LIFESTYLE BUSINESS ACCELERATOR 90 Day Program | 5 Accounting & Finance for Small Business
WHY LEARN THE NUMBERS? Business is about profit & wealth creation. These are all about the numbers.
End the story of “I am not a numbers person�
Business growth and success will be severely limited without understanding how the numbers work.
Help you make rational & profitable business decisions quickly.
ACCOUNTING & FINANCE ACCOUNTING VS FINANCE
Accounting is a subset of Finance
Accounting looks backwards and records company transactions and creates reports. (P&L, Cash Flow & Balance Sheet)
Finance analyzes those reports and makes plans for the future.
ACCOUNTING VIDEO
ACCOUNTING Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business. Accounting also refers to the process of summarizing, analyzing and reporting these transactions
A company usually provides 3 accounting reports on a regular basis:
PROFIT & LOSS STATEMENT BALANCE SHEET CASH FLOW STATEMENT
PROFIT 7 LOSS STATEMENT OR INCOME STATEMENT
P&L STATEMENT
A profit and loss statement (P&L) is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year. These records provide information about a company's ability – or lack thereof – to generate profit by increasing revenue, reducing costs, or both. The P&L statement is also referred to as "statement of profit and loss", "income statement," "statement of operations," "statement of financial results," and "income and expense statement."
WHAT DOES P&L TELL YOU? (PROFIT AND LOST IS ALSO CALLED THE INCOME STATEMENT)
P&L
This shows the summary of revenue and expenses over a specific period of time.
Example P&L of January 2016 Revenue -Cost of Goods Sold =Gross Profit
$100 $50 $50
-Operating Expenses =Operating Profit
$30 $20
-Interest -Taxes =Net Profit
$3 $5 $12
It can tell you if you are making $ or if not why you are not.
It can also tell you when compared to your budget how you are doing compared to how you planned to do.
P&L STATEMENT SAMPLE
CASH BASIS
ACCRUAL VS CASH BASIS ACCOUNTING
A major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out. http://www.investopedia.com/terms/c/cashbasis.asp#ixzz4AdP4PLXr
ACCRUAL ACCOUNTING Accrual accounting is an accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. http://www.investopedia.com/terms/a/accrualaccounting. asp#ixzz4AdOqS4HU
ACCOUNTING REPORTS Accounting Reports looks backwards
ACCOUNTING REPORTS VS FINANCIAL PROJECTIONS FINANCIAL PROJECTIONS Financial Projections estimates of the future financial performance of a business. Typically done for 5 years in the future. Financial Projections usually consist of a Profit & Loss Projections (P&L), Balance Sheet and Cash Flow Statements just like Accounting Reports.
HOW TO CREATE YOUR OWN P&L PROJECTIONS
1
PROJECT SALES
2
CALCULATE COGS
3
PROJECT PERSONNEL EXPENSES
4
PROJECT MAKING EXPENSES
5
PROJECT OTHER EXPENSE
REVIEW OF FINANCIAL PROJECTIONS TEMPLATE
ACTION ITEMS
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2
3
Watch Excel Videos if you do not know Excel
Complete Sales Tabs
Complete an Act of Service to someone in the class