PROJECT MANAGEMENT TRAINING Instructor Guide

Basic Bookkeeping
Instructor Guide
Corporate Training Materials
TABLE OF CONTENTS
Preface...................................................................................................................................................5
What is Courseware?..............................................................................................................................5
How Do I Customize My Course?.............................................................................................................5
Materials Required.................................................................................................................................7
Maximizing Your Training Power............................................................................................................7
Module One: Introduction......................................................................................................................9

Housekeeping Items................................................................................................................................9
The Parking Lot.....................................................................................................................................10
Workshop Objectives............................................................................................................................10
Pre-Assignment Review.........................................................................................................................11
Module Two: Basic Terminology (I)......................................................................................................12

Balance Sheet.......................................................................................................................................12
Assets....................................................................................................................................................14
Liabilities...............................................................................................................................................14
Equity....................................................................................................................................................14
Income Statement.................................................................................................................................14
Revenue................................................................................................................................................15
Cost of Goods Sold................................................................................................................................15
Expenses...............................................................................................................................................15
Accounting Period.................................................................................................................................15
Module Two: Review.............................................................................................................................16
Module Three: Basic Terminology (II)...................................................................................................18

Accounts Receivable.............................................................................................................................18
Accounts Payable..................................................................................................................................18
Depreciation.........................................................................................................................................19
General Ledger......................................................................................................................................19
Interest..................................................................................................................................................19
Inventory...............................................................................................................................................19
Journals.................................................................................................................................................20
Payroll...................................................................................................................................................20
Trial Balance.........................................................................................................................................20
Module Three: Review..........................................................................................................................21
Module Four: Accounting Methods......................................................................................................23

Cash Method.........................................................................................................................................23
Accrual Method....................................................................................................................................24
Differences between Cash and Accrual.................................................................................................25
Module Four: Review Questions............................................................................................................26
Module Five: Keeping Track of Your Business.......................................................................................28

Accounts Payable..................................................................................................................................28
Accounts Receivable.............................................................................................................................30
The Journal............................................................................................................................................32
The General Ledger...............................................................................................................................33
Cash Management................................................................................................................................34
Module Five: Review Questions............................................................................................................35
Module Six: Understanding the Balance Sheet.....................................................................................37

The Accounting Equation......................................................................................................................39
Double-Entry Accounting......................................................................................................................40
Types of Assets......................................................................................................................................40
Types of Liabilities.................................................................................................................................42
Equity....................................................................................................................................................43
Module Six: Review Questions..............................................................................................................44
Module Seven: Other Financial Statements..........................................................................................46

Income Statement.................................................................................................................................46
Cash Flow Statement............................................................................................................................47
Capital Statement.................................................................................................................................48
Budget vs. Actual..................................................................................................................................49
Module Seven: Review Questions.........................................................................................................51
Module Eight: Payroll Accounting / Terminology.................................................................................53

Gross Wages.........................................................................................................................................53
Net Wages............................................................................................................................................53
Employee Tax Withholding’s.................................................................................................................54
Employer Tax Expenses.........................................................................................................................54
Salary Deferrals.....................................................................................................................................54
Employee Payroll..................................................................................................................................54
Employee Benefits.................................................................................................................................55
Tracking Accrued Leave........................................................................................................................55
Government Payroll Returns/Reports...................................................................................................55
Module Eight: Review...........................................................................................................................56
Module Nine: End of Period Procedures...............................................................................................57

Depreciating Your Assets......................................................................................................................57
Reconciling Cash...................................................................................................................................58
Reconciling Investments........................................................................................................................59
Working with the Trial Balance.............................................................................................................60
Bad Debt...............................................................................................................................................60
Posting Adjustments and Corrections...................................................................................................61

Module Nine: Review Questions...........................................................................................................62
Module Ten: Financial Planning, Budgeting and Control......................................................................65

Reasons for Budgeting..........................................................................................................................65
Creating a Budget.................................................................................................................................66
Comparing Budget to Actual Expenses.................................................................................................67
Module Ten: Review Questions.............................................................................................................69
Module Eleven: Auditing......................................................................................................................71

What is an Audit?.................................................................................................................................71
When and Why Would You Audit?........................................................................................................72
Internal.................................................................................................................................................73
External.................................................................................................................................................74
Module Eleven: Review Questions........................................................................................................75
Module Twelve: Wrapping Up..............................................................................................................77

Words from the Wise............................................................................................................................77
Parking Lot............................................................................................................................................77
Action Plans and Evaluations................................................................................................................77

Learning is a treasure that will follow its
owner everywhere.
Chinese Proverb
Preface
What is Courseware?
Welcome to Corporate Training Materials, a completely new training
experience!
Our courseware packages offer you top-quality training materials that

are customizable, user-friendly, educational, and fun. We provide your
materials, materials for the student, PowerPoint slides, and a take-home
reference sheet for the student. You simply need to prepare and train!
Best of all, our courseware packages are created in Microsoft Office and can be opened using any
version of Word and PowerPoint. (Most other word processing and presentation programs support
these formats, too.) This means that you can customize the content, add your logo, change the color
scheme, and easily print and e-mail training materials.
How Do I Customize My Course?

Customizing your course is easy. To edit text, just click and type as you would with any document. This is
particularly convenient if you want to add customized statistics for your region, special examples for
your participants’ industry, or additional information. You can, of course, also use all of your word
processor’s other features, including text formatting and editing tools (such as cutting and pasting).
To remove modules, simply select the text and press Delete on your keyboard. Then, navigate to the
Table of Contents, right-click, and click Update Field. You may see a dialog box; if so, click “Update entire
table” and press OK.
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(You will also want to perform this step if you add modules or move them around.)
If you want to change the way text looks, you can format any piece of text any way you want. However,
to make it easy, we have used styles so that you can update all the text at once.
If you are using Word 97 to 2003, start by clicking the Format menu followed by Styles and Formatting.
In Word 2007 and 2010 under the Home tab, right-click on your chosen style and click Modify. That will
then produce the Modify Style options window where you can set your preferred style options.
For example, if we wanted to change our Heading 1 style, used for Module Titles, this is what we would
do:
Now, we can change our formatting and it will apply to all the headings in the document.
For more information on making Word work for you, please refer to Word 2007 or 2010 Essentials by
Corporate Training Materials.
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Materials Required
All of our courses use flip chart paper and markers extensively. (If you prefer, you can use a whiteboard
or chalkboard instead.)
We recommend that each participant have a copy of the Training Manual, and that you review each
module before training to ensure you have any special materials required. Worksheets and handouts are
included within a separate activities folder and can be reproduced and used where indicated. If you
would like to save paper, these worksheets are easily transferrable to a flip chart paper format, instead
of having individual worksheets.
We recommend these additional materials for all workshops:
 Laptop with projector, for PowerPoint slides
 Quick Reference Sheets for students to take home
 Timer or watch (separate from your laptop)
 Masking tape
 Blank paper
Maximizing Your Training Power

