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My Small Business
Theory, Book keeping and Financial reporting
Presentation by Mr Boye Sodeke, 3 May 2014
My Small Business
![Page 3: My Small Business Theory, Book keeping and Financial reporting Presentation by Mr Boye Sodeke, 3 May 2014 My Small Business](https://reader036.vdocument.in/reader036/viewer/2022062518/56649e675503460f94b634cf/html5/thumbnails/3.jpg)
My Small Business
SECTIONS
1.THEORY OF ACCOUNTING
2.BOOK KEEPING
3.FINANCIAL REPORTING
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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
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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
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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)
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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*****
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My Small BusinessSection 2: Book keeping for SmallBiz Ltd
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My Small BusinessSection 2: Book keeping for SmallBiz Ltd
(Cont’d)
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My Small BusinessSection 2: Book keeping for SmallBiz Ltd
(Cont’d)
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My Small BusinessSection 2: Book keeping for SmallBiz Ltd
(Cont’d)
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My Small BusinessSection 2: Book keeping for SmallBiz Ltd
(Cont’d)
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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
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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