Bookkeeping Applications (Bookkeeping II)

Lesson Structure

There are 10 lessons in this course:

1. Introduction to Bookkeeping Applications
   • Stock defines a trading business
   • Bookkeeping requirements for a trading business
   • Steps in processing stock transactions
   • Books required for a trading business
   • Trading businesses and accounting rules
   • Accounting doctrines
   • Accounting standards
2. Decision Making -How to manage bookkeeping
   • Bookkeepers Terminology
   • Using bookkeeping as a management tool
   • What are business structures
   • Business requirements of companies
   • Financial information, and who uses it
   • Alternative approaches to accounting systems
   • Definitions and bookkeeping processes
   • Double entry bookkeeping
   • Single entry bookkeeping
   • Cash accounting
   • Modified cash accounting
   • Accrual accounting
   • Choosing depreciation methods
   • Depreciation calculation
   • Calculating depreciation with the straight line method
   • What if there is no residual value
   • How to enter depreciation in the books
   • Declining balance method of depreciation
   • Calculating percentage rate of depreciation
   • Units of activity depreciation method
   • Intangible assets
   • Tracking assets and depreciation
   • Closing stock control methods
   • Functional profit and loss in a trading business
   • Informative profit and loss presentation - segmentation, grouping expenses
   • Showing Extraordinary Revenue and Expenses
3. Managing Cash Flow, Obtaining Finance, Managing Bad Debts and Accounts Payable
   • Definition of cash
   • The cash cycle
   • Cash flow and liquidity
   • Analysing a businesses cash flow
   • Cash flow margin
   • Statements of cash flow
   • Managing costs in a business
   • Financing a business
   • Rules for business funding
   • Business set up costs
   • Thinking outside the box
   • Loss of time and income
   • Managing bad debt
   • Initiating collection
   • Bookkeeping procedures for bad and doubtful debts
   • Accounts payable procedures
   • Accounts payable schedule
   • Ageing report
   • Source Documents -invoice, monthly statement
   • Credit purchasers journal
   • Creditors subsidiary ledger and schedule
   • Cash payments journal and creditors control account
4. Managing Inventory Part 1
   • Difference between goods and commodities
   • Role of stock in a trading business
   • Purpose of physical stock take
   • Costing goods
   • When an articles cost changes
   • How cost relates to gross profit
   • Difference between cost of goods sold and selling expenses
   • Pricing stock
   • Mark up
   • Margin
   • Stock coding system
   • Stock sheets
   • Journals used in businesses that carry stock
   • Common journals
   • Examples of journal entries
   • Recording purchase returns in the general journal
   • Closing books
   • Closing ledger accounts
   • Preparing for new accounting period
   • Transferring balance day closing entries
   • Profit and loss account
   • Balance sheet
5. Managing Inventory Part 2
   • Perpetual stock control
   • Stock cards and subsidiary ledger
   • Records on stock cards
   • Stock gains and losses
   • Adjustments
   • Errors in stock taking
   • Bar codes
   • Costing sales
   • Inventory turnover ratio
   • Modified general journals for perpetual stock control
   • Valuing stock methods -FIFO, LIFO, Identified cost method, weighted average, etc.
   • Terminology
6. Establishing and Managing Control Accounts
   • Introduction
   • Grouping accounts
   • Advantages of control accounts
   • Debtors control accounts
   • Debtors subsidiary ledger and control account
   • Cash receipts journal and debtors control account
   • Credit purchasers journal
   • Creditors subsidiary ledger and control account
   • Cash payments journal and creditors control account
   • Control accounts relationship to non current assets
   • What happens at the end of assets useful life
   • Assets register
   • Disposal of non current assets
   • Creditors control accounts relationship to subsidiary accounts
   • Control accounts and expenses
   • Control accounts and inventory
7. Budgeting Part 1
   • Introduction
   • Budget types
   • Cash budget
   • Capital budget
   • Sales budget
   • Marketing budget
   • Production budget
   • Expense budget
   • Project budget
   • Master budget
   • Inter-relationships between budgets
   • The cash budget
   • Preparing a cash budget
   • Factoring in safety margins
   • Variable Costs
   • Using net profit to evaluate business performaNCE
   • What is profitability?
   • What is gross profit?
   • What is net profit?
   • Cash flow margin
   • Return on assets margin
   • Gearing ratio
   • Owners equity margin
   • Budgeted profit and loss statements
   • Budgeted balance sheets
   • Variances in budgets
   • Budget reviews and performance reports
8. Budgeting Part 2
   • A problem based learning project (ie. PBL) where you will prepare budgeting for a retail business.
   • PBL project is carefully designed by experts to expose you to the information and skills that we want you to learn.
   • In undertaking the project, you are given:
   • • A statement of the problem (e.g. diseased animal; failing business; anorexia case study);
   • • Questions to consider when solving the problem;
   • • A framework for the time and effort you should spend on the project;
   • • Support from the school.
9. Payroll, PAYG Taxation, Taxation for Trading Businesses
   • How to set up a payroll system
   • Types of payments made for work done
   • Employee records to be kept
   • Other records
   • Fringe benefits and taxation
   • Recording wage payments
   • Employee payment summary
   • PAYG Taxation
   • Using time sheets
   • Superannuation or pension funds
   • Taxation law terminology
   • Tax related expenses
10. Financial Statement Analysis
    • Analysis and interpretation
    • Why do we analyze financial data
    • Using net profit figures to evaluate business performance
    • Analyzing cost centres in business
    • Functional classification on P & L Statement
    • Difference between analysis and interpretation
    • Ratio analysis
    • Trend analysis Vertical analysis
    • Horizontal analysis
    • When should financial data be analyzed
    • Calculating investment returns
    • Return on assets margin, equity margin
    • Cash flow ratio operation
    • Accounts receivable turnover ration
    • Evaluating business performance using net profit ratio
    • Profitability

