1. Developing an Accounting System for your VE firm
Tuesday, July 11, 11:00 AM
Presented by: Teri Jones & Chi Zhang

4. Agenda Accounting Journals (Reference Files, Accounting Journals)
Cash Budget (Task 1 & 2)
Making Projections  Income Statement
Financing the Business  Balance Sheet
Cash vs. Accrual Basis
Beginning of the Year Financing

5. Journals Cash Receipts and Payments Journal Inventory Record
WHY? To keep more accurate records WHAT? A system with checks and balances to help avoid mistakes
Cash Receipts and Payments Journal
Inventory Record
Payroll Register
Sales Journal
Loan Payment Table
Purchases Journal
Found on the Portal / Accounting & Finance / Reference Files

6. Cash Journal

7. Cash Task: Cash Receipts and Payments
WHY? To determine if cash balance is sufficient for operations.
WHAT? Basic Sections of Financial Statement are:
Beginning Balance,
cash in,
cash out,
ending balance
Task: Cash Receipts and Payments
Prepare a record of all money coming in and going out of the bank account
Itemized by type (See “Cash Budget”)

8. Cash Budget Description FY 2016-2017 TOTALS
Cash balance at beginning of period:
Receipts of cash:
Sales
Receipts of accounts receivable
Loan proceeds
Other
Total receipts
Beginning balance + cash receipts
Payments:
Cost of merchandise
(wholesale marketplace)
Salaries
 (net pay on payroll register)
Accounts payable
Rent
 (regional office)
Advertising/ promotion
 (other VEI firms)
Payroll tax
(from payroll register & 941 form)
Insurance
 (other VEI firms or regional office)
Accounting and legal fees
Utilities
Loan Payment
 (loan payment table)
Pension, 401(k)
 (from payroll register + emp. cont.)
Freight out
 (have you researched shipping fees?)
Sales tax
 VEI Sales Tax is 7% of sales (Nationally)
Other or miscellaneous
Corporate tax
 (paid at the end of the year)
Total payments
Cash balance at end of period
Net increase or decrease in cash

9. Projections Budget/Expenses Sales Projections Break-Even Analysis
WHY? To estimate profit, cash needs
WHAT? A realistic, researched, educated guess
Budget/Expenses
Monthly Expenses – Rent/Payroll/Utilities
One-time expenses – Furniture/Equipment/Initial Inventory
Sales Projections
(Sales & Marketing/Reference Files)
Break-Even Analysis
COGS
Profit/Loss (Income Statement)

10. Income Statement For the period May 1, 2016 – April 30, 2017
Revenue
- Cost of Goods Sold
Gross Profit
- Total Operating Expenses
Provide details
Income from Operations
- Corporate Tax
Net Income After tax
“Statement of Earnings”
What is your projected revenue?
Projected operating expenses?
How much profit or loss does your firm project to have this year?
GROSS MARGIN %:
Gross Profit/ Revenue = Gross Margin
The % of revenue that you keep after COGS.
PROFIT MARGIN %:
Net Income/Revenue = Profit Margin
The % of revenue that you keep after all expenses and taxes.

11. Income Statements “Fiscal Year by Month” = Year End & Projections

12. Use P&L Projections to assist with Pro-forma Cash Flow

13. Financing the Enterprise
WHY? To assure enough cash is on hand for successful operations
WHAT? Borrowing money or increasing owner’s equity (or out-of-network sales for VE)
Debt vs. Equity Financing
Non-VE Sales
The Balance Sheet
COMPLETE THE BUSINESS REGISTRATION FORM TO APPLY FOR STARTUP FUNDING
VE PORTAL / SUBMITTAL FORMS

15. Finance  Beginning of the Year
Business Registration Form
Startup Budget Worksheet
Monthly expenses & One-time expenses
Seed Money
All new firms receive $20,000 in seed funding from the VE National Office in exchange for 2,000 shares of company stock ($10 par value per share).
Create Initial Balance Sheet
Additional Cash to Support Operations
Use Capital Needs Flowchart & Fulfill requirements and Submit request
As the Year Continues:
Update Balance Sheet
Manage the Bank Account
Monitor and Record Cash Received
Make and Record Cash Payments

16. + = ASSETS Balance Sheet LIABILITIES SHAREHOLDER’S EQUITY
WHY? To Show Owner’s Equity
WHAT? Uses the Accounting Equation:
Assets = Liabilities + Shareholders’ Equity
LIABILITIES + =
ASSETS
SHAREHOLDER’S
EQUITY

17. How Does Equity Grow (or shrink)?
What will happen to your assets (cash, inventory, equipment) over the course of the year?
How to show changes in equity?
Retained Earnings
Assets = Liabilities + (Shareholders’ Equity + Retained Earnings)
Retained Earnings = Assets - Liabilities - Shareholders’ Equity

18. Balance Sheet:
Accounting & Finance/Reference Files/Financial Statement Templates with Explanations

19. Cash vs. Accrual Accounting
WHAT? Using accounting that will either log records according to when the cash is spent or received (CASH BASIS) or According to when the expense/income was incurred (ACCRUAL BASIS).
WHY?
One is easier (Cash) and one more accurate for the time period (Accrual)
Once a company chooses either Cash or Accrual system, there is no changing.

20. Accrual – Income Statement
Cash vs. Accrual
Accrual – Income Statement
Cash – Cash Budget
When the transaction takes place or when a service is used
When the money is received or paid
Month 1 2 3
Receipts
Cash Receipts
1,500
3,500
Payments
Insurance
1,000
Utilities
4,750/8 …
Month 1 2 3
Revenues
Internet
Sales
2,000
Expenses
Insurance
1,000/12 …
Utilities
4,750/12
Utilities= $4,750 for 12 months of use, payable in 8 monthly installments
For another explanation, visit the Khan Academy:

21. Review: General accounting practices in VE
Prepare a budget
Keep records of all transactions
Using the accounting journals
Oversight & Internal Controls
Using the Webinars
Using the journals to prepare & Update financial statements
Cash Budget
Income Statement
Balance Sheet
Year-end reporting in the Annual Report

22. ACTIVITY: Using the Accounting Journals
Go to:
portal.veinternational.org
Accounting & Finance/task 1 & 2
Reference Files/Payroll Register (or with instructions)
Videos/Basics of the Accounting Journals/Reference Files/Payroll #1

23. Engage Various Company Departments:
Cash Payments and Receipts Journal (Finance Dept.)
Payroll Register (w/ HR Dept.)
Sales Journal (w/ Sales & Marketing)
Keep Good Records:
Purchases Journal
Inventory Log
Asset Log
Loan Payment Table

24. Go to veinternational.org to join the transformation.

25. Financial Statements Cash Flow Statement Income Statement
Balance Sheet
Break-Even Analysis (for Business Plan)