We have just one more thing for you before you get started. Our company is built for trainers, by
trainers, so we thought we would share some of our tips with you, to help you create an engaging,
unforgettable experience for your participants.
 Make it customized. By tailoring each course to your participants, you will find that your results
will increase a thousand-fold.
o Use examples, case studies, and stories that are relevant to the group.
o Identify whether your participants are strangers or whether they work together. Tailor
your approach appropriately.
o Different people learn in different ways, so use different types of activities to balance it
all out. (For example, some people learn by reading, while others learn by talking about
it, while still others need a hands-on approach. For more information, we suggest
Experiential Learning by David Kolb.)
 Make it fun and interactive. Most people do not enjoy sitting and listening to someone else talk
for hours at a time. Make use of the tips in this book and your own experience to keep your
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participants engaged. Mix up the activities to include individual work, small group work, large
group discussions, and mini-lectures.
 Make it relevant. Participants are much more receptive to learning if they understand why they
are learning it and how they can apply it in their daily lives. Most importantly, they want to
know how it will benefit them and make their lives easier. Take every opportunity to tie what
you are teaching back to real life.
 Keep an open mind. Many trainers find that they learn something each time they teach a
workshop. If you go into a training session with that attitude, you will find that there can be an
amazing two-way flow of information between the trainer and trainees. Enjoy it, learn from it,
and make the most of it in your workshops.
And now, time for the training!
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The company accountant is shy and
retiring. He’s shy a couple of million bucks,
that’s why he’s retiring!
Milton Berle
Module One: Introduction
Numbers! Numbers! Numbers! Wherever you go, you are bound to see
them. On addresses, license plates, phones, prices, and of course, money!
Numbers connect us all to each other in many more ways than we might
imagine. Essentially, our world revolves around numbers. Some of us
enjoy dealing with numbers while others may have a fear of them, or
even a phobia. For those of you who have already recognized and
appreciate the impact that numbers actually have on just about
everything, you deserve a cookie. Welcome to Basic Bookkeeping!
Housekeeping Items
Take a few moments to cover basic housekeeping items.
 If you need an opening or a way to introduce the participants to each other, utilize the
Icebreakers folder to begin or between breaks during the day.
 Let participants know where they can find washrooms, break facilities, and fire exits.
 Ask participants to turn off their cell phones or at least turn them to vibrate. If they must take a
call, request that they do it outside.
 Take this time to encourage the group to ask questions and make this an interactive workshop.
 Write the words Respect, Confidentiality, and Practice on a piece of flip chart paper and tape it
to the wall. Explain to participants that in order to get the most out of this workshop, we must
all work together, listen to each other, explore new ideas, and make mistakes. After all, that’s
how we learn!
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The Parking Lot
Explain the concept of The Parking Lot to participants.
 The Parking Lot is a visible place where you will “park” ideas that arise
which are not on the agenda, may be off topic, or are better addressed
outside of the program.
 At the end of the session, we will review parked ideas and follow up, or make suggestions for
your own investigation when you are back at work.
Suggestions for the trainer:
1. If you are working with a large group of participants, you may wish to nominate a recorder to
park items as you are facilitating.
2. It’s a good idea to note the name of the contributor along with the parked item.
3. Items noted on the parking lot can be useful to you later as you plan future training sessions.
Workshop Objectives
Research has consistently demonstrated that when clear goals are associated
with learning, the learning occurs more easily and rapidly. With this in mind, let’s
review our goals for today.
By the end of this workshop, participants will be able to:
 Understand basic accounting terminology.
 Identify the differences between the cash and accrual accounting methods.
 Keep track of your business by becoming familiar with accounts payable and accounts
receivable.
 Use a journal and general ledger to document business financials.
 Utilize the balance sheet.
 Identify different types of financial statements.
 Uncover the reasons for and actually create a budget.
 Be familiar with internal and external auditing.
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Pre-Assignment Review
The purpose of the Pre-Assignment is to get participants thinking about their
current set of Basic Bookkeeping skills. You will also find a Pre-Assignment
handout in the Activities folder.
List three areas in relation to bookkeeping you feel you are strong.
1.
__________________________________________________________________________________
__________________________________________________________________________
2. ______________________________________________________________________________
______________________________________________________________________________
3. ______________________________________________________________________________
______________________________________________________________________________
List three areas in regards to bookkeeping where you would like to see improvement.
1. ______________________________________________________________________________
______________________________________________________________________________
2. ______________________________________________________________________________
______________________________________________________________________________
3. ______________________________________________________________________________
______________________________________________________________________________
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A bank is a place that will lend you money
if you can prove that you don’t need it.
Bob Hope
Module Two: Basic Terminology (I)
So the good thing about accounting is that you can start out wherever you
want, at the beginning, the middle, or the end and you will still wind up at
the same place, nowhere (Just kidding). You really have to start at the
beginning, or you will get lost. So let’s start there, with some basic
terminology. Some of this stuff may ring a bell for those of you who took
accounting previously, were hired to keep the books at the corner Mom &
Pop’s shop, or, were too cheap to hire a “real Accountant” and tried to do
your own books. (How did that work out for you?). Either way, when we are
done here, you are bound to be familiar with a lot of these basic
bookkeeping and accounting terms.
Balance Sheet
A balance sheet is a financial statement that shows the assets, liabilities, and owner’s
equity at a specific point in time. Assets and liabilities are usually listed first, followed
by the equity which is the difference between the assets and the liabilities. The
balance sheet will ultimately provide a snapshot of the company’s current financial
condition.
Balance Sheet
Business Title: Bob & Tom’s Crunchy Cookie Co. Date:
Assets Liabilities
Current Assets $ Current Liabilities
Cash $ Accounts Payable $_____________

Notes Payable $_____________
Petty Cash $ Interest Payable $_____________
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Accounts Receivable $ Taxes Payable
Federal Income Tax $_____________
Inventory $ Self-Employment Tax $_____________
State Income Tax $_____________
Short-term Investments $
Sales Tax Accrual $_____________
Property Tax $_____________
Prepaid Expenses $ Payroll Accrual $_____________
Long-term Liabilities
Long-term Investments $ Notes Payable $_____________
Fixed Assets $
Land (Valued at Cost) $
Buildings $
1. Cost ________________
2. Less acc. Depr. _______
Improvements $ Total Liabilities $_____________

