Page 1 of 15 40229 - Transcript 00:00:00 1 00:00:06,166 --> 00:00:08,733 male narrator: To operate a successful business these days, 2 00:00:08,766 --> 00:00:12,330 you need to acquire, absorb, sort, record, 3 00:00:12,660 --> 00:00:16,565 retain, and analyze all sorts of information. 00:00:01 4 00:00:16,600 --> 00:00:19,433 The most important information of any company 5 00:00:19,466 --> 00:00:23,366 is that contained in the financial reports. 00:00:02 6 00:00:23,400 --> 00:00:26,966 Record keeping and how it affects the accounting equation 7 00:00:27,000 --> 00:00:29,566 allows the company owner to make crucial decisions 8 00:00:29,600 --> 00:00:32,133 involving the survival of a business. 00:00:04 9 00:00:32,165 --> 00:00:35,266 This program explores insights from business owners 10 00:00:35,300 --> 00:00:37,800 about how reports are used within their company 11 00:00:37,833 --> 00:00:40,566 for analysis and decision making. 00:00:06 12 00:00:40,600 --> 00:00:44,500 We'll look at an introduction to accounting reports, 13 00:00:44,533 --> 00:00:46,266 reporting for cash, 14 00:00:46,300 --> 00:00:47,700 reporting for profit, 15 00:00:47,733 --> 00:00:50,466 reporting for position in relation to assets, 16 00:00:50,500 --> 00:00:51,800 and reporting for position 17 00:00:51,833 --> 00:00:54,933 in relation to liabilities and owner's equity. 00:00:09 18 00:01:09,833 --> 00:01:11,766 Both small and big businesses 19 00:01:11,800 --> 00:01:14,733 can have hundreds of transactions every week. 00:00:10 20 00:01:14,766 --> 00:01:16,800 An efficient system for organizing 21 00:01:16,833 --> 00:01:19,660 and summarizing transactions is essential 22 00:01:19,100 --> 00:01:21,366 if a business is to effectively keep track 23 00:01:21,400 --> 00:01:23,900 of its financial status. 00:00:12 24 00:01:23,933 --> 00:01:25,700 Bookkeeping is the process 25 00:01:25,733 --> 00:01:27,466 of formally recording the details 26 00:01:27,500 --> 00:01:29,533 of all finances and dealings 27 00:01:29,566 --> 00:01:31,966 in permanent records of books of account. 00:00:14 28 00:01:32,000 --> 00:01:34,366 These records can commonly take the form 29 00:01:34,400 --> 00:01:37,433 of handwritten entries in a series of books 30 00:01:37,466 --> 00:01:39,166 or in suitable computer programs 31 00:01:39,200 --> 00:01:40,966 which perform specialized functions 32 00:01:41,000 --> 00:01:43,500 for different types of transactions. 00:00:16 33 00:01:43,533 --> 00:01:46,000 When the finances are recorded, 34 00:01:46,330 --> 00:01:47,533 they are organized and classified 35 00:01:47,566 --> 00:01:49,466 into the following groups: 36 00:01:49,500 --> 00:01:51,466 cash receipts: 37 00:01:51,500 --> 00:01:54,866 this is cash received by the business from any source; 38 00:01:54,900 --> 00:01:59,660 cash payments or any cash paid out by a business; 39 00:01:59,100 --> 00:02:01,660 https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 2 of 15 credit sales: 40 00:02:01,100 --> 00:02:03,660 these transactions apply to customers 41 00:02:03,100 --> 00:02:05,433 who buy now but pay cash for the sale 42 00:02:05,466 --> 00:02:08,200 at some time in the near future; 43 00:02:08,233 --> 00:02:10,500 credit purchases: 44 00:02:10,533 --> 00:02:12,633 when a business buys goods from suppliers 45 00:02:12,666 --> 00:02:16,200 and pays them at some time in the near future; 46 00:02:16,233 --> 00:02:18,966 sales returns and allowances 47 00:02:19,000 --> 00:02:21,666 are used when customers return items sold to them 48 00:02:21,700 --> 00:02:23,900 for reasons such as damage; 49 00:02:23,933 --> 00:02:26,566 purchases returns and allowances, 50 00:02:26,600 --> 00:02:29,166 which is the mirror image of sales returns, 51 00:02:29,200 --> 00:02:32,600 when a business may need to return stock it has purchased; 52 00:02:32,633 --> 00:02:34,533 and general transactions 53 00:02:34,566 --> 00:02:37,533 that do not fit into any other category. 00:00:27 54 00:02:37,566 --> 00:02:40,400 Businesses separate these transaction types 55 00:02:40,433 --> 00:02:42,700 to provide an orderly day-by-day method 56 00:02:42,733 --> 00:02:44,800 of recording each entry. 00:00:28 57 00:02:44,833 --> 00:02:47,700 Today computers play an integral role 58 00:02:47,733 --> 00:02:49,833 in accounting for business. 00:00:29 59 00:02:49,866 --> 00:02:52,666 Some of the advantages offered by computers 60 00:02:52,700 --> 00:02:55,933 is that the storage of data is reliable and convenient, 61 00:02:55,966 --> 00:02:57,366 they're extremely accurate, 62 00:02:57,400 --> 00:02:58,600 it's quicker, 63 00:02:58,633 --> 00:03:01,400 and of course, financial spreadsheet programs 64 00:03:01,433 --> 00:03:03,566 cut down enormous amounts of downtime 65 00:03:03,600 --> 00:03:06,100 for accounting departments. 00:00:33 66 00:03:06,133 --> 00:03:10,433- The accounting software that I use is QuickBooks, 67 00:03:10,466 --> 00:03:11,866 which can be purchased off the shelf 68 00:03:11,900 --> 00:03:14,100 at any good retailer. 00:00:34 69 00:03:14,133 --> 00:03:18,533 It's-what we do is enter in our daily takings 70 00:03:18,566 --> 00:03:20,533 in QuickBooks. 00:00:35 71 00:03:20,566 --> 00:03:24,433 We also enter in all the bills for our creditors. 00:00:36 72 00:03:24,466 --> 00:03:26,330 It makes life a hell of a lot easier, 73 00:03:26,660 --> 00:03:28,833 as years ago, we used to enter everything 74 00:03:28,866 --> 00:03:30,266 into a daily cash book, 75 00:03:30,300 --> 00:03:33,200 and that cash book was handwritten. 00:00:38 76 00:03:33,233 --> 00:03:37,330 But with computers today and software packages 77 00:03:37,660 --> 00:03:40,166 like QuickBooks or MYOB, 78 00:03:40,200 --> 00:03:42,600 it makes-it saves a hell of a lot of time, 79 00:03:42,633 --> 00:03:46,266 and we can produce timely reports, 80 00:03:46,300 --> 00:03:49,200 which help us run the business. 00:00:40 81 00:03:49,233 --> 00:03:53,833- Bayside Blades has been in operation since May 2003. 00:00:41 82 00:03:53,866 --> 00:03:57,766 In the beginning, it was very much about selling goods. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 3 of 15 00:00:42 83 00:03:57,800 --> 00:04:02,333 And we sell rollerblades, T-shirts, clothing, 84 00:04:02,366 --> 00:04:07,433 helmets, everything that you can buy to do with rollerblading. 00:00:43 85 00:04:07,466 --> 00:04:10,300 We use MYOB Accounting Plus. 00:00:43 86 00:04:10,333 --> 00:04:12,533 And we also use MYOB RetailManager, 87 00:04:12,566 --> 00:04:13,900 which is an external program 88 00:04:13,933 --> 00:04:16,366 to what I use on a regular basis. 00:00:45 89 00:04:16,400 --> 00:04:20,100 The benefit of using it is not having to do it manually 90 00:04:20,133 --> 00:04:23,660 and the ability to be able to produce a report 91 00:04:23,100 --> 00:04:24,266 just by clicking a button, 92 00:04:24,300 --> 00:04:26,466 and you have the information in front of you. 00:00:47 93 00:04:26,500 --> 00:04:31,330- We use a program called Masterpiece. 00:00:47 94 00:04:31,660 --> 00:04:33,900 It basically houses our general ledger 95 00:04:33,933 --> 00:04:36,330 as well as our accounts payable ledger 96 00:04:36,660 --> 00:04:37,633 and our fixed asset register. 00:00:49 97 00:04:37,666 --> 00:04:40,000 So essentially, 98 00:04:40,330 --> 00:04:43,660 it's a database of all of our accounting transactions. 00:00:50 99 00:04:43,100 --> 00:04:45,766 So it ensures that there's integrity 100 00:04:45,800 --> 00:04:48,766 around our postings. 00:00:51 101 00:04:48,800 --> 00:04:51,333 narrator: Financial reporting, or bookkeeping, 102 00:04:51,366 --> 00:04:53,330 should be sorted and categorized 103 00:04:53,660 --> 00:04:56,466 so that similar transactions are grouped together. 00:00:52 104 00:04:56,500 --> 00:04:58,500 Those groups are: 105 00:05:11,400 --> 00:05:12,866 Computer software packages 106 00:05:12,900 --> 00:05:15,466 allow you to access reliable storage data, 107 00:05:15,500 --> 00:05:18,766 making transactions extremely accurate. 00:00:54 108 00:05:18,800 --> 00:05:20,666 They speed up the accounting process 109 00:05:20,700 --> 00:05:23,166 and are cost effective. 00:00:55 110 00:05:37,133 --> 00:05:40,400 Cash transactions are critical for a business, 111 00:05:40,433 --> 00:05:43,833 as there must be cash inflow in order to pay bills. 00:00:57 112 00:05:43,866 --> 00:05:47,000 In simple terms, the statement of cash flows, 113 00:05:47,330 --> 00:05:48,566 or cash flow statement, 114 00:05:48,600 --> 00:05:52,133 is designed to report cash inflow and outflow 115 00:05:52,166 --> 00:05:55,133 of a business. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 4 of 15 00:00:59 116 00:05:55,166 --> 00:05:58,000 Businesses can prepare basic cash flow statements 117 00:05:58,330 --> 00:06:02,330 merely listing all cash receipts and all cash payments. 00:01:00 118 00:06:02,660 --> 00:06:04,933 However, many businesses prepare a classified statement 119 00:06:04,966 --> 00:06:08,533 of cash flow, reporting under three main headings: 120 00:06:16,466 --> 00:06:18,900- Some of the examples of operating activities 121 00:06:18,933 --> 00:06:20,400 would be the income of the business, 122 00:06:20,433 --> 00:06:22,400 so what we expect to sell. 00:01:03 123 00:06:22,433 --> 00:06:26,300 We actually break down each item that we do sell, 124 00:06:26,333 --> 00:06:29,400 so what items are selling better than others. 00:01:04 125 00:06:29,433 --> 00:06:33,766 Also a part of that is also the training of school bookings 126 00:06:33,800 --> 00:06:36,933 and, you know, how much of those school bookings 127 00:06:36,966 --> 00:06:39,300 had actual private lessons as well. 00:01:05 128 00:06:39,333 --> 00:06:42,566- The cash receipts from our sales. 00:01:06 129 00:06:42,600 --> 00:06:45,400 Obviously, being the biggest one, 130 00:06:45,433 --> 00:06:49,766 our payments for our expenses associated with our store. 00:01:07 131 00:06:49,800 --> 00:06:52,000 So rental payments, wage payments, 132 00:06:52,330 --> 00:06:54,633 payments to all of our suppliers, 133 00:06:54,666 --> 00:06:59,400 They would be the main ones in our operating activities. 00:01:09 134 00:06:59,433 --> 00:07:01,866- Well, some examples of some investment activities 135 00:07:01,900 --> 00:07:04,800 would be the purchase of a motor vehicle that we purchased, 136 00:07:04,833 --> 00:07:07,100 I think, about two years ago. 00:01:10 137 00:07:07,133 --> 00:07:10,000 Another investment activity 138 00:07:10,330 --> 00:07:13,733 was a computer lease for some computer equipment. 00:01:11 139 00:07:13,766 --> 00:07:15,766 Rather than actually buying it outright, 140 00:07:15,800 --> 00:07:19,933 we actually lease the equipment over 12 months. 00:01:13 141 00:07:19,966 --> 00:07:23,933- We have long-term assets that we've got to purchase, 142 00:07:23,966 --> 00:07:27,133 being the premises. 00:01:14 143 00:07:27,166 --> 00:07:31,366 We have security gates in our shops 144 00:07:31,400 --> 00:07:33,660 to prevent theft 145 00:07:33,100 --> 00:07:34,466 and movies going. 00:01:15 146 00:07:34,500 --> 00:07:36,800 So all the- 147 00:07:36,833 --> 00:07:39,933 there's an investment in buying security systems. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 5 of 15 00:01:16 148 00:07:39,966 --> 00:07:42,866- Most of our capital expenditure 149 00:07:42,900 --> 00:07:46,166 is around store fit-out for us. 00:01:17 150 00:07:46,200 --> 00:07:48,466 So whenever we lease a new site, 151 00:07:48,500 --> 00:07:50,166 we get the show. 00:01:18 152 00:07:50,200 --> 00:07:54,233 We get contractors in to come and put the carpet down, 153 00:07:54,266 --> 00:07:56,900 put the shelves in. 00:01:19 154 00:07:56,933 --> 00:08:00,666 So all of that, we classify as an investing activity. 00:01:20 155 00:08:00,700 --> 00:08:03,700 One of our biggest outflows 156 00:08:03,733 --> 00:08:06,333 is our investment in store fit-out. 00:01:21 157 00:08:06,366 --> 00:08:09,000 So we do set a budget at the beginning of the year 158 00:08:09,330 --> 00:08:10,933 for our capital expenditure. 00:01:22 159 00:08:10,966 --> 00:08:12,766 We may have a particular day 160 00:08:12,800 --> 00:08:16,100 where we're short on cash 161 00:08:16,133 --> 00:08:17,866 because we have a large amount of creditors 162 00:08:17,900 --> 00:08:19,200 that we need to pay. 00:01:24 163 00:08:19,233 --> 00:08:20,500 So in that sort of scenario, 164 00:08:20,533 --> 00:08:23,233 we might draw on our overdraft for a day. 00:01:25 165 00:08:23,266 --> 00:08:25,166 And then the next day, 166 00:08:25,200 --> 00:08:26,666 we're in a position to repay it 167 00:08:26,700 --> 00:08:29,600 because all of our stores have banked, 168 00:08:29,633 --> 00:08:32,233 so we're flush with cash again. 00:01:26 169 00:08:32,266 --> 00:08:35,800 narrator: Cash-flow crisis is one of the major reasons 170 00:08:35,833 --> 00:08:38,633 why many businesses go under. 00:01:28 171 00:08:38,666 --> 00:08:40,933 It pays to do a few simple things, 172 00:08:40,966 --> 00:08:43,433 such as do checks on new customers, 173 00:08:43,466 --> 00:08:45,500 decide on credit policy, 174 00:08:45,533 --> 00:08:47,500 clearly state payment terms, 175 00:08:47,533 --> 00:08:50,500 bank checks as soon as they are received, 176 00:08:50,533 --> 00:08:52,400 make minimum payments each month, 177 00:08:52,433 --> 00:08:54,330 follow up on late payments. 00:01:31 178 00:08:54,660 --> 00:08:56,330 And if the business needs more cash, 179 00:08:56,660 --> 00:08:57,966 arrange a bank overdraft 180 00:08:58,000 --> 00:09:00,433 or defer necessary payments. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 6 of 15 00:01:33 181 00:09:00,466 --> 00:09:02,400- We can improve cash flow 182 00:09:02,433 --> 00:09:07,866 by extending our creditors' payment terms. 00:01:34 183 00:09:07,900 --> 00:09:12,366 So instead of the longer we can pay creditors 184 00:09:12,400 --> 00:09:14,733 means the more money we've got in our bank. 00:01:35 185 00:09:14,766 --> 00:09:19,566 Also, collecting money quickly off customers that owe you money 186 00:09:19,600 --> 00:09:21,660 helps the cash flow, 187 00:09:21,100 --> 00:09:24,133 because we've got more money coming in than going out. 00:01:36 188 00:09:24,166 --> 00:09:26,466- Advertising the business to different companies. 00:01:37 189 00:09:26,500 --> 00:09:29,833 We do a lot of promotional work through racing. 00:01:38 190 00:09:29,866 --> 00:09:31,733 Two of the directors are actually participants 191 00:09:31,766 --> 00:09:33,600 in a lot of racing in Queensland 192 00:09:33,633 --> 00:09:35,400 and different states. 00:01:39 193 00:09:35,433 --> 00:09:38,266 The other way is by having sales 194 00:09:38,300 --> 00:09:41,433 and actually contacting people directly 195 00:09:41,466 --> 00:09:44,233 and saying, "Are you interested in this particular item 196 00:09:44,266 --> 00:09:45,600 that's up for sale?" 197 00:09:46,800 --> 00:09:48,660 narrator: A cash flow statement 198 00:09:48,100 --> 00:09:52,660 reports the cash inflow and outflow of a business. 00:01:42 199 00:09:52,100 --> 00:09:57,233 The three activities it reports are cash flow from operating, 200 00:09:57,266 --> 00:09:59,333 cash flow from investment, 201 00:09:59,366 --> 00:10:03,000 and cash flow from financing. 00:01:44 202 00:10:03,330 --> 00:10:05,566 To improve cash flow and stay afloat, 203 00:10:05,600 --> 00:10:08,133 business owners can do a number of things, 204 00:10:08,166 --> 00:10:11,400 including: make checks on new customers, 205 00:10:11,433 --> 00:10:13,900 make minimum payments each month, 206 00:10:13,933 --> 00:10:15,800 follow up on late payments, 207 00:10:15,833 --> 00:10:16,900 or if needed, 208 00:10:16,933 --> 00:10:20,600 seek assistance from a financial advisor. 00:01:47 209 00:10:34,733 --> 00:10:37,766 The profit and loss statement is an historical record 210 00:10:37,800 --> 00:10:40,333 of profits and losses that have occurred in a business 211 00:10:40,366 --> 00:10:43,633 by subtracting expenses from revenue. 00:01:49 212 00:10:43,666 --> 00:10:45,933 The importance of this document 213 00:10:45,966 --> 00:10:47,100 is that it forces the owner 214 00:10:47,133 --> 00:10:49,633 to spell out financial objectives 215 00:10:49,666 --> 00:10:53,833 and frames an action plan to achieve those objectives. 00:01:51 216 00:10:53,866 --> 00:10:57,133 It reveals whether returns are capable of being achieved 217 00:10:57,166 --> 00:11:00,766 and establishes targets for management and employees, 218 00:11:00,800 --> 00:11:02,800 which enables the owner to have more control 219 00:11:02,833 --> 00:11:05,700 over sales and expenses. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 7 of 15 00:01:53 220 00:11:05,733 --> 00:11:07,866- The importance of having a profit and loss statement 221 00:11:07,900 --> 00:11:10,666 is so that we can see where the business is at, 222 00:11:10,700 --> 00:11:14,266 see what-if we've made a profit for the year, 223 00:11:14,300 --> 00:11:19,600 how the actuals have worked out for the current year, 224 00:11:19,633 --> 00:11:22,433 and to see if-you know, if we can compare 225 00:11:22,466 --> 00:11:24,400 previous profit and loss statements. 00:01:57 226 00:11:24,433 --> 00:11:25,633 If we have them side by side, 227 00:11:25,666 --> 00:11:28,133 we can see where we've gone better or worse 228 00:11:28,166 --> 00:11:30,933 in current subsequent years. 00:01:58 229 00:11:30,966 --> 00:11:34,200- Well, the benefit of the P and L 230 00:11:34,233 --> 00:11:36,666 is that you can see at a quick glance 231 00:11:36,700 --> 00:11:38,666 how the business has performed, 232 00:11:38,700 --> 00:11:40,433 how you've derived your results. 00:02:00 233 00:11:40,466 --> 00:11:44,766 So was it higher sales than you expected? 00:02:01 234 00:11:44,800 --> 00:11:48,266 Was it because you spent less on your expenses? 00:02:01 235 00:11:48,300 --> 00:11:51,566 If we did spend more on expenses compared to budget, 236 00:11:51,600 --> 00:11:54,133 is there anything we can do to improve that situation 237 00:11:54,166 --> 00:11:56,660 going forward? 00:02:03 238 00:11:56,100 --> 00:11:58,666 narrator: The starting point for a profit and loss statement 239 00:11:58,700 --> 00:12:00,400 is the revenue. 00:02:04 240 00:12:00,433 --> 00:12:02,900 This sets out the cash sales or credit sales 241 00:12:02,933 --> 00:12:06,266 that have occurred during a particular period. 00:02:05 242 00:12:06,300 --> 00:12:09,500- Some of the factors that we take into account 243 00:12:09,533 --> 00:12:14,633 when forecasting our sales on a global basis, firstly, 244 00:12:14,666 --> 00:12:19,400 it is how many stores do we have set to open 245 00:12:19,433 --> 00:12:21,100 in the coming year, 246 00:12:21,133 --> 00:12:24,233 as well as how many existing stores do we have? 00:02:08 247 00:12:24,266 --> 00:12:29,000 We also have a look at fashions and what impact that will have 248 00:12:29,330 --> 00:12:32,933 on the type of product mix we have in the stores. 00:02:09 249 00:12:32,966 --> 00:12:35,533 narrator: It may be necessary for price increases, 250 00:12:35,566 --> 00:12:37,633 delivery charges, insurance, 251 00:12:37,666 --> 00:12:39,800 but the relationship between the cost price 252 00:12:39,833 --> 00:12:41,866 and selling price is essential, 253 00:12:41,900 --> 00:12:45,400 as this determines gross profit. 00:02:12 254 00:12:45,433 --> 00:12:50,833- Working at cost of sales, we work on percentages. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 8 of 15 00:02:12 255 00:12:50,866 --> 00:12:54,330 So we'd like to think that- 256 00:12:54,660 --> 00:12:55,900 we like to look at our margins 257 00:12:55,933 --> 00:12:59,633 in calculating our gross profit. 00:02:14 258 00:12:59,666 --> 00:13:02,766 And, you know, we like to look at margins in the region of, 259 00:13:02,800 --> 00:13:04,330 say, 20%. 00:02:15 260 00:13:04,660 --> 00:13:07,566 So these margins that we work on... 00:02:15 261 00:13:07,600 --> 00:13:10,800 And you need to look at averaging margins, 262 00:13:10,833 --> 00:13:12,900 'cause some movies you can make more money on, 263 00:13:12,933 --> 00:13:14,166 some you make less on. 00:02:17 264 00:13:14,200 --> 00:13:16,166 So we need to blend those margins 265 00:13:16,200 --> 00:13:20,133 so I can average about 20%, 25%. 00:02:18 266 00:13:20,166 --> 00:13:22,333 narrator: When preparing profit and loss, 267 00:13:22,366 --> 00:13:24,833 a range of aspects come into the thinking, 268 00:13:24,866 --> 00:13:27,330 such as changes in levels of sales, 269 00:13:27,660 --> 00:13:30,466 increases in wages or award rates for employees, 270 00:13:30,500 --> 00:13:32,166 and expansion of any administration 271 00:13:32,200 --> 00:13:34,866 or equipment facilities. 00:02:21 272 00:13:34,900 --> 00:13:38,233 Other expenses might include paying off bad debts 273 00:13:38,266 --> 00:13:41,100 or interest incurred from borrowing money. 00:02:22 274 00:13:41,133 --> 00:13:42,700- Some of the things we take into account 275 00:13:42,733 --> 00:13:47,166 for our operating expenses include, I guess, usage. 00:02:23 276 00:13:47,200 --> 00:13:53,166 At a store level, we have a look at how we're using, for example, 277 00:13:53,200 --> 00:13:56,600 the bags that we use to put our product into. 00:02:25 278 00:13:56,633 --> 00:14:00,466 So first of all, we'll look at the make of the bag. 00:02:25 279 00:14:00,500 --> 00:14:05,660 Should we be using a certain type of- 280 00:14:05,100 --> 00:14:06,700 if it's a fabric bag, 281 00:14:06,733 --> 00:14:08,333 should we be using a certain type of fabric 282 00:14:08,366 --> 00:14:09,366 versus another? 00:02:27 283 00:14:09,400 --> 00:14:10,766 What's cheaper? 00:02:28 284 00:14:10,800 --> 00:14:12,733 At the same time, we have to maintain the balance 285 00:14:12,766 --> 00:14:17,366 between the brand and what we want to say to our customers 286 00:14:17,400 --> 00:14:20,966 as well as doing it at a cost-effective price. 00:02:29 287 00:14:21,000 --> 00:14:24,833 narrator: If results fall short of weekly or monthly targets, 288 00:14:24,866 --> https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 9 of 15 00:14:28,366 it will necessary to investigate the problematic causes 289 00:14:28,400 --> 00:14:31,666 and plan better so a business can better meet its targets 290 00:14:31,700 --> 00:14:33,666 for the end of the financial year. 00:02:32 291 00:14:33,700 --> 00:14:37,433 The profit and loss statement sets financial targets 292 00:14:37,466 --> 00:14:39,133 and formulates an action plan 293 00:14:39,166 --> 00:14:41,833 to achieve those targets. 00:02:33 294 00:14:41,866 --> 00:14:43,833 Net profit is calculated 295 00:14:43,866 --> 00:14:47,633 by subtracting expenses from revenue. 00:02:34 296 00:14:47,666 --> 00:14:51,166 It's vital to minimize expenses or maximize sales 297 00:14:51,200 --> 00:14:52,633 in a financial year. 00:02:35 298 00:14:52,666 --> 00:14:54,833 Otherwise, the owner has to bear the cost, 299 00:14:54,866 --> 00:14:57,933 which could result in bankruptcy. 00:02:36 300 00:15:13,133 --> 00:15:14,966 Assessing the financial stability 301 00:15:15,000 --> 00:15:16,733 of a business for the future 302 00:15:16,766 --> 00:15:20,300 is what is known as "reporting for position." 303 00:15:20,333 --> 00:15:21,900 The use of the balance sheet 304 00:15:21,933 --> 00:15:23,733 reports all assets and equities 305 00:15:23,766 --> 00:15:25,866 at a given point in time. 00:02:39 306 00:15:25,900 --> 00:15:28,166 Assets are those things of value 307 00:15:28,200 --> 00:15:29,466 which are owned by your business 308 00:15:29,500 --> 00:15:33,100 and which it uses to earn income. 00:02:41 309 00:15:33,133 --> 00:15:34,900- Types of assets we have on our balance sheet 310 00:15:34,933 --> 00:15:36,166 include cash-up bank. 00:02:42 311 00:15:36,200 --> 00:15:39,166 We've got lay-by debtors. 00:02:42 312 00:15:39,200 --> 00:15:43,166 We've got the cost of the fit-out of our stores, 313 00:15:43,200 --> 00:15:45,233 the equipment in our stores. 00:02:43 314 00:15:45,266 --> 00:15:47,633 We've got some motor vehicles in our books. 00:02:44 315 00:15:47,666 --> 00:15:49,933 All of our regional managers 316 00:15:49,966 --> 00:15:52,133 need to have a car to do their job 317 00:15:52,166 --> 00:15:53,733 and drive from one store to another. 00:02:45 318 00:15:53,766 --> 00:15:56,500 narrator: In order to allow better analysis 319 00:15:56,533 --> 00:15:58,900 of the types and distribution of assets, 320 00:15:58,933 --> 00:16:01,833 they are generally classified into two groups: 321 00:16:01,866 --> 00:16:05,233 current assets and non-current assets. 00:02:48 322 00:16:05,266 --> 00:16:08,233 Current assets are those which are already, 323 00:16:08,266 --> 00:16:12,133 or likely to include, petty cash within the next 12 months. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 10 of 15 00:02:49 324 00:16:12,166 --> 00:16:14,666 It would include things such as petty cash, 325 00:16:14,700 --> 00:16:16,000 cash at the bank, 326 00:16:16,330 --> 00:16:19,500 debtors, and stock. 00:02:50 327 00:16:19,533 --> 00:16:23,333 Non-current assets are those which a business intends to keep 328 00:16:23,366 --> 00:16:26,466 in a non-cash form for longer than 12 months. 00:02:51 329 00:16:26,500 --> 00:16:29,266 These assets, with a longer life, 330 00:16:29,300 --> 00:16:31,700 will include vehicles, machinery, 331 00:16:31,733 --> 00:16:36,100 premises, or loans repayable to your business over a long term. 00:02:53 332 00:16:36,133 --> 00:16:38,400- In simple terms, the importance of having assets 333 00:16:38,433 --> 00:16:40,466 is that it can be converted into cash. 00:02:54 334 00:16:40,500 --> 00:16:43,600 And we need cash to keep investing 335 00:16:43,633 --> 00:16:44,833 in our business 336 00:16:44,866 --> 00:16:46,700 and to pay for operating- 337 00:16:46,733 --> 00:16:49,700 to pay for operating expenses and to invest further 338 00:16:49,733 --> 00:16:51,966 to keep growing our business. 00:02:57 339 00:16:52,000 --> 00:16:54,330 narrator: All accounting reports, 340 00:16:54,660 --> 00:16:55,600 such as the balance sheet, 341 00:16:55,633 --> 00:16:58,330 have a heading featuring the name of the business 342 00:16:58,660 --> 00:17:00,866 and the date which it applies. 00:02:59 343 00:17:00,900 --> 00:17:03,166 Category headings, such as assets, 344 00:17:03,200 --> 00:17:06,500 and subgroup headings, such as current and non-current, 345 00:17:06,533 --> 00:17:08,533 are necessary to ensure that the report 346 00:17:08,566 --> 00:17:11,800 provides as much information as possible. 00:03:01 347 00:17:13,266 --> 00:17:16,500 Reporting for position is the future financial assessment 348 00:17:16,533 --> 00:17:18,330 of your business. 00:03:02 349 00:17:18,660 --> 00:17:20,000 This is done through a balance sheet, 350 00:17:20,330 --> 00:17:22,400 which discloses the three key components 351 00:17:22,433 --> 00:17:23,600 of a business: 352 00:17:23,633 --> 00:17:28,100 assets, liabilities, and owner's equity. 00:03:04 353 00:17:28,133 --> 00:17:31,300 Assets are classified into two categories: 354 00:17:31,333 --> 00:17:33,933 current and non-current. 00:03:05 355 00:17:33,966 --> 00:17:36,133 Current are those which are already cash 356 00:17:36,166 --> 00:17:39,733 or likely to be cash in the next 12 months. 00:03:06 357 00:17:39,766 --> 00:17:42,633 Non-current are those which you intend to keep 358 00:17:42,666 --> 00:17:46,866 in a non-cash form for longer than 12 months. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 11 of 15 00:03:07 359 00:18:01,966 --> 00:18:03,900 Liabilities are amounts of money 360 00:18:03,933 --> 00:18:06,933 that a business owes to outside entities. 00:03:08 361 00:18:06,966 --> 00:18:09,866 For example, if a business is allowed to buy materials 362 00:18:09,900 --> 00:18:14,333 on credit from a supplier, then it has a liability. 00:03:09 363 00:18:14,366 --> 00:18:16,633 Other liabilities can include amounts owed 364 00:18:16,666 --> 00:18:19,233 for loans from banks in the form of overdrafts 365 00:18:19,266 --> 00:18:21,330 or mortgages. 00:03:11 366 00:18:21,660 --> 00:18:23,933- Some examples of liabilities that we have: 367 00:18:23,966 --> 00:18:26,000 the loan for the motor vehicle, 368 00:18:26,330 --> 00:18:28,500 which, again, is an asset that we use, 369 00:18:28,533 --> 00:18:30,166 and also for trade finance, 370 00:18:30,200 --> 00:18:32,833 which we actually use to purchase inventory. 00:03:14 371 00:18:32,866 --> 00:18:35,566 And we have 30 days to pay off, 372 00:18:35,600 --> 00:18:38,733 which are usually small loans of around about $10,000. 00:03:15 373 00:18:38,766 --> 00:18:40,766 Rather than having a credit card interest, 374 00:18:40,800 --> 00:18:42,330 which can be quite high, 375 00:18:42,660 --> 00:18:46,100 we have a small discounted interest from the bank. 00:03:16 376 00:18:46,133 --> 00:18:49,333- Liabilities are mainly your creditors, 377 00:18:49,366 --> 00:18:51,333 which is the money that I owe the suppliers, 378 00:18:51,366 --> 00:18:55,866 the distributors, for buying the movies. 00:03:18 379 00:18:55,900 --> 00:18:57,533 They're short-term liabilities, 380 00:18:57,566 --> 00:19:00,433 because we buy movies on a monthly basis, 381 00:19:00,466 --> 00:19:03,266 and I've got to pay the bills on a monthly basis. 00:03:20 382 00:19:03,300 --> 00:19:06,166 All long-term liabilities are the bank loans, 383 00:19:06,200 --> 00:19:07,900 my overdraft, 384 00:19:07,933 --> 00:19:12,733 which helped fund the purchase of the business 385 00:19:12,766 --> 00:19:17,766 and the operating- operations of the business. 00:03:22 386 00:19:17,800 --> 00:19:20,233 narrator: In a similar way to assets, 387 00:19:20,266 --> 00:19:21,933 liabilities can be classified 388 00:19:21,966 --> 00:19:24,966 into current or non-current divisions. 