Each lesson culminates in an assignment which is submitted to the school, marked by the school's tutors and returned to you with any relevant suggestions, comments, and if necessary, extra reading.

Aims

• Outline of the nature of trading businesses and their bookkeeping requirements. Review bookkeeping procedures.
• Describe the selection of bookkeeping processes to suit particular business needs and the advantages and disadvantages of each.
• Describe: cash flow management and cash flow margins and returns on investment, business finance methods, how to manage bad debts and accounts payable procedures.
• Describe the nature of stock and the periodic system used to record inventory.
• Outline various control accounts and their use.
• Outline budgeted reports used in trading businesses and their preparation methods.
• Outline methods used in payroll systems and taxes applicable to payroll; describe a range of taxes applicable to trading businesses.
• Analyse the financial position of a business

Does this sound like you?

This Course is for Trading Businesses

Trading businesses sell things rather than services. They are retailers primary producers and manufacturers, rather than service providers.

The operation of a trading business creates a need to record both the buying and the selling of such goods.  This is in addition to the usual recording needs of the typical service business.

The definition of trading inventory excludes some items which may be sold from time to time by a business.  Non-current assets (fixed assets) such as equipment and vehicles may be sold for a profit at the end of their useful life, however, when such assets are purchased, they are usually purchased with the intention of not reselling the items to generate a profit.  An owner of a business usually buys non-current assets with the intention of owning them for several accounting periods for the purpose of earning income

FINANCING A BUSINESS

When starting a business, it will generally need money to finance it for example fund will be needed for:

• The set-up phase (rent in advance, bonds, office equipment, telephones, computers, staff wages, marketing costs and perhaps the purchase of products you are selling (unless you are setting up a service type business). 
  
  
• To cover day to day running costs, until the business starts to generate a turn-over - and hopefully also a profit. 
  
  

As an example: to set up a furniture showroom, money is needed to rent the showroom, maybe employ staff, buy the furniture, market your business and so on. A lot of capital will be required. 
Less capital may be required to set up small a cleaning business, the proprietor may print off some leaflets about the business and the rates and drop them into letterboxes of houses in the local area. There will have initial costs of buying cleaning materials and equipment. But the cost will be substantially less than opening a furniture business.  
Some businesses will not require much initial funding at all for example a professional writer working from a home office only needs need is a computer, scanner/printer and telephone. There is very little outlay but it will be a lot harder to generate income in the initial phases (until you are better recognized) then when you are selling (say) furniture.

Funding
It is easy to underestimate the amount of money needed to finance a business - and this is the fastest way to failure! 
There are many ways to fund the set-up of a business:

• Use owner’s savings.
• Use owner’s assets (liquidate them).
• Borrow against assets (mortgage or equity release).
• Bank overdraft or loan
• Credit cards
• Business grants
• Private investors
• Borrow from family
• Work in paid work your job until adequate turn-over is generated

No matter how a business is funded it needs:

• Sufficient money to set up the business.
• Sufficient funds to run the business, until it starts to generate income.
• To make enough profit to make the business viable (i.e. continue with the business).

Where and how money is borrowed will depend on what the business plan is, however when taking out large loans from a bank or anyone, ensure that the business is able to to repay the loan. Funding a business by using the equity in a family home can lead to disaster – if the business fails the home may be lost! 

HOW CAN THIS COURSE HELP YOU?