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FINANCIAL PLANNING FOR SENIOR MANAGERS
ACCOUNTING METHODS AND FORMATION OF FINANCIAL
STATEMENTS
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Fundamental requirement
– Show “true and fair view”
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Fundamental requirement
– Show “true and fair view”
– Prepared in accordance with:
• Generally Accepted Accounting Principles (GAAP)
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Fundamental requirement
– Show “true and fair view”
– Prepared in accordance with:
• Generally Accepted Accounting Principles (GAAP)
• Standard Statement of Accounting Practice (SSAP’s)
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Fundamental requirement
– Show “true and fair view”
– Prepared in accordance with:
• Generally Accepted Accounting Principles (GAAP)
• Standard Statement of Accounting Practice (SSAP’s)
• Financial Reporting Standards (FRS’s)
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Four basic accounting concepts:
– Going concern concept – assumes the business will continue
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Four basic accounting concepts:
– Going concern concept – assumes the business will continue
– Accruals concept – income and costs matched
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Four basic accounting concepts:
– Going concern concept – assumes the business will continue
– Accruals concept – income and costs matched
– Consistency concept – same treatment one period to next
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Four basic accounting concepts:
– Going concern concept – assumes the business will continue
– Accruals concept – income and costs matched
– Consistency concept – same treatment one period to next
– Prudence concept – full provision for all costs and losses
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Accounting policies:
– Sales income recognition
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Accounting policies:
– Sales income recognition
– Depreciation of fixed assets
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Accounting policies:
– Sales income recognition
– Depreciation of fixed assets
– Stocks and work in progress
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Accounting policies:
– Sales income recognition
– Depreciation of fixed assets
– Stocks and work in progress
– Research and development
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Double entry bookkeeping
– Each transaction represented by two entries
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FINANCIAL PLANNING FOR SENIOR MANAGERS
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Double entry bookkeeping
– Each transaction represented by two entries
– Two simple rules apply:
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Double entry bookkeeping
– Each transaction represented by two entries
– Two simple rules apply:
• DEBIT the account of the receiver of value
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Double entry bookkeeping
– Each transaction represented by two entries
– Two simple rules apply:
• DEBIT the account of the receiver of value
• CREDIT the account of the giver of value
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Traditional structure of accounts
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• The Mega Toy Company
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Types of accounting entries made
– Trading and non-trading
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FINANCIAL PLANNING FOR SENIOR MANAGERS
• Types of accounting entries made
– Trading and non-trading
– Cash and non cash
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANY
Debit Credit
1-1-07 Share capital account £400,000
GENERAL LEDGER
BANK ACCOUNT
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANY
Debit Credit
1-1-07 Share capital account £400,000
Debit Credit
1-1-07 Bank account £400,000
GENERAL LEDGER
BANK ACCOUNT
SHARE CAPITAL ACCOUNT
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 1 New balance
Racking & equipmentBank account £400,000 £400,000StockDebtorsPrepaymentsCreditorsAccrualsShare capital £(400,000) £(400,000)SalesCost of salesDistribution costsSalariesRentMarketing costsOther overheadDepreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANY
Debit Credit
1-1-07 Share capital account £400,000 8-1-07 Bank account £30,000
GENERAL LEDGER
BANK ACCOUNT
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANY
Debit Credit
1-1-07 Share capital account £400,000 8-1-07 Bank account £30,000
Debit Credit
8-1-07 Bank account £15,000
GENERAL LEDGER
BANK ACCOUNT
RENT ACCOUNT
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANY
Debit Credit
1-1-07 Share capital account £400,000 8-1-07 Bank account £30,000
Debit Credit
8-1-07 Bank account £15,000
Debit Credit
8-1-07 Bank account £15,000
GENERAL LEDGER
BANK ACCOUNT
RENT ACCOUNT
PREPAYMENT ACCOUNT
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 2 New balance
