Developing an Accounting System for

your VE firm
Tuesday, July 11, 11:00 AM
Presented by: Teri Jones & Chi Zhang
Agenda
• Accounting Journals (Refere nce 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
 Journals WHY? To keep more accurate records
WHAT? A system with checks and balances
to help avoid mistakes

• Cash Receipts and • Inventory Record

Payments Journal • Payroll Register
• Sales Journal • Loan Payment Table
• Purchases Journal

Found on the Portal / Accounting & Finance / Reference Files

Cash Journal
Cash 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”)
 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 0
Beginning balance + cash receipts 0
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 (other VEI firms or regional office)
Utilities (other VEI firms or regional office)
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 0
Cash balance at end of period 0
Net increase or decrease in cash 0
Projections 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
• (S ale s & Marketing/Refere nce Files)
• Break-Even Analysis
• COGS
• Profit/Loss (Income State me nt)
Income Statement
For the period May 1, 2016 – April 30, 2017
Revenue “ S tatement 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 GROS S MARGIN %:

• Provide details Gross Profit/ Revenue = Gros s Margin
•The % of revenue that you keep after
Income from Operations COGS.

- Corporate Tax PROFIT MARGIN %:

Net Income/Revenue = Profit Margin
Net Income After tax •The % of revenue that you keep after all
expenses and taxes.
Income Statements
“Fiscal Year by Month” = Year End & Projections
Use P&L Projections to assist with Pro-forma Cash Flow
 Financing the WHY? To assure enough cash is on
hand for successful operations
Enterprise 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 BUSINES S REGIS TRATION FORM TO
APPLY FOR S TARTUP FUNDING
VE PORTAL / S UBMITTAL FORMS
 Finance → Beginning of the Year
✓Bus ines s 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 S heet
✓Additional Cas h to S upport Operations
✓Use Capital Needs Flowchart & Fulfill requirements and Submit request

As the Year Continues :

✓Update Balance S heet
✓Manage the Bank Account
✓Monitor and Record Cash Received
✓Make and Record Cash Payments
 Balance Sheet
WHY? To Show Owner’s Equity
WHAT? Uses the Accounting Equation:
Assets = Liabilities + Shareholders’ Equity

LIABILITIES

AS S ETS = +
SHAREHOLDER’S
EQUITY
http://prezi.com/4b0mpbgw-ccx/the-balance-sheet/?utm_campaign=share&utm_medium=copy
 How Does Equity Grow (or shrink)?
What will happe n to your assets (cash, inventory,
e quipment) over the course of the ye ar?

How to show changes in equity?

Retained Earnings
Assets = Liabilities + (Shareholders’ Equity + Retained
Earnings)
Retained Earnings = Assets - Liabilities - Shareholders’
Equity
Balance Sheet:

Accounting & Finance/Refere nce

Files/Financial State me nt
Te mplates with Explanations
 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?
1. One is easier (Cash) and one more accurate for the time period
(Accrual)
2. Once a company chooses either Cash or Accrual system, there
is no changing.
 Cash vs. Accrual
Cash – Cash Budget Accrual – Income Statement
When the transaction takes place or
When the money is received or paid when a service is used

Month 1 2 3 Month 1 2 3
Receipts Revenues
Cas h 1,500 0 3,500 Internet 2,000 2,000 2,00
Receipts S ales 0

Payments Expens es
Insurance 1,000 0 0 Insurance 1,000/12 1,000/12 …
Utilities 4,750/8 4,750/8 … Utilities 4,750/12 4,750/12 …

Utilities = $4,750 for 12 months of us e, payable in 8 monthly installments

•For another explanation, vis it the Khan Academy:
https : //www.khanacademy.org/ec onomics -finance-domain/core-finance/accounting-and-
financial-s tateme
Review: General accounting practices in VE
• Prepare a budget
• Keep records of all transactions
o Using the accounting journals
• Oversight & Internal Controls
• Using the Webinars
• Using the journals to prepare & Update financial
statements
o Cash Budget
o Income Statement
o Balance Sheet
• Year-end reporting in the Annual Report
ACTIVITY:
Using the Accounting Journals
• Go to:
• portal.veinternational.org
1. Accounting & Finance/task 1 & 2
2. Reference Files/Payroll Register (or with instructions)
3. Videos/Basics of the Accounting Journals/Reference
Files/Payroll #1
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
Go to veinternational.org to join the transformation.
Financial Statements
• Cash Flow Statement
• Income Statement
• Balance Sheet

• Break-Even Analysis (for Business Plan)