1. Cost ________________
2. Less acc. Depr. _______ Net Worth (Equity)
Equipment $ Proprietorship $_____________
1. Cost ________________ Or
2. Less acc. Depr. _______ Partnership
(Name) _______, _____% equity $_____________
Furniture $ (Name) _______, _____% equity $_____________
1. Cost ________________
Or
Corporation
Automobiles $ Capitol Stock $_____________
1. Cost ________________ Surplus Paid in $_____________
2. Less acc. Depr. _______ Retained Earnings $_____________
Other Assets $ Total Net Worth $_____________

1. Assets – Liabilities = Net Worth
2. $
&
Liabilities + Equity = Total Assets
Total Assets $
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Assets
Assets are probable future economic benefits obtained or controlled by a
particular entity as a result of past transactions or events. Anything that has an
economic value and can be owned or controlled to produce value has the potential
to produce such future economic benefits. Whether tangible or intangible,
ownership of any form of value such as cash money or stock is considered to be an
asset.
Liabilities
Probable future sacrifices of income or assets, arising from present obligation to a
particular entity. If liabilities are settled, they may become transferred assets or
provide services to other entities in the future as a result of past transactions or
events. A liability is a duty or responsibility to another in return for some form of
debt such as a business loan which would entail the settlement of that loan.
Equity
Ownership in assets after all debts owed for that asset has been paid off. Assets such
as stock and home ownership can be considered equity if no associated debts
remain. Once a house or automobile is paid off, the asset is now the owner’s equity.
Equity is any asset that can be sold for monetary gain without any attached debts
being owed. The owner should gain 100% of the revenue from the sale of an asset if
that asset is his or her own equity.
Income Statement
A financial statement is used to summarize the amounts of revenues earned, and
the expenses incurred by a business or entity over a period of time. It is used to
measure a business’s financial performance. This statement includes a summary of
how a business typically incurs its revenues and expenses over a fiscal quarter or
year.
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Revenue
The fee paid to a lender for a loan or all transactions for which monies are received. It
can be the income from products and services sold and the use of investments.
Revenue can also be a transaction and the resulting income for which monies are
received, however, loan funds and equity deposits are not considered revenue.
Cost of Goods Sold

The cost of producing products that are delivered to customers to create revenue or
the cost of inventory sold during an accounting period. This includes the cost of
purchases made during an inventory period minus the ending inventory for that
period. This term is often abbreviated as COGS.
Expenses
Expenses are the cost of producing revenue through the sale of goods or
services. They can come in many forms such as salaries or wages, and
depreciation of assets. An expense can be almost anything that is incurred when
doing business.
Accounting Period
The Accounting period is the amount of time in which income statements and other
financial statements are utilized to track and report operating results. They usually
run for twelve months between January to December, but can begin and end
anytime depending on the businesses needs or wants.
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Module Two: Review
You should now be familiar with a few general accounting terms most often used for businesses.
Remember:
 A balance sheet is a financial statement that shows the assets, liabilities, and owner’s equity at a
specific point in time.
 Whether tangible or intangible, ownership of any form of value such as cash or stock is
considered an asset.
 Liabilities are probable future sacrifices of income or assets, arising from present obligation to a
particular entity.
 Equity can be ownership in assets after all debts owed for that asset have been paid off.
 An income statement includes a summary of how a business typically incurs its revenues and
expenses over a fiscal quarter or year.
 Revenue can be a transaction and the resulting income for which monies are received.
 Cost of Goods Sold is the cost of purchases made during an inventory period minus the ending
inventory for that period.
 Expenses are the cost of producing revenue through the sale of goods or services and finally.
 An accounting period is a period of time in which income statements and other financial
statements are utilized to track and report operating results.
Estimated Time 10-15 minutes
Topic Objective To help recognize and familiarize yourself with accounting terms.
Now that you have been introduced to a few of the basic accounting terms,
Topic Summary
you should be able to develop recognition of all of the terms.
Materials Required Worksheet : “Basic Terminology” word search, writing utensil
Allow enough time to find the majority, if not all of the words in the word
Planning Checklist
search.
Recommended Activity Complete the word search independently. Discuss the answers as a group.
Stories to Share None
Delivery Tips For an interactive twist on this activity, allow participants to get into teams
Page 16
of two or four and race to find the words, in a friendly competition.
What are the three main components included in a balance sheet?

Review Questions
COGS is the abbreviation for what term?
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Knowledge is like money: the more he gets
the more he craves.
Josh Billings
Module Three: Basic Terminology (II)
In this unit, we will finish up with the basic accounting terms that
are bound to impress at the next corporate fundraiser for the IRS. I
know what you’re thinking. There is no such thing as a corporate
fundraiser for the IRS because the only funds the IRS will be raising
are those out of our wallets. Below are the next few terms you will
need to know!
Accounts Receivable
This type of record is used to keep track of money that is owed to a business. Such
money can come from extending credit to a customer who purchases the businesses
products or services. The best way to keep track of these figures is to set up a
separate accounts receivable record for each customer.
Accounts Payable
This type of record is used to keep track of debts owed by a business to creditors for
purchased goods or services. Though the business will likely be billed regularly by its
creditors for the balance on the account, having its own records will allow the
business to be aware of their financial standing with the creditors at any given time.
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Depreciation
Involves both the decline in value of assets, usually due to unfavorable market
conditions as well as the allocation of the costs of tangible assets over their useful
lifetime to the periods in which the assets are actually used. The decline in value will
have an effect on the value of business and entities while the allocation of cost
effects net income.
General Ledger
In double-entry accounting, these are forms used for the accounts on separate
sheets, in a book or binder and are called the general ledger. This is considered
to be a permanent, classified record for each business account.
Interest
Interest is a sort of compensation to a lender for taking a risk of principal
loss when money or another asset is loaned. When money is borrowed the,
borrower usually pays a percentage of the total amount owed also known
as the principal, as a fee, along with a certain amount of the original balance
for each billing period. It is a sum amount charged for borrowing.
Inventory
Inventory can be described as either a list of goods and materials or the
goods and materials themselves. It is considered an asset and usually refers
to materials held in stock by a business. Inventory is one of the most
important assets that a business possesses because they are ready or will be
ready to be sold thus; inventory is often a primary source for revenue.
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Journals
A journal is used to record the financial transactions made by a business.
Whether the transactions are credits or debits, they should be input into a
journal at the time and date which they occur. These recordings can then be
used for future reference and reconciling and can be transferred to other official
records such as the general ledger. All journal entries should include the
transaction date, type, and amount.
Payroll
Payroll can refer to either the total sum in compensation that a business owes to its
employees for a set period of time, or the actual list of employees the business must
pay along with the amount owed. It is usually a major expense for businesses but
will likely differ from time to time depending on the business’ need of its employees
at the time, amongst other things.
Trial Balance
A worksheet usually prepared at the end of each recording period. The balances
of all ledgers are recorded into two columns labeled “debits” and “credits”. This
worksheet helps to ensure that all numerical data entered into the business’
bookkeeping system is correct. If the total debits are in fact equal to the total
credits, the trial balance is balanced. This worksheet method is also referred to as
a T-Account due to the shape the data takes on with the two column format.
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Module Three: Review
You should now be familiar with a few accounting documents most often used for businesses as well as
terms which can define the health of a business.
Remember:
 Accounts receivable are those records which keep track of money owed to a business or money
received.
 Accounts payable involves records which keep track of money owed by the business or money
paid.
 Depreciation most often refers to the decline in value of assets but may also refer to the
allocation of the costs of tangible assets over their useful lifetime.
 The general ledger is used to keep permanent, classified record of business accounts.
 Interest is a form of compensation owed to a lender from the borrower for allowing them to
borrow.
 Inventory can be either a list of goods and materials of a business or the goods and materials
themselves.
 A journal is used to record the financial transactions made by a business, whether they are
credits or debits.
 Payroll can be either the total sum in pay a business owes to its employees of the actual list of
employees the business shall pay.
 And finally, a trial balance is used to record the balance of all ledgers, usually in the format of
two columns labeled “debits” and “credits”, known as the T-Account format.
Topic Objective To learn basic accounting terminology.
Now that you have been introduced to a few more of the basic accounting
Topic Summary
terms, you should be able to match them to their meanings.
Materials Required Worksheet: “Basic Terminology” Crossword Puzzle, Writing utensil
Planning Checklist Allow enough time to find the majority, if not all of the words in the crossword
puzzle.
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Recommended Activity Complete the crossword puzzle independently. Discuss as a group.
Accounting can be a dry subject, but lighten it up with humor found by clicking
Stories to Share
the following link: http://www.groco.com/readingroom/humor.aspx
Delivery Tips None
What is the basic use of journals?
Does depreciation involve the gaining or losing of value?

Review Questions
Between accounts receivable and accounts payable, which one is referenced
when making payments?
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You can’t do today’s job with yesterdays
methods and be in business tomorrow.
Anonymous
Module Four: Accounting Methods
Since the preceding units of this course were a piece of cake, now let’s
talk about accounting methods, starting with the topics of cash and
accrual. When you were a child, if your parents allowed you to go door
to door selling items for your school’s fundraiser, you have used cash
and accrual methods. It’s a simple concept that allows you to record
the sale or purchase of an item even if you have not yet received
payment.
Cash Method
This means that you will record the money once you receive it. The
receipts for such transactions are recorded during the periods they are
received. An example of this method is when you are making a cash
deposit in the bank and they record it into your account as receiving
cash. If you present the teller with a check, then she would not be able
to document it as cash. If the teller does not record the cash as she receives it, she would not be able to
properly account for the cash later.
Estimated Time 15 minutes
Topic Objective Learn the information provided.
“You will record the money once you receive it” is the main idea of the cash
Topic Summary
method. Test your knowledge and understanding of this meaning.
Materials Required Bean bags, writing utensils
Planning Checklist Bring two bean bags (one for each group).
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Get into groups and toss the bean bag as each participant cites situations
Recommended Activity
where the cash method is commonly used.
Stories to Share None.
Delivery Tips None.
What does cash method mean?

Review Questions
When are receipts recorded?
Accrual Method
Accrual is the method of accounting in which all income and expenses are
recognized on the income statement at the time when they are earned and
incurred, regardless of when the cash for that transaction is received or paid. An
example of this method would be, when you work, your hours are documented,
and although you are earning a salary, you won’t receive the money you have
accumulated until you get a pay check, and it is cashed. The accounting department still has to recognize
that those funds are going to be paid in the future.
“You will record the money when earned but not necessarily paid” is the
Topic Summary main idea of the accrual method. Test your knowledge and understanding of
this meaning.
Materials Required Bean bags, writing utensils
Planning Checklist None.
Get into groups and toss the bean bag as each participant cites situations
where the accrual method is commonly used.
To get a better look at how to convert cash to accrual, view the following
Stories to Share
video: http://www.ehow.com/video_4987107_converting-cash-accrual.html
Delivery Tips None.
Review Questions What does accrual method mean?
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What statement are income and expenses recognized on?
Differences between Cash and Accrual

The differences between the two are that the cash method is
recorded when you receive the actual cash whereas with the
accrual method, you will record it even if you have not received it
or paid for it. For example, you are selling candy bars for your
child’s school, when you receive the cash; you mark it down in the
paid section. This is considered the cash method. If you were using
the accrual method, you would want to record the transaction with anticipation of receiving the funds at
a later date. This method will help you keep track of anticipated funds so that you can better manage
your business. With the cash method, you receive the revenue at the time of the transaction like when
you go into a store and purchase something vs. putting something on a “pay later” plan.
Use the exercise to determine what accounting method should be used for
Topic Summary
particular financial transactions.
Materials Required Flip chart and marker
Create a list of 10 potential financial transactions (e.g. selling candy bars for a
Planning Checklist
school fundraiser).
Divide participants into two groups. Designate one recorder for each group
and allow the recorder of each group to write the BEST accounting method
for each transaction. Once each team has written their responses for all of
the transactions, go over their answers as a large group.
Delivery Tips None.
What is the difference between the cash method and accrual method?
Review Questions What anticipation would you have when recording using the accrual
method?
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Module Four: Review Questions
1. What does cash method mean?
a) Record the money as you receive it
b) Record the money as you earn it but not receive it
c) Only accept cash when conducting transactions
d) Do not accept cash when conducting transactions
There are two commonly used accounting methods. The accrual method is used to record
money as it is earned but not necessarily paid. The cash method is used to record payment as it
is received.
2. When are receipts recorded with the cash method?

a) When the transaction is completed but the payment is not made
b) When the payment is received
c) The fiscal year following when the transaction is completed
d) The quarter following when the transaction is completed
The receipts are recorded at different times with cash method of accounting as opposed to the
accrual method. With the cash method, it is done as soon as the payment has been made. The
accrual method records the receipts when the transaction is complete, but the payment does
not have to be made.
3. What does accrual method mean?

