Creating an Accounting System for your VEI Firm

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Creating an Accounting System for your VEI Firm Summer 2015 Presented by: Nick Chapman,

Creating an Accounting System for your VEI Firm Summer 2015 Presented by: Nick Chapman, National Program Director

General accounting practices in the Virtual Enterprise • Prepare a budget • Keep records

General accounting practices in the Virtual Enterprise • Prepare a budget • Keep records of all transactions o Using the accounting journals • Oversight & Internal Controls • Using the Webinars • Using the journals to prepare financial statements o Cash Budget o Income Statement o Balance Sheet • Year-end reporting using the Firm Financial Data Form An Overview of the VEI Program veinternational. org

Financing the Enterprise • Debt vs. Equity Financing • Non-VE Sales • The Balance

Financing the Enterprise • Debt vs. Equity Financing • Non-VE Sales • The Balance Sheet http: //prezi. com/4 b 0 mpbgw-ccx/the-balancesheet/? utm_campaign=share&utm_medium=co py COMPLETE THE BUSINESS REGISTRATION FORM TO APPLY FOR STARTUP FUNDING VEI PORTAL / SUBMITTAL FORMS An Overview of the VEI Program veinternational. org

The Balance Sheet Assets Cash Accounts Receivable Fixed Assets Computers/Equipment/Furniture _________________ Liabilities Accounts Payable

The Balance Sheet Assets Cash Accounts Receivable Fixed Assets Computers/Equipment/Furniture _________________ Liabilities Accounts Payable Loan Payable Shareholders’ Equity Common Stock Retained Earnings An Overview of the VEI Program veinternational. org

Financial Statements Cash Budget – a record of when money comes in and out

Financial Statements Cash Budget – a record of when money comes in and out of the account (Cash basis of accounting) Income Statement – a statement of earnings that books when revenues or expenses occur (Accrual basis of accounting) Balance Sheet – what your financial position looks like on a given day in time (Statement of financial position) An Overview of the VEI Program veinternational. org

Cash Budget Description Cash balance at beginning of period: Receipts of cash: Sales Receipts

Cash Budget Description 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 Salaries Accounts payable Rent Advertising/ promotion Payroll tax Insurance Accounting and legal fees Utilities Loan Payment Pension, 401(k) Freight out Sales tax Other or miscellaneous Corporate tax Total payments Cash balance at end of period Net increase or decrease in cash FY 2013 -2014 TOTALS 0 0 (wholesale marketplace) (net pay on payroll register) (regional office) (other VEI firms) (from payroll register & 941 form) (other VEI firms or regional office) (loan payment table) (from payroll register + emp. cont. ) (have you researched shipping fees? ) VEI Sales Tax is 7% of sales (Nationally) (paid at the end of the year) An Overview of the VEI Program veinternational. org 0 0 0

Cash vs. Accrual When the money is received or paid When the transaction takes

Cash vs. Accrual When the money is received or paid When the transaction takes place or when a service is used Accrual – Income Statement Cash – Cash Budget Month 1 2 3 Receipts Cash Receipts Month 1 2 3 2, 000 2, 00 0 Revenues 1, 500 0 3, 50 0 Payments Internet Sales Expenses Insurance 1, 000 0 0 Utilities 4, 750/8 … Insurance 1, 000/12 … Utilities 4, 750/12 … 4, 750/12 Utilities= $4, 750 for 12 months of use, payable in 8 monthly installments • For another explanation, visit the Khan Academy: https: //www. khanacademy. org/economics-finance-domain/core-finance/accounting-andfinancial-stateme

Income Statement For the period May 1, 2014 – April 30, 2015 - Revenue

Income Statement For the period May 1, 2014 – April 30, 2015 - Revenue “Statement of Earnings” • What is your projected revenue? Cost of Goods Sold • Projected operating expenses? • How much profit or loss does your Gross Profit firm project to have this year? Total Operating Expenses. GROSS MARGIN %: • Provide details - Income from Operations Corporate Tax Net Income After tax 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. An Overview of the VEI Program veinternational. org

Income Statement OCT Sales revenues Source of Sales (ex. Online) Source of Sales (ex.

