Creating an Accounting System

for your VEI FirmPresented by: Nick Chapman, National

Program DirectorSummer 2015

An Overview of the VEI Programveinternational.org

General accounting practices in the Virtual Enterprise

• Prepare a budget• Keep records of all transactions

o Using the accounting journals• Oversight & Internal Controls• Using the Webinars• Using the journals to prepare financial

statementso Cash Budgeto Income Statemento Balance Sheet

• Year-end reporting using the Firm Financial Data Form

An Overview of the VEI Programveinternational.org

Financing the Enterprise

• Debt vs. Equity Financing• Non-VE Sales• The Balance Sheet

http://prezi.com/4b0mpbgw-ccx/the-balance-sheet/?utm_campaign=share&utm_medium=copy

COMPLETE THE BUSINESS REGISTRATION FORM TO APPLY FOR STARTUP FUNDING

VEI PORTAL / SUBMITTAL FORMS

An Overview of the VEI Programveinternational.org

The Balance SheetAssets

CashAccounts ReceivableFixed Assets

Computers/Equipment/Furniture

______________________________________

LiabilitiesAccounts PayableLoan Payable

Shareholders’ EquityCommon StockRetained Earnings

An Overview of the VEI Programveinternational.org

Financial StatementsCash Budget – a record of when money comes in and out of the account

(Cash basis of accounting)

Income Statement – a statement of earnings that books when revenues or expenses occur

(Accrual basis of accounting)

Balance Sheet – what your financial position looks like on a given day in time

(Statement of financial position)

An Overview of the VEI Programveinternational.org

Description FY 2013-2014 TOTALSCash balance at beginning of period:  Receipts of cash:  Sales  Receipts of accounts receivable  Loan proceeds  Other  Total receipts 0Beginning balance + cash receipts 0Payments:  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 period 0Net increase or decrease in cash 0

Cash Budget

Cash vs. Accrual

Cash – Cash BudgetMonth 1 2 3

Receipts

Cash Receipts

1,500 0 3,500

Payments

Insurance 1,000 0 0

Utilities 4,750/8 4,750/8

…

Accrual – Income Statement

Month 1 2 3

Revenues

InternetSales

2,000 2,000 2,000

Expenses

Insurance

1,000/12

1,000/12

…

Utilities 4,750/12

4,750/12

…

•For another explanation, visit the Khan Academy:https://www.khanacademy.org/economics-finance-domain/core-finance/accounting-and-financial-stateme

When the money is received or paid When the transaction takes place or when a service is used

Utilities= $4,750 for 12 months of use, payable in 8 monthly installments

An Overview of the VEI Programveinternational.org

Income StatementFor the period May 1, 2014 – April 30, 2015

Revenue- Cost of Goods Sold

Gross Profit- Total Operating Expenses

• Provide 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 Margin•The % of revenue that you keep after COGS.

PROFIT MARGIN %:Net Income/Revenue = Profit Margin•The % of revenue that you keep after all expenses and taxes.

An Overview of the VEI Programveinternational.org

OCT NOV DEC JAN FEB MAR APR TOTALSales revenues  

Source of Sales (ex. Online)               0Source of Sales (ex. Trade Show)               0Source of Sales (ex. Non-VE Sales)               0

Total sales revenues 0 0 0 0 0 0 0 0 

Cost of goods sold or services provided

 What is your firm’s Gross Margin?Apply the gross margin to your sales  to determine COGS     0

 Gross profit 0 0 0 0 0 0 0 0

 Operating expenses  

Salaries “Gross Pay” from Payroll Register       0Rent From your lease       0Depreciation Taken from the Asset Log       0Payroll tax  7.65% of Gross Pay (this is the firm’s contribution to Social Security & Medicare)  0Advertising          0Promotion          0Insurance Total amount of the insurance policy divided by 12 months  (ACCRUAL) 0Pension or 401(k) Taken from the Payroll Register       0

InterestThis is only the interest portion of your loan payment  (Found on the Amortization Table) 0

Supplies       0Utilities 8 monthly payments based on 12 months of use       0Other       0

Total operating expenses 0 0 0 0 0 0 0 0 

Income from operations 0 0 0 0 0 0 0 0Other revenues/gains and expenses/losses                

Net income before taxes 0 0 0 0 0 0 0 0Corporate income tax ONLY OWED IF NET INCOME IS POSITIVE!!!        Net income after taxes 0 0 0 0 0 0 0 0

Income Statement

Taken from Sales Journal

An Overview of the VEI Programveinternational.org

Balance Sheet

ASSETS

LIABILITIES

SHAREHOLDER’S

EQUITY

= +

An Overview of the VEI Programveinternational.org

The Balance Sheet

Assets

Current AssetsCash  From Bank AccountInvestments in stocks  Accounts receivable  From Sales Journal/Acc Rec.Merchandise inventory  From Inventory LogSupplies  Estimate

Total Current Assets -

Fixed AssetsComputers  Original ValueLess: accumulated depreciation

 How much value has it lost over its life?

Furniture and fixtures  Original ValueLess: accumulated depreciation  Office equipment  Original ValueLess: accumulated depreciation  

Total Fixed Assets 0

Total Assets 0

Liabilities and Stockholders' Equity

Current LiabilitiesAccounts payable  Who do you owe?Sales tax payable  Sales Tax ReportingSalaries payable  April Salaries?Payroll tax payable  April Payroll Tax401(k) payable  Other payable  Corporate tax payable  Did you make a profit?

Total Current Liabilities 0

Long Term Liabilities Loan payable  Loan Payment table

Total Liabilities

Stockholders' EquityPaid-in capital

Common stock, $10 par value, * # shares issued  Seed money

Additional paid-in-capital

In excess of par value  Was your firm certified?

Retained earnings  ”Plug” number

Total Stockholders' Equity 0

Total Liabilities and Stockholders' Equity

=

An Overview of the VEI Programveinternational.org

Session Debrief / Q & A

An Overview of the VEI Programveinternational.org

General accounting practices in the Virtual Enterprise

• Prepare a budget• Keep records of all transactions

o Using the accounting journals• Oversight & Internal Controls• Using the Webinars• Using the journals to prepare financial

statementso Cash Budgeto Income Statemento Balance Sheet

• Year-end reporting using the Firm Financial Data Form

An Overview of the VEI Programveinternational.org

ACTIVITY: Using the Accounting

JournalsGo to:portal.veinternational.orgAccounting & Finance

“Webinars” “Basics of the Accounting Journals”