a) Record the money as you receive it
b) Record the money as you earn it but not receive it
c) Only accept cash when conducting transactions
d) Do not accept cash when conducting transactions
There are two commonly used accounting methods. The accrual method is used to record
money as it is earned but not necessarily paid. The cash method is used to record payment as it
is received.
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4. What statement are income and expenses recognized on?
a) Balance sheet
b) Statement of cash flows
c) Income statement
d) Declaration statement
There are four main types of financial statements. The income statement is used to document
income and expenses.
5. What is the main difference between the cash method and accrual method?
a) There is no difference
b) The accrual method is only used for large businesses while the cash method is only used for
small businesses
c) The accrual method is only used for small businesses while the cash method is only used for
large businesses
d) The time at which the receipts are recorded
The recording time of the transaction is the major difference between the two methods.
6. What anticipation would you have when recording using the accrual method?
a) Receiving the funds at a later date
b) Immediately receiving the funds
c) Not ever collecting the funds; receiving a tax write-off
d) Eventually having to convert the recording to the cash method
The time at which funds are received is the major difference between this method and the cash
method.
Page 27
Never ask of money spent, where the
spender thinks it went, nobody was ever
meant, to remember or invent, what he did
with every cent.
Robert Frost
Module Five: Keeping Track of Your Business
Knowing how to keep track of your business will prove to be very

valuable in the short run and long run. There are a number of
different aspects involved in keeping track of any business the right
way. Many businesses go out of business within the first year or two
if things are not handled properly. Have you ever been up late at
night, just craving one of those good old roast beef sandwiches
from the local 24 hour deli? You find that the craving gets so bad,
you get up, leave (in your plaid jammies) and take a ride over there,
with your mouth watering the whole way. You pull up, and hop out
of the car (very excited), only to find that your favorite business is
no longer “in business.” One could assume they did not keep very
good track of their business or, they moved.
Knowing how to keep track will hopefully help keep you in business, not to mention having customers,
capital, and all those other things that keep a business afloat. In this section, we will discuss the ins and
outs of accounts payable, accounts receivable, the journal, the general ledger, and cash management.
Accounts Payable
As discussed earlier, this type of record is used to keep track of debts owed by a
business to creditors for purchased goods or services on an open account. Though
the business will likely be billed regularly by its creditors for the balance on the
account, having their own records will allow the business to be aware of their
financial standing with the creditors at any given time.
Accounts payable is the actual debt of a business that is due or payable to another
entity. These debts must be paid off within a given period of time so as to avoid defaulting on the
account. Accounts payable debts are similar to those many of us have at home. Household bills such as
electricity and cable are like our personal accounts payable. The companies from which we receive these
services are like our creditors. Just as our personal accounts can go into default if the services rendered
are not paid for by a certain time, so can those of a business.
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Topic Objective To learn the very basics in accounting terms with regard to your business.
Topic Summary Basic terminology
Materials Required Flip chart and marker.
Recommended Activity Create a list of items that are commonly documented as “accounts payable.”
Delivery Tips Complete the exercise as a large group.
Does “accounts payable” document debts a company owes or should be

Review Questions
paid?
Accounts Payable
Account Record
Client: _____________________
Address: _____________________
Tel #: _______________________
Fax #: _______________________
Email: _______________________
Account #: ___________________
Invoice Date Invoice # Invoice Terms Date Paid Amount Balance

Amount Paid
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Accounts Receivable
This type of record is used to keep track of money which is owed to a business. Such money can come
from extending credit to a customer who purchases the business’ products or services. The best way to
keep track of these records is to set up a separate “accounts receivable” record for
each customer.
If a business makes a sale or renders a service, it has "receivables." This means that
the business has money to collect or receive for its products or services. Such
collectable money is usually in the form of an operating line of credit. Accounts
receivable can be recorded as an asset on a business’s balance sheet because it
represents a future payment. The customer who has received the products or services from the business
is legally obligated to pay for them per the agreement set between the two parties, thus the business
can list this customers debt to them as an asset. An example of a receivable in the everyday world is a
paycheck. Employers are legally bound to pay their employees for the services they have already
rendered.
Topic Objective To learn the very basics in accounting terms with regard to your business.
Topic Summary Basic terminology
Materials Required Flip chart and marker.
Create a list of items that are commonly documented as “accounts

receivable.”
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Delivery Tips Complete the exercise as a large group.
Does “accounts receivable” document debts a company owes or should be

Review Questions
paid?
Accounts Receivable
Account Record
Client: _____________________
Address: _____________________
Tel #: _______________________
Fax #: _______________________
Email: _______________________
Account #: ___________________
Invoice Date Invoice # Invoice Terms Date Paid Amount Balance

Amount Paid
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The Journal
The journal is a way to keep track of all inputted information or data with regard to a business to allow
for the books to be properly balanced.
The Balancing Act: When dealing with journals, you will also be dealing with debits and credits. You
cannot use one without the other, for every debit there must be a credit in order to keep things
balanced. You can use one journal for all transactions or several journals for similar or
like transactions. A simple example is when we keep track of our checkbooks by
entering both our purchases, which would be considered debits and our deposits,
which would be considered our credits or money received. This is known as balancing
a checkbook. Keeping a journal is basically the same concept. Remember, always try
to be as accurate as possible or you will throw everything off balance.
Topic Objective To learn how to properly record all financial aspects of a business.
Topic Summary You have just started a new catering business, record all related expenses.
Worksheet: Beginning Journal worksheet, writing utensil, calculator (if

Materials Required
needed)
Consider all expenses for:

Consider all income from:
 Supplies/ Equipment
Planning Checklist  Sales
 Mileage to and from
 Donations
 Payroll
 Etc.
 Etc.
Recommended Activity Fill in the blank “Beginning Journal” form for a mock catering business.
Delivery Tips Rule of Thumb: Journal everything. When in doubt, journal it!
Review Questions What is the purpose of a beginning journal?
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The General Ledger
In double-entry accounting, these are forms used for the accounts on separate sheets, in a book or
binder and are called the general ledger. This is considered a permanent, classified record for each
business account.
The general ledger is usually the main record of accounting that a business uses. It can include assets
and liabilities as well as gains and losses, along with the revenue and expense items
that caused the gains and losses. This record will often take the form of a "T-
Account", showing all debits on the left side of a T-shaped chart and all credits on
the right. The ledger is an accumulation of all of a business’ finances, from their
journals and other records. It can then be used as a basis for both the balance sheet
and income statement because it provides all of the needed transactions. The size of
a general ledger can vary immensely depending on the size of the business.
Topic Objective To learn the basic components of a general ledger.
Topic Summary Understand the general ledger.
Materials Required Handout One: Sample General Ledger
Recommended Activity Review the sample general ledger and discuss its components as a group.
Divide the group into small groups or pairs and review and discuss the
Delivery Tips
general ledger.
Review Questions What is the general ledger used for?
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Cash Management
Cash management is the process of collecting, managing, and investing cash. Cash
management can ensure a business’ financial stability by avoiding insolvency. In a
business, the term “cash” does not only refer to money or the amount of money
at the end of the year. Cash and the management of cash can also be used to
refer to managing anything that can be made liquid like, certificate of deposits by
selling them, short term investments, and anything that can be used as a cash
equivalent. The art of cash management in a business is very important because it
is essential in keeping a business operating properly. If there is a mismanagement
of cash, it may result in a big loss of revenue for any business. Proper cash management will help make
sure a business does not become insolvent. Anytime a business cannot pay any of its bills due to a lack
of cash that means it has become insolvent. Insolvency is the main reason a company may go bankrupt.
Topic Objective Cash and all its equivalents
Topic Summary Determine what appropriate cash management skills involve
Materials Required Writing utensil, paper, flip chart
Planning Checklist Plan to Have fun!
Get into small groups and discuss ways to keep a business from becoming
Recommended Activity insolvent. Write down your ideas. As a large group, discuss and write the
most common tips on the flip chart.
Discuss a time you may have experienced a lack of “cash management” and
what resulted.
Stories to Share
Instructor: This may be too personal for participants, so you should get the
ball rolling with an example.
Delivery Tips None
Review Questions What is cash management and why is it so important?
Page 34
Module Five: Review Questions
1. What does “accounts payable” track?
a) Debts owed by a business to a creditor
b) Debts owed to a business
c) Employee payroll obligations
d) The types of bank accounts owned by a company
When it comes to accounting, there are “accounts payable” and “accounts receivable”.
“Accounts payable” refers to the debts a company owes a creditor. “Accounts receivable” is the
money owed to the business.
2. Why is it important for the company to keep track of accounts payable?

