Lecture 12 Financial Issues Dr. Hatem Elaydi ECOM 5368 Engineering Management (Entrepreneurship & ework) Islamic University of Gaza Oct 8, 2016

Government and Legal Requirements 5.7 Basic Records Keeping Government and Legal Requirements Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Income tax Every person (that is carrying on a business or is required to pay or collect taxes) is required to maintain adequate books and records. The records must be maintained for a period of at least six year. Every employer paying remuneration to an employee by him in personable employment must keep records that will enable any contributions payable or any contribution amounts that should have been deducted or paid, to be determined. Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Business corporations records Articles and bylaws, all amendments made, a copy of any unanimous shareholder agreement and any amendment to unanimous shareholder agreement . Minutes of meetings and resolutions of shareholders. Copies of all elections and appointments to directors and notices of change of directors. A securities register showing the names and addresses of all shareholders and the number of shares they hold. Copies of the financial statements. Corporation is also required to maintain adequate internal control to prevent or detect fraud or errors . Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Users of financial information Two types of users: internal and external Directly using accounting information about business enterprises Indirectly using accounting information about business enterprises Owners Financial analysts and advisors Management Stock exchangers Employees lawyers Creditors Regulatory & registration authorities Suppliers Financial press & reporting agencies Taxing and regulatory Trade associations authorities Labor unions customers Public at large Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Branches of accounting Financial accounting: is directed towards providing information to outsiders such as shareholders and creditors. Management accounting: is directed towards providing information to assist management in internal decision making. Financial reporting provides relevant information to external users that is: Useful in investment and credit decisions, Useful in assessing cash flow prospects, About enterprise resources, claims to those resources and changes in them. Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Branches of accounting management accounting contributes to four major processes: Managerial planning and control, Preparation of financial statements for distribution to outsiders, Preparation of business income tax returns, Determination of reimbursable amounts under cost-based contracts or similar pricing or funding arrangements. Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Accounting process Transactions (exchange of resources between parties) Accounts (assets, liabilities, revenues, expense, and capital) Real and nominal accounts Real (asset, liability, equity) appear on the balance sheet Nominal – temporary (revenues and expenses) appear on the income statement and are periodically closed. Ledgers: books or printouts of final entries containing the general ledger or subsidiary ledger. General ledger: collection of all asset, liability, equity, revenues, and expenses accounts. Subsidiary ledger: group of accounts with details related to specific ledger. Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Original entries: first accounting records of transactions. Journals: books of original entry with all transactions are initially recorded and summarized. General journals: books of original entry not used before for specialized journals. Posting: mechanically transferring facts and figures from journals to accounts in a ledger. Trial balances: lists of all open accounts in the ledger Adjusting entries: entries made to the general journal Closing entries: transferring balances from nominal to capital accounts Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Multipurpose synoptic journal Double entry: two sides – debit and credit Revenues and expenses: one column for – office supplies, utilities, professional fees, … Capital items versus ordinary expenses: longer than a year – capital , less than $200 ordinary Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Other journals and ledgers Subsidiary ledgers: account payable and accounts receivable. Specialized journals: cash payment journal, purchase journal, sales journal, cash receipt journal Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Other bookkeeping Petty cash Daily cash reconciliation Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

5.8 manage inventory Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Manage inventory Determine model assortment ---image, choices, product mix Examine and assess sales projection Determine shipping and receiving times Consider spoilage Consider inventory terms Consider markdowns Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

5.9 Selling on credit Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Types of credit Open accounts Revolving accounts Installment accounts Budget accounts Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

5.10 Assess Risks & Business Problems Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Creative problem solving Accept the situation Analyze the situation Define the problem Generate various solutions Select the solution Implement the solution Evaluate Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship