) method, First-In-First-Out (FIFO) method, etc 3) Asset capitalisation

• Some relevant bodies: 1)Financial Accounting Standard Board (FASB); 2)International Accounting Standards Board (IASB); 3) HM Revenue, etc

• Broad Types of business (for accounting purposes) 1) Manufacturing (Cussons, BP, etc;) 2) Trading (House of Fraser, TESCO , IKEA, etc); 3)Service (Barclays, Aviva, NHS, Wonga, MOT centre etc); 4) Others (Construction, etc)

My Small BusinessSection 1:Theory of Accounting (Cont’d)• Some other Considerations

1) Guiding principles for admissibility of expense (“WREN”) –a)Wholly; b)Reasonably; b)Exclusively; c)Necessarily

2) Common causes of failing small businesses:a) Poor book keeping - unrecorded transactions, errors, etc;b) Non separation of business from personal dealings - think Entity Concept!! c) Incessant drawings in all forms - think WREN! d) Absence of, or disregard for policye) Ineffective pricing policy/practicef) Lack of clear strategy (eg volume Vs margin)

3) Principle of double entry*****

My Small BusinessSection 2: Book keeping for SmallBiz Ltd

My Small BusinessSection 2: Book keeping for SmallBiz Ltd

(Cont’d)

My Small BusinessSection 2: Book keeping for SmallBiz Ltd

(Cont’d)

My Small BusinessSection 2: Book keeping for SmallBiz Ltd

(Cont’d)

My Small BusinessSection 2: Book keeping for SmallBiz Ltd

(Cont’d)

My Small BusinessSection 3: Financial Reporting for SmallBiz Ltd

SMALL BUSINESS LTD FINANCIAL STATEMENTS I] Income Statement For 1 Month to 30 April 2014

Note

Amt (£) Amt (£)

Sales (189 boxes) E 1,737.00 Cost of Good sold (189 @ £4.25) I -803.25 Gross Profit 933.75 Less Admin Expenses:

Rent J 300 Telecomms J 50

Transportation, Selling and Distribution J 80 General J 45 Utilities J 100

-575.00

Net Profit before tax 358.75 Tax @ 20% -71.75 Net profit After Tax 287.00

My Small BusinessSection 3: Financial Reporting for SmallBiz Ltd

II] Balance Sheet as at 30 April 2014 Note Amt (£) Amt (£) Assets:

Bank D 712.00 Petty Cash C 70.00

Trade Debtors F 780.00 Stock of goods I 896.75

Prepayments J 2,000.00 Total Assets 4,458.75

Liabilities: Trade Creditors H 500.00

Acrrued Expenses K 100.00 HM Revenue (Tax Creditor) 71.75

Other Creditors (Loans) B 500.00

Total Liabilities -

1,171.75

Total Asses less total liabilities

3,287.00 Represented by:

Capital A 3,000.00 Retained Eearnings (Profit after Tax) 287.00

Capital plus Retained Earnings 3,287.00

QUESTIONS?

forBoye Sodeke

cityofgod.rccg@yahoo.com