a) It’s not necessary for the company to keep track of accounts payable. The creditor will do so
b) So the company knows its financial standing at any given time
c) If they don’t, they can be fined by the IRS
d) If they don’t, they can be fined by the state
Although it is true the creditor will have records of the debt the company owes, the company
should have its own record to help avoid discrepancies.
3. What does “accounts receivable” track?

a) Debts owed by a business to a creditor
b) Debts owed to a business
c) Employee payroll obligations
d) The types of bank accounts owned by a company
When it comes to accounting, there are “accounts payable” and “accounts receivable”.
“Accounts payable” refers to the debts a company owes a creditor. “Accounts receivable” is the
money owed to the business.
4. Why is it important for the company to keep track of accounts receivable?

a) It’s not necessary for the company to keep track of accounts receivable.
b) So the company knows who owes it money and when that money comes in
c) If they don’t, they can be fined by the IRS
d) If they don’t, they can be fined by the state
Understanding who owes the company money and when it comes in can help the company
avoid discrepancies.
5. The journal includes what information?

a) Debits only
b) Credits only
c) Debits and credits
d) None of the above
When it comes to the journal, you cannot have a debit without a credit.
Page 35
Page 36
6. You must always use a separate journal for each transaction?
a) Always true
b) True only if you are a large business
c) True only if you are a small business
d) False
Although you can use a separate journal for each transaction, it is not mandatory.
7. The general ledger is used in what type of accounting?

a) Double-entry
b) Simplistic
c) Cash
d) Accrual
When performing double-entry accounting, general ledgers are especially useful.
8. The general ledger is considered what type of record?

a) Temporary
b) Permanent
c) Used only by large businesses
d) Used only by small businesses
Both large and small businesses have the privilege of using general ledgers.
9. Cash management refers to doing what with cash?

a) Collecting only
b) Managing only
c) Investing only
d) All of the above
Cash management is the general term that refers to performing various functions with cash.
Collecting, managing, and investing cash are three main functions.
10. Cash management helps businesses avoid what?

a) Insolvency
b) Being audited
c) Losing any customers/clients
d) Losing employees
Proper cash management is crucial in helping businesses avoid what can put them “out of
business.”
Page 37
Finding oneness and balance is the only
source of genuine happiness.
Anonymous
Module Six: Understanding the Balance Sheet
In this unit we will be discussing the accounting equation, double-

entry accounting, types of assets, types of liabilities and equity. The
balance sheet will help provide balance to your business. It helps
keep everything organized and on point. One of the worst things in
accounting is un-organization. So, don’t treat your balance sheet like
your sock drawer at home or that mysterious junk drawer in your
kitchen that no one wants to organize.
A balance sheet is a financial statement that shows the assets,

liabilities, and owner’s equity at a specific point in time. Assets and
liabilities are usually listed first, followed by the equity which is the
difference between the assets and the liabilities. The balance sheet will ultimately provide a snapshot of
the company’s current financial condition.
Example: Bob & Tom’s Crunchy Cookie Co. had an impressive increase in sales this past month however,
the company is only three months old and they therefore still have a number of liabilities to attend to. In
order to keep track of their increases and to determine the financial position of their business this
month, Bob and Tom will need to summarize their business assets, liabilities, and equity into what is
known as a balance sheet.
Page 38
Balance Sheet
Business Title: Bob & Tom’s Crunchy Cookie Co. Date:
Assets Liabilities
Current Assets $ Current Liabilities
Cash $ Accounts Payable $_____________

Notes Payable $_____________
Petty Cash $ Interest Payable $_____________
Accounts Receivable $ Taxes Payable

Federal Income Tax $_____________
Inventory $ Self-Employment Tax $_____________
State Income Tax $_____________
Sales Tax Accrual $_____________
Short-term Investments $
Property Tax $_____________
Prepaid Expenses $ Payroll Accrual $_____________
Long-term Liabilities
Long-term Investments $ Notes Payable $_____________
Fixed Assets $
Land (Valued at Cost) $
Buildings $
1. Cost ________________
Improvements $ Total Liabilities $_____________

1. Cost ________________
2. Less acc. Depr. _______ Net Worth (Equity)
Equipment $ Proprietorship $_____________
1. Cost ________________ Or
2. Less acc. Depr. _______ Partnership
(Name) _______, _____% equity $_____________
Furniture $ (Name) _______, _____% equity $_____________
1. Cost ________________
Or
Corporation
Automobiles $ Capitol Stock $_____________
1. Cost ________________ Surplus Paid in $_____________
Page 39
2. Less acc. Depr. _______ Retained Earnings $_____________
Other Assets $ Total Net Worth $_____________

1. Assets – Liabilities = Net Worth
2. $
&
Total Assets $
The Accounting Equation

The accounting equation is simple. It is the combination of liabilities and equity,
which equals assets.
Assets = Liabilities + Equity
The accounting equation helps to identify the relationship between crucial elements of accounting. An
asset is anything of value, that which a company owns. Assets consist of tangible and intangible assets.
Examples of current assets include: stocks, bonds, cash, and property. Liabilities are, a company’s
existing debts that are owed to third parties .Examples of liabilities would be, accounts payable, wages
payable and interest payable.
Topic Objective To obtain a better understanding of the accounting equation.
Topic Summary Review the video at the link below about the accounting equation.
Materials Required Laptop/PC
Watch and discuss the video on the accounting equation.

