Grow your business by better financial management and accounting - PowerPoint PPT Presentation

Grow your business by better financial management and accounting for SME 4 October 2016 GNZ Business Alliances

BUSINESS IS A SEPARATE ENTITY Owners Others BUSINESS Directors Mgmt/ Staff GNZ Business Alliances

BUSINESS CYCLE Customer Dividend/ Drawings Sales Cash Owners Funds Product Supplier GNZ Business Alliances

PARTS OF A BUSINESS FRONT-END MIDDLE PART BACK-END • Sales/Marketing • Operations • Data entry • End Products • Raw Materials • Accounting • Services • Suppliers • Finance • Customers • Inventory • Reports finance and accounting need to integrate all processes in a business GNZ Business Alliances

BUSINESS CONTINUITY/SURVIVAL - Satisfactory business - Satisfactory business - Able to generate - Able to generate position position required business profit required business profit - and to pay obligation - and to pay obligation - measured for a pre- - measured for a pre- as it falls due as it falls due defined time period defined time period BUSINESS BUSINESS CONTINUITY/ CONTINUITY/ SURVIVAL SURVIVAL Balance Sheet provides information on the first condition Profit & Loss provides information on the second condition GNZ Business Alliances

BALANCE SHEET : business position • snapshot at a point in time DEFINITION: • business control over resources • assets, liabilities & equity DETAILS: • Assets : items of value owned/controlled • Liabilities : amounts owing to external parties • Equity : claims of business owners on the resources GNZ Business Alliances

BALANCE SHEET EQUATION ASSETS = LIABILITES + EQUITY Provides basis for information on business position Information to determine satisfactory financial position and ability to pay its obligation as it falls due GNZ Business Alliances

PROFIT & LOSS : profit position DEFINITION: • pre-defined time period • resources flow • “matching” process CATEGORIES: • Revenue : resource inflow • Expense : resource consumed/outflow • Cost : unconsumed or unexpired cost considered asset GNZ Business Alliances

PROFIT & LOSS : Accrual Accounting Revenue recognised and recorded at a date earlier than when the associated cash is received means profit measured using “accrual accounting” Similarly for Expense GNZ Business Alliances

PROFIT MEASUREMENT PROFIT = REVENUE - EXPENSE Provides basis for information on profit position (P&L) Survival of business dependent on its ability to generate satisfactory business profit measured for a particular period GNZ Business Alliances

EQUATION & CHART OF ACCOUNTS Asset + Expense = Liability + Equity + Revenue Represents groups of items under Chart of Accounts Provides basis for Debit or Credit entry in Accounting System Asset or Expense (on LHS) normally Debit entry Liability or Equity or Revenue (on RHS) normally Credit entry GNZ Business Alliances

ACCOUNTING EQUATION ILLUSTRATION Asset + Expense = Liability + Equity + Revenue Business receives RM20,000 as equity from Business Owners Cash (under Asset) increase : Debit Cash Share Capital (under Equity) increase : Credit Equity LHS = RHS; equation balanced Entry affecting one item to be matched with entry affecting another to keep accounting equation in balance Gives meaning to double-entry book-keeping GNZ Business Alliances

SUMMARY Business require a structured framework for better financial management and accounting to survive and grow GNZ Business Alliances

The End GNZ Business Alliances