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

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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

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

13. 5.8 manage inventory
Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

14. 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

15. 5.9 Selling on credit
Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

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

17. 5.10 Assess Risks & Business Problems
Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship

18. 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

19. Dr. Hatem Elaydi, IUG, Fall 2016, Entrepreneurship