http://www.youtube.com/watch?v=EatuePtY_FA
Delivery Tips None
Review Questions What is the importance of the accounting equation?
Page 40
Double-Entry Accounting
Double entry accounting involves credits and debits. This will show information about
increases and decreases in one balance statement. This can also be known as a “T”
account because it looks like the letter “T” on paper, consisting of the debits on one
side and the credits on the other. This method provides a simple way to accurately
and efficiently balance the sums in accounts using the debit and credit method.
Remember, debits should be equivalent to credits. You should not do a debit without a credit if you
want to keep everything balanced.
Topic Objective To obtain a better understanding of double-entry accounting.
Topic Summary Review the video at the link below about double-entry accounting.
Watch and discuss the video on double-entry accounting.

http://www.youtube.com/watch?v=uachtHIWk3s
Delivery Tips None
Review Questions What is the importance of the double-entry accounting?
Types of Assets
Assets are probable future economic benefits obtained or controlled by a particular

entity as a result of past transactions or events. Anything that has an economic
value and can be owned or controlled to produce value has the potential to produce
such future economic benefits. Whether tangible or intangible, ownership of any
form of value is considered to be an asset.
Basically anything worth anything can be an asset. Now let’s not get carried away here, we’re not talking
about the pack of gum at the bottom of your purse, or the teddy bear that’s missing an eye you had
when you were a child. We’re also not talking about that blue velvet armchair sitting in your man cave
that you inherited from your uncle’s, cousins’, Brother-in-law. Then again, you know what they say
Page 41
about another man’s trash. Anyway let’s get back to business. There exist both tangible and intangible
assets. Cash is a tangible asset whereas ownership in stock is an intangible asset.
Tangible assets are belongings that can be physically touched and/or seen, they are real and actual
rather than hypothetical. As mentioned before, cash is a tangible asset. Others include real estate,
equipment, automobiles, and other physical valuables. Intangible assets are non-physical assets which
have a useful life, lasting usually more than one year. They can include patents, trademarks, internet
domain names, literary and musical works, and patented technology.
Example: Bob and Tom have ordered a few industrial sized ovens for their growing cookie business.
These ovens along with refrigerators, dining furniture, and other supplies and equipment essential for
their business, are all tangible assets. Bob and Tom have also created an original slogan for their cookie
company which is growing to be quite popular; this slogan can be viewed as one of their intangible
assets.
Topic Objective Recognize the differences between tangible and intangible assets.
The list below consists of tangible and intangible assets which you must
Topic Summary
identify as either tangible or intangible.
Materials Required “Assets list” below, writing utensil
Be sure to read the following list carefully and refer back to the definitions of
Planning Checklist
tangible and intangible assets if needed.
Use the following assets list; identify the listed items as either tangible or
intangible assets:
1. Flat screen Television

Recommended Activity 2. The song, “Thriller” by Michael Jackson
3. 1961 Ferrari 250 GT
4. The Beatles Original Song Book
5. Crunchycookies.com
Delivery Tips Provide further examples of tangible and intangible assets.
What are the two types of assets?

Review Questions
Which type of asset would an internet domain name be?
Page 42
Types of Liabilities
Probable future sacrifices of income or assets, arising from present obligation to a
particular entity. If liabilities are settled, they may become transferred assets or
provide services to other entities in the future as a result of past transactions or
events. It is a duty or responsibility to another in return for some form of debt
such as a business loan which would entail the settlement of that loan. These can
be current or long-term.
I know that’s a mouth full, so let’s clarify. An example of a liability would be, before Bob and Tom
purchased their top of the line ovens, they attempted to borrow the money from a family member who
would in-turn receive a small percentage of the company’s revenue. Since the cookie company was a
new business, the family member decided not to go through with the deal because their potential loss
would be greater than the potential gain, if the company folded. Whereas the bank agreed to loan them
the money based on their projected business potential and business plan, because the bank could afford
to do so.
Topic Objective To obtain a better understanding of current and long-term liabilities.
Topic Summary Review the video at the link below about liabilities.
Watch and discuss the video on current and long-term liabilities.

http://www.youtube.com/watch?v=hjT6hRz96zc&feature=related
Delivery Tips None
Review Questions What are liabilities?
Page 43
Equity
The interest in the assets of an entity that is left over after all liabilities are
deducted or ownership in assets after all debts owed for that asset have been
paid off. Assets such as stock and home ownership can be considered equity if no
associated debts remain. Once a house or automobile is paid off, the asset is now
the owner’s equity. Equity is any asset that can be sold for monetary gain without
any attached debts being owed. The owner should gain 100% of the revenue from the sale of an asset if
that asset is their own equity. However, if there are more liabilities than assets, then negative equity
exists.
In the stock world, equity involves an investment in shares or stock on a stock market. Just as individuals
can buy stock, so can businesses. As the value of stock rises, so will their equity. Many individuals do not
hold their shares directly; instead they are involved in what is called a mutual fund. These funds are
usually managed by larger companies and management firms. Having the support and management of a
company will allow individuals to leave the management of their shares in the hands of a skilled,
professional fund manager. Larger, private businesses and investors however will often hold their own
stock rather than seeking a third party Management Company. Equity in stock is generally termed
shareholders equity.
Topic Objective To obtain a better understanding of equity.
Topic Summary Review the video at the link below about equity.
Watch and discuss the video on equity.

http://www.youtube.com/watch?v=H79m-3AKPAM
Delivery Tips None
Review Questions What is equity?
Page 44
Module Six: Review Questions
1. What is the equation commonly used?
a) Assets = Liabilities + Equity
b) Liabilities = Assets – Equity
c) Equity = Assets + Liabilities
d) Assets = Liabilities – Equity
This equation is known as the accounting equation.
2. What is the name of the equation commonly used?

a) Mathematic
b) Accounting
c) Business
d) Small business
The accounting equation is commonly used among businesses to help keep track of the money
coming in and going out of their business.
3. What does double-entry accounting show?

a) Decreases only
b) Increases only
c) Increases and decreases
Double-entry accounting shows credits and debits, which means it shows increases and
decreases in funds.
4. When on paper, what letter does double-entry accounting look like?

a) B
b) D
c) I
d) T
Because it looks like the letter “T”, double-entry accounting is known as the “T account.”
5. Cash is what type of asset?

a) Tangible
b) Intangible
c) Current
d) Long-term
There are two types of assets: tangible and intangible. Tangible assets can be physically touched,
while intangible assets cannot.
Page 45
Page 46
6. Stock is what type of asset?
a) Current
b) Intangible
c) Tangible
d) Long-term
There are two types of assets: tangible and intangible. Tangible assets can be physically touched,
while intangible assets cannot.
7. Which of the following is a type of liability?

