1. Gaphor M. Panimbang Introduction of Financial Records
Logo
2. Tools in Records Keeping 2 Major Tools Records Keeping Cash
Record Income Statement
3. Important Points
Both the cash records and a regular Income Statement are a
necessity for every entrepreneur because:
It help the cash position at anytime;
It helps the entrepreneur in detecting fluctuations in prices,
market demands for goods, and in production;
It enhances the entrepreneur's business consciousness and
control over his enterprise;
Regular evaluation of the business is important for planning
purposes;
4. Important Points
The cash record should be kept separate from the household and
other business accounts;
The cash record should provide specific information such as
volumes and prices to be able to prepare the income statement and
to analyze the result;
In preparing the income statement, we need to check the data in
the cash record carefully, and ask about the non-cash transactions
as well. A periodic inventory record is also needed;
5. Important Points
The income statement covers a logical period such as one
production cycle (for production and processing enterprise) or a
time period ( for trading and service type of enterprise);
From the income statement, strengths and weaknesses of the
business can be identified;
The beginning balance is the cash status at the beginning of
the period for which the record will be kept
If the enterprises account is mixed with other accounts, it is
very difficult to compute the enterprise income
6. Exercises Answer 1. Inflow 2. Outflow 3. Outflow 4.Outflow
5. Inflow 6. Outflow 7. Non-cash 8. Non-cash TRANSACTIONS Tell
whether inflow, outflow or a non-cash transaction 1. Loan from the
group 2. Repaid loan to the group 3. Bought equipment 4. Bought
materials 5. Husband paid back money he borrowed from enterprise 6.
Deposit additional savings to the group 7. Goods consumed by
husband 8. Harvest reduced by half
The value of these goods must be treated as income & be
added to the net profit.
Sales on Credit
Credit sales that can be paid by the buyer must be treated as
income
Credit sales cannot be paid should be treated as loss
Use of own raw materials
The value of the raw materials should be treated as costs &
be deducted from the net profit
8. Net Cash Income Profit Sales Income Costs
9. Net Cash Income Fixed Assets Working Capital Capital It
shall be used for the production costs/ costs of goods sold
Production Costs are the costs incurred each time the output volume
is produced. These are variable costs.
10. Components of Production Costs Production Costs These are
costs like rent or fees paid to use land or facilities like drying
facilities. Use of facilities Paid Labor Materials These are the
costs we have to make the output volume ton purchase the materials
that are consumed in producing the estimated output volume . These
are the costs of hiring external labor force or for paying members
to do a certain tasks.
11. Important Points
Total income is gross sales plus other income;
Gross profit is the total income minus production costs;
Gross profit determines whether production costs can be
recovered from the total income that business generates;
Net cash income is gross profit minus other expenses;
Net cash income is what remains from the income after deducting
all costs and expenses of the enterprise
12. Net profit
Net Profit is the net cash income minus depreciation minus
interest on loans;
Depreciation is the amount of money the enterprise should
generate to be able to replace the fixed assets on time.
The net profit reflects the entrepreneurs return on his/her
labor, management and capital investment
13. Profit can be utilize in several ways Savings for child
education 1 Consumption 2 Expansion of enterprise 3 Investment in
new enterprise 4