Racking & equipmentBank account £400,000 £(30,000) £370,000StockDebtorsPrepayments £15,000 £15,000CreditorsAccrualsShare capital £(400,000) £(400,000)SalesCost of salesDistribution costsSalariesRent £15,000 £15,000Marketing costsOther overheadDepreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 3 New balance
Racking & equipment £40,000 £40,000Bank account £370,000 £(40,000) £330,000StockDebtorsPrepayments £15,000 £15,000CreditorsAccrualsShare capital £(400,000) £(400,000)SalesCost of salesDistribution costsSalariesRent £15,000 £15,000Marketing costsOther overheadDepreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 4 New balance
Racking & equipment £40,000 £40,000Bank account £330,000 £(20,000) £310,000StockDebtorsPrepayments £15,000 £15,000CreditorsAccrualsShare capital £(400,000) £(400,000)SalesCost of salesDistribution costsSalaries £20,000 £20,000Rent £15,000 £15,000Marketing costsOther overheadDepreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 4 New balance
Racking & equipment £40,000 £40,000Bank account £310,000 £(18,000) £292,000StockDebtorsPrepayments £15,000 £15,000CreditorsAccrualsShare capital £(400,000) £(400,000)SalesCost of salesDistribution costsSalaries £20,000 £20,000Rent £15,000 £15,000Marketing costsOther overhead £18,000 £18,000Depreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 5 New balance
Racking & equipment £40,000 £40,000Bank account £292,000 £(200,000) £92,000Stock £200,000 £200,000DebtorsPrepayments £15,000 £15,000CreditorsAccrualsShare capital £(400,000) £(400,000)SalesCost of salesDistribution costsSalaries £20,000 £20,000Rent £15,000 £15,000Marketing costsOther overhead £18,000 £18,000Depreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 6 New balance
Racking & equipment £40,000 £40,000Bank account £92,000 £92,000Stock £200,000 £75,000 £275,000DebtorsPrepayments £15,000 £15,000Creditors £(75,000) £(75,000)AccrualsShare capital £(400,000) £(400,000)SalesCost of salesDistribution costsSalaries £20,000 £20,000Rent £15,000 £15,000Marketing costsOther overhead £18,000 £18,000Depreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 7 New balance
Racking & equipment £40,000 £40,000Bank account £92,000 £92,000Stock £275,000 £(147,000) £128,000DebtorsPrepayments £15,000 £15,000Creditors £(75,000) £(75,000)AccrualsShare capital £(400,000) £(400,000)SalesCost of sales £147,000 £147,000Distribution costsSalaries £20,000 £20,000Rent £15,000 £15,000Marketing costsOther overhead £18,000 £18,000Depreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 7 New balance
Racking & equipment £40,000 £40,000Bank account £92,000 £(14,000) £78,000Stock £128,000 £128,000DebtorsPrepayments £15,000 £15,000Creditors £(75,000) £(75,000)AccrualsShare capital £(400,000) £(400,000)SalesCost of sales £147,000 £147,000Distribution costs £14,000 £14,000Salaries £20,000 £20,000Rent £15,000 £15,000Marketing costsOther overhead £18,000 £18,000Depreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 7 New balance
Racking & equipment £40,000 £40,000Bank account £78,000 £78,000Stock £128,000 £128,000Debtors £245,000 £245,000Prepayments £15,000 £15,000Creditors £(75,000) £(75,000)AccrualsShare capital £(400,000) £(400,000)Sales £(245,000) £(245,000)Cost of sales £147,000 £147,000Distribution costs £14,000 £14,000Salaries £20,000 £20,000Rent £15,000 £15,000Marketing costsOther overhead £18,000 £18,000Depreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 8 New balance
Racking & equipment £40,000 £40,000Bank account £78,000 £78,000Stock £128,000 £128,000Debtors £245,000 £245,000Prepayments £15,000 £15,000Creditors £(75,000) £(75,000)Accruals £(17,000) £(17,000)Share capital £(400,000) £(400,000)Sales £(245,000) £(245,000)Cost of sales £147,000 £147,000Distribution costs £14,000 £14,000Salaries £20,000 £20,000Rent £15,000 £15,000Marketing costs £17,000 £17,000Other overhead £18,000 £18,000Depreciation
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANYBalance Transaction 9 New balance
Racking & equipment £40,000 £(2,000) £38,000Bank account £78,000 £78,000Stock £128,000 £128,000Debtors £245,000 £245,000Prepayments £15,000 £15,000Creditors £(75,000) £(75,000)Accruals £(17,000) £(17,000)Share capital £(400,000) £(400,000)Sales £(245,000) £(245,000)Cost of sales £147,000 £147,000Distribution costs £14,000 £14,000Salaries £20,000 £20,000Rent £15,000 £15,000Marketing costs £17,000 £17,000Other overhead £18,000 £18,000Depreciation £2,000 £2,000
CHECK TOTAL 0 0 0
TRANSACTIONS TO 31ST MARCH 2007
PAUL LOWER FOR ReCh MANAGEMENT CENTRE
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FINANCIAL PLANNING FOR SENIOR MANAGERS
THE MEGA TOY COMPANY
Racking & equipment £38,000Bank account £78,000Stock £128,000Debtors £245,000Prepayments £15,000Creditors £(75,000)Accruals £(17,000)Share capital £(400,000)Sales £(245,000)Cost of sales £147,000Distribution costs £14,000Salaries £20,000Rent £15,000Marketing costs £17,000Other overhead £18,000Depreciation £2,000
CHECK TOTAL 0
TRIAL BALANCE AT 31ST MARCH 2007
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FINANCIAL PLANNING FOR SENIOR MANAGERS
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