00:03:23 389 00:19:25,000 --> 00:19:27,933 Current liabilities are those which must be repaid 390 00:19:27,966 --> 00:19:29,700 within the next 12 months, 391 00:19:29,733 --> 00:19:33,133 such as overdrafts or any short-term loan. 00:03:25 392 00:19:33,166 --> 00:19:36,000 Non-current liabilities are those which will be repaid 393 00:19:36,330 --> 00:19:38,933 over a longer time span than 12 months. 00:03:26 394 00:19:38,966 --> 00:19:41,400 An example of this could be a long-term loan, 395 00:19:41,433 --> 00:19:43,566 such as a mortgage. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 12 of 15 00:03:27 396 00:19:43,600 --> 00:19:46,700- The importance of having liabilities? 00:03:28 397 00:19:46,733 --> 00:19:48,330 It's great if you don't have any. 00:03:28 398 00:19:48,660 --> 00:19:51,133 [laughs] 399 00:19:51,166 --> 00:19:53,500 I guess the importance of having trade creditors 400 00:19:53,533 --> 00:19:56,533 is that it means that you've been able 401 00:19:56,566 --> 00:19:58,933 to negotiate terms with your supplier, 402 00:19:58,966 --> 00:20:03,433 that you need to pay upon shipment of stock. 00:03:31 403 00:20:03,466 --> 00:20:05,500 So it gives you 30 to 45 days, 404 00:20:05,533 --> 00:20:07,966 depending on what you've negotiated with the supplier, 405 00:20:08,000 --> 00:20:09,833 to pay for that stock. 00:03:32 406 00:20:09,866 --> 00:20:13,433 So that helps with cash flow, obviously. 00:03:33 407 00:20:13,466 --> 00:20:17,100 narrator: Again, go back to the balance sheet 408 00:20:17,133 --> 00:20:19,500 and mark up the total liabilities of a business 409 00:20:19,533 --> 00:20:21,700 for that particular period, 410 00:20:21,733 --> 00:20:24,700 separating the current and non-current liabilities 411 00:20:24,733 --> 00:20:27,933 under their subheadings. 00:03:36 412 00:20:27,966 --> 00:20:29,100 The final component 413 00:20:29,133 --> 00:20:31,366 for reporting your company's position 414 00:20:31,400 --> 00:20:33,600 is owner's equity. 00:03:37 415 00:20:33,633 --> 00:20:35,733 Owner's equity is the owner's investment 416 00:20:35,766 --> 00:20:37,833 or capital in the business. 00:03:38 417 00:20:37,866 --> 00:20:39,966 It represents the claims on the assets 418 00:20:40,000 --> 00:20:43,200 after taking into account the claims by outsiders, 419 00:20:43,233 --> 00:20:45,966 as represented by liabilities. 00:03:40 420 00:20:46,000 --> 00:20:48,833 The three components of owner's equity are: 421 00:20:53,200 --> 00:20:56,000 Capital is the difference between total assets 422 00:20:56,330 --> 00:20:59,400 minus total liabilities. 00:03:41 423 00:20:59,433 --> 00:21:02,300 The most positive way in which owner's equity 424 00:21:02,333 --> 00:21:05,233 can increase is for the business to make a profit 425 00:21:05,266 --> 00:21:07,966 which accumulates to the owner. 00:03:43 426 00:21:08,000 --> 00:21:11,633 Owner's equity will decrease if the business makes a loss 427 00:21:11,666 --> 00:21:14,766 or if the owner withdraws assets for personal use. 00:03:44 428 00:21:14,800 --> 00:21:19,660 This withdrawal of assets by the owner is known as drawings. 00:03:45 429 00:21:19,100 --> 00:21:23,300 Drawings represents a reduction in the value of owner's equity. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 13 of 15 00:03:45 430 00:21:23,333 --> 00:21:28,166- Owner's equity is the amount of money we've invested 431 00:21:28,200 --> 00:21:30,433 in the business to establish the business, 432 00:21:30,466 --> 00:21:33,700 that's the amount of money we've put in as owners 433 00:21:33,733 --> 00:21:37,500 to get the business up and running. 00:03:48 434 00:21:37,533 --> 00:21:38,900 The addition to owner's equity 435 00:21:38,933 --> 00:21:41,766 is any profits that we've made in the business 436 00:21:41,800 --> 00:21:43,433 that we keep. 00:03:49 437 00:21:43,466 --> 00:21:45,600 We don't draw out of the business. 00:03:50 438 00:21:45,633 --> 00:21:47,566 That's what goes into owner's equity. 00:03:50 439 00:21:47,600 --> 00:21:50,900 What reduce owner's equity is our drawings, 440 00:21:50,933 --> 00:21:52,933 the money that we pull out of the business 441 00:21:52,966 --> 00:21:55,330 for our own private use. 00:03:52 442 00:21:55,660 --> 00:21:58,600 And that's basically- comes out of owner's equity 443 00:21:58,633 --> 00:22:00,233 from the profit that we've made. 00:03:53 444 00:22:00,266 --> 00:22:03,333 A drawings being living expenses, 445 00:22:03,366 --> 00:22:06,700 your private car, overseas travel. 00:03:54 446 00:22:06,733 --> 00:22:09,300 Those sort of things are drawings that we draw out 447 00:22:09,333 --> 00:22:13,400 of the business, which reduce the owner's equity. 