Income Statement OCT Sales revenues Source of Sales (ex. Online) Source of Sales (ex. Trade Show) Source of Sales (ex. Non-VE Sales) Total sales revenues Cost of goods sold or services provided Interest Supplies Utilities Other DEC JAN Taken from Sales Journal 0 0 0 FEB MAR APR 0 0 0 What is your firm’s Gross Margin? Apply the gross margin to your sales to determine COGS 0 Gross profit Operating expenses Salaries Rent Depreciation Payroll tax Advertising Promotion Insurance Pension or 401(k) NOV 0 0 0 TOTAL 0 0 0 0 “Gross Pay” from Payroll Register From your lease Taken from the Asset Log 7. 65% of Gross Pay (this is the firm’s contribution to Social Security & Medicare) Total amount of the insurance policy divided by 12 months (ACCRUAL) Taken from the Payroll Register This is only the interest portion of your loan payment (Found on the Amortization Table) 8 monthly payments based on 12 months of use Total operating expenses 0 0 0 0 Net income before taxes Corporate income tax 0 0 0 ONLY OWED IF NET INCOME IS POSITIVE!!! 0 0 0 0 0 Income from operations Other revenues/gains and expenses/losses 0 0 0 VEI Program An Overview of the 0 0 veinternational. org 0 0

Balance Sheet LIABILITIES ASSETS = + SHAREHOLDER’S EQUITY An Overview of the VEI Program

Balance Sheet LIABILITIES ASSETS = + SHAREHOLDER’S EQUITY An Overview of the VEI Program veinternational. org

The Balance Sheet Liabilities and Stockholders' Equity Assets Current Assets Cash From Bank Account

The Balance Sheet Liabilities and Stockholders' Equity Assets Current Assets Cash From Bank Account Investments in stocks Accounts receivable From Sales Journal/Acc Rec. Merchandise inventory From Inventory Log Supplies Estimate Total Current Assets Fixed Assets Computers Less: accumulated depreciation Furniture and fixtures Less: accumulated depreciation Office equipment Less: accumulated depreciation Total Fixed Assets Total Assets - = Original Value How much value has it lost over its life? Original Value Current Liabilities Accounts payable Sales tax payable Salaries payable Payroll tax payable 401(k) payable Other payable Corporate tax payable Total Current Liabilities Who do you owe? Sales Tax Reporting April Salaries? April Payroll Tax Did you make a profit? 0 Long Term Liabilities Loan payable Loan Payment table Total Liabilities Stockholders' Equity Paid-in capital Common stock, $10 par value, * # shares issued Seed money Additional paid-in-capital In excess of par value Was your firm certified? Retained earnings ”Plug” number Original Value Total Stockholders' Equity 0 0 An Overview of the VEI Program Total Liabilities and veinternational. org Stockholders' Equity 0

Session Debrief / Q & A An Overview of the VEI Program veinternational. org

Session Debrief / Q & A An Overview of the VEI Program veinternational. org

General accounting practices in the Virtual Enterprise • Prepare a budget • Keep records

General accounting practices in the Virtual Enterprise • Prepare a budget • Keep records of all transactions o Using the accounting journals • Oversight & Internal Controls • Using the Webinars • Using the journals to prepare financial statements o Cash Budget o Income Statement o Balance Sheet • Year-end reporting using the Firm Financial Data Form An Overview of the VEI Program veinternational. org

ACTIVITY: Using the Accounting Journals Go to: portal. veinternational. org Accounting & Finance “Webinars”

ACTIVITY: Using the Accounting Journals Go to: portal. veinternational. org Accounting & Finance “Webinars” “Basics of the Accounting Journals” An Overview of the VEI Program veinternational. org