a) Gross
b) Net
c) Current
d) Intangible
There are two types of liabilities. These are current and long-term.
8. Of the following, which is a type of liability?

a) Tangible
b) Capital
c) Equity
d) Long-term
There are two types of liabilities. These are current and long-term.
9. What is most true of equity?

a) Once all debts owed on the asset have been paid off, the owner has ownership of the asset
b) Small businesses cannot have equity in assets
c) Large companies cannot have equity in assets
d) Small and large companies must always share equity in assets
The definition of equity says once the debts associated with an asset have been paid off, the
owner of the asset has 100% ownership of it and can sell it for monetary gain.
10. What percentage of an asset does an “owner” hold once all debts associated with the asset have
been paid off?
a) 50%.
b) 100%
c) 75%.
d) 25%.
When there are no creditors who can lay claim to the asset, the owner of the asset holds 100%
ownership of it.
Page 47
Finance is the art of passing money from
hand to hand until it finally disappears.
Robert Sarnoff
Module Seven: Other Financial Statements
In this unit, we will introduce the income statement, cash flow

statement, capital statement, and budget versus actual. These terms
all involve money or the use of money in some form. When we are
done, you will have a better understanding of how the use of these
methods will help your business run more efficiently. You’ll be
swapping accounting terms with that hotshot accountant friend of
yours in no time.
Income Statement
An income statement is a financial statement that summarizes the amounts of
revenue earned and the expenses incurred by a business or entity over a period of
time, which measures the financial performance of a business. This statement
includes a summary of how a business typically incurs its revenues and expenses
over a fiscal quarter or year. “Profit and Loss Statement” or “Statement of Revenue
and Expense” are also terms used in reference to the income statement.
Income statements are divided into two parts, which are the operating and non-
operating sections. The operating section will cover information with regard to revenues and expenses,
which are directly related to or resulting from normal business operations. For instance, for a restaurant,
the food the business must buy and then sell can be listed as both revenue and an expense. The non-
operating section on the other hand, deals with revenues and expenses that are not directly related to
the business’ normal operations. For instance, if a business were to have an all-expense paid company
picnic for its employees, this could be considered an abnormal expense, unrelated to normal business
operations and would therefore go under the “non-operations” section as a non-operations expense.
Additionally, if the business as a whole had shareholders equity or “stock” in another business or
company’s product, any profits obtained from the stock would be non-operations revenue.
Page 48
Topic Objective To obtain a better understanding of the income statement
Topic Summary Use the handout as a tool for discussing the income statement
Materials Required Handout Two: Income Statement
Planning Checklist None
Recommended Activity Review the sample income statement and discuss its components
Delivery Tips
income statement.
Review Questions What is an income statement used for?
Cash Flow Statement

The Cash Flow Statement is a part of a total of four statements which also include: Balance Sheet,
Income Statement, and Statement of Retained Earnings. The cash flow statement
shows the flow of cash within the business, where that money came from, and how
that money may have been spent during a certain time period. This statement can
prove to be very important because it allows the cash flow of the company to be
tracked from its origin, by indicating which types of transaction help create cash
flow.
There are three forms of cash flow: operating cash flow, outbound cash flow, an
inbound cash flow, each of which can be found on the statement of cash flows.
 Operating cash flow would be any cash generated from normal operations of the business,
which is then calculated and adjusted to produce the net income. This is basically the money a
business gets for being a business, whatever type it may be. It provides a better look at what
profits the business makes rather than just its earnings. This type of cash flow would be used to
pay debts and bills.
 Outbound cash flow is any money that a business must pay out when they complete a
transaction with another party. This includes wages for employees, federal and state taxes, as
well as the money it pays for the products it sells. Basically, whenever the business is required to
pay money, this money is outbound cash flow.
 Inbound cash flow is the opposite of outbound cash flow and is quite similar in some ways to
operating cash flow. It is any money a business receives via a transaction with another party.
This can include cash flow generated from normal business operations sales, refunds received
Page 49
from suppliers, and gains from legal proceedings. It is any positive monetary addition to the
bank account of a business.
Topic Objective To obtain a better understanding of the cash flow statement
Topic Summary Use the handout as a tool for discussing the cash flow statement
Materials Required Handout Three: Cash Flow Statement
Recommended Activity Review the sample cash flow statement and discuss its components
Divide the group into small groups or pairs and review and discuss the cash
Delivery Tips
flow statement.
Review Questions What is a cash flow statement used for?
Capital Statement
The Capital Statement is a statement that is concerned with, or keeps track of the items that are going
to last for longer than one year, like the long term assets of a company (e.g. buildings).
The Capital Statement’s major duty includes keeping track of the owner’s account
prior, current as well as the ending balance. It also serves as a connector between
the income statement and the balance sheet. Capital Statements are usually
checked monthly or annually.
Topic Objective To learn about capital statements
Topic Summary Capital Statement
Materials Required Flip chart, marker
Fill in the blanks of the review questions in the “review questions” section
below. Write the answers on the flip chart.
Page 50
Delivery Tips None
1. Long term assets of the company are ________.

Review Questions
2. The Capital Statement’s major duty includes keeping track of ______.
Budget vs. Actual

The main purposes of a budget are to plan for the future and to control the long term operations and
spending of a company. Just like any budget, at a certain time, it may be adjusted according to what is
needed, or changes that have occurred since the budget was created. Past financial statements are
often used when creating a budget. These allow one to see what has worked in the past and what has
not.
Additionally, a list of all possible sources of income should be kept as reference and
updated when necessary. Creating a budget mainly involves considering all possible
expenses. Some expenses are fixed and others are variable. This means some do not
change and others have the ability to change from month to month or year to year,
for example. Though a budget is the ideal or projected amount of money a business
expects to spend, things are not always so. This is where actual expenses come in.
The actual on the other hand is when the revenues or expenses are recognized on an income statement
when they are incurred whether or not the cash for them has been received. While expenditures can
easily change from the budgeted amount due to unexpected costs, revenue or income can also turn out
to be more or less than the forecasted amount. This is why it is important to create a budget that is very
much within the means of a business and based on past financial experiences and statements.
Topic Objective To obtain a better understanding of the budget vs. actual statement
Topic Summary Use the handout as a tool for discussing the budget vs. actual statement
Materials Required Handout Five: Budget vs. Actual
Recommended Activity Review the sample budget vs. actual statement and discuss its components
Delivery Tips
budget vs. actual statement.
Page 51
Review Questions What is a budget vs. actual statement used for?
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Module Seven: Review Questions
1. What does the income statement summarize?
a) Revenue earned and expenses