00:03:55 448 00:22:13,433 --> 00:22:16,433- Some examples of drawings would be, you know, 449 00:22:16,466 --> 00:22:18,500 both of them are keen rollerbladers, 450 00:22:18,533 --> 00:22:21,366 and they'll withdraw stock for themselves 451 00:22:21,400 --> 00:22:23,330 and sometimes the clothes here 452 00:22:23,660 --> 00:22:25,266 that they actually withdraw for themselves as well, 453 00:22:25,300 --> 00:22:27,330 which, in a sense, 454 00:22:27,660 --> 00:22:28,633 it actually promotes a business as well, 455 00:22:28,666 --> 00:22:31,100 because they're showing other people what great skates 456 00:22:31,133 --> 00:22:32,933 that they're wearing or, you know, 457 00:22:32,966 --> 00:22:35,600 "You're wearing that top, so I'll wear it as well." 458 00:22:35,633 --> 00:22:37,700 The other thing that they draw out 459 00:22:37,733 --> 00:22:40,600 is their own drawings to be able to live, 460 00:22:40,633 --> 00:22:42,600 for personal reasons. 00:04:02 461 00:22:42,633 --> 00:22:44,600 And that's calculated into their director's fees 462 00:22:44,633 --> 00:22:46,166 at the end of the financial year. 00:04:03 463 00:22:46,200 --> 00:22:49,330- Owner's equity for the Just Group 464 00:22:49,660 --> 00:22:51,233 is made up of two main components. 00:04:04 465 00:22:51,266 --> 00:22:53,666 One is our issued capital. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 14 of 15 00:04:04 466 00:22:53,700 --> 00:22:57,633 So that represents the cost of the shares 467 00:22:57,666 --> 00:23:00,533 purchases by our several hundred shareholders. 00:04:06 468 00:23:00,566 --> 00:23:02,600 So that's their capital 469 00:23:02,633 --> 00:23:04,166 that they've invested in the business 470 00:23:04,200 --> 00:23:05,266 and what we owe back to them, 471 00:23:05,300 --> 00:23:06,800 should they ever sell their shares. 00:04:08 472 00:23:06,833 --> 00:23:08,266 And why's that- 473 00:23:08,300 --> 00:23:10,333 obviously, that's important because it's important 474 00:23:10,366 --> 00:23:12,200 that we keep people investing in our business 475 00:23:12,233 --> 00:23:17,200 so that we can continue growing and adding brands 476 00:23:17,233 --> 00:23:19,133 and adding stores to our portfolio 477 00:23:19,166 --> 00:23:20,900 and keep making profits. 00:04:11 478 00:23:20,933 --> 00:23:24,330 The second component of owner's equity 479 00:23:24,660 --> 00:23:28,466 is our accumulated profits, so profits 480 00:23:28,500 --> 00:23:32,166 that we haven't distributed to our shareholders as yet. 00:04:12 481 00:23:32,200 --> 00:23:37,166 So we pay a dividend to our shareholders twice a year, 482 00:23:37,200 --> 00:23:40,660 and that comes out of that retained profits. 00:04:13 483 00:23:40,100 --> 00:23:41,933 So I guess it's- 484 00:23:41,966 --> 00:23:43,766 from an investor's point of view, 485 00:23:43,800 --> 00:23:45,833 it gives them an idea of our ability 486 00:23:45,866 --> 00:23:48,566 to pay dividends in the future. 00:04:15 487 00:23:48,600 --> 00:23:53,660 narrator: The equation to work out the total of owner's equity 488 00:23:53,100 --> 00:23:58,333 is owner's equity equals assets minus liabilities. 00:04:17 489 00:23:58,366 --> 00:24:01,266 Remember, the balance sheet 490 00:24:01,300 --> 00:24:03,300 is a depiction of the financial status 491 00:24:03,333 --> 00:24:08,330 of a business at one particular moment in time. 00:04:18 492 00:24:08,660 --> 00:24:10,133 A business will change its financial status 493 00:24:10,166 --> 00:24:11,300 from day to day, 494 00:24:11,333 --> 00:24:14,330 as it continues to engage in transactions. 00:04:20 495 00:24:14,660 --> 00:24:16,333 And every transaction affects the balance sheet 496 00:24:16,366 --> 00:24:19,100 in some way or another. 00:04:21 497 00:24:19,133 --> 00:24:23,533 Liabilities are monies owed to outside entities. 00:04:21 498 00:24:23,566 --> 00:24:24,900 Like assets, 499 00:24:24,933 --> 00:24:30,200 liabilities can be classed as current or non-current. 00:04:22 500 00:24:30,233 --> 00:24:32,700 Owner's equity is the owner's investment 501 00:24:32,733 --> 00:24:35,233 or capital in the business. https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019 Page 15 of 15 00:04:23 502 00:24:35,266 --> 00:24:37,700 The three components in owner's equity 503 00:24:37,733 --> 00:24:42,660 are capital, profit/loss, and drawings. 00:04:25 504 00:24:42,100 --> 00:24:43,533 The accounting equation 505 00:24:43,566 --> 00:24:48,700 is owner's equity equals assets minus liabilities. 00:04:26 506 00:24:57,700 --> 00:24:59,666 There are a range of a fundamentals 507 00:24:59,700 --> 00:25:03,000 associated with financial reporting. 00:04:27 508 00:25:03,330 --> 00:25:05,966 The nuts and bolts of accounting will help the business owner 509 00:25:06,000 --> 00:25:08,000 steer clear of the debt traps. 00:04:28 510 00:25:08,330 --> 00:25:09,266 And more importantly, 511 00:25:09,300 --> 00:25:12,300 it helps avoid the booming business of bankruptcy. cielo24 | what’s in your video? | cielo24.com https://fod-infobase-com.eu1.proxy.openathens.net/p_ViewVideo.aspx?xtid=40229 6/9/2019
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