Transcript Document 7197778

Account for Profits
Understand how to account for profits using
basic accounting methods.
Accounting Basics
Essential Financial Records
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Types of Accounts include
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Accounts Receivable – money owed to a business by its
customers
Accounts Payable – money owed to a vendor for
merchandise, equipment, or other supplies
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Purchase Order – a written form authorizing vendors to ship
products at a specified price
Cash Receipts – any cash brought into the business
Cash Disbursements – any cash paid out by the business
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To maintain accurate records, a business
should record all financial activities of a
business in a ledger or journal.
Financial Statements
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Income Statement – summarizes the business’s income and
expenses during a specified time period. Basic calculations
for an income statement are
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Total Sales – Total amount received from the sales for a business
Sales Returns and Allowances – the credit granted to customers who have returned a
damaged or unwanted good
Cost of Goods Sold – the cost to either manufacture or buy the merchandise to be sold
Operating Expenses – the costs incurred from operating the business which can include
wages or rent
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Net Sales = Total Sales – Sales Returns and Allowances
Gross Profit = Net Sales – Cost of Goods Sold
Net Income before Taxes = Gross Profit – Operating Expenses
Net Income = Net Income before Taxes – Taxes
Variable expenses – change monthly
Fixed expenses – stay the same no matter the level of production
Income Taxes
Net Income – income earned after deducting sales returns and allowances, cost of
goods sold, operating expenses, and income taxes from sales
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Balance Sheet – the summary of a business’s
assets and liabilities. Indicates the financial
condition of the business.
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Asset – anything of value that the business owns
Liability – the amount of money the business
owes
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Net Worth = Assets - Liabilities
Manage Your Cash Flow
Daily Transactions
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Sales Tally – a calculation of the daily sales
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Can be used to compare a store’s performance
from year to year
Provides up-to-date information about what is
selling and not selling
Allows the business to catch any discrepancies on
a daily basis
Deposits should be made daily to ensure that
large sums of money are not left in the store
Sales Reports
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Uses of Sales Reports is important to a
business in the following decisions
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Merchandising Decisions
Pricing Decisions
Purchasing Decisions
Sales Quotas – a sales goal
Scheduling of employees
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Data from Sales Reports can include
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Total Sales
Department Sales
Product Sales
Average Dollar Sale
Average Units per Transaction
Hourly Sales
Goals
Auditing
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Auditing – the process that ensures the
accuracy of a business’s finances
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Identifying Discrepancies – identifies errors
Protecting the Business – from dishonest
employees
Verifying Accuracy
Computerized Accounting
Systems
Point-of-Sale Systems
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Some features of a POS system includes
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Tracking Inventory
Tracking Purchasing Patterns
Reordering Merchandise
Printing Financial Statements
Identifying Sales Trends
Tracking Employee Productivity
Tracking Customers
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Advantages of POS Systems include
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Quick
Accurate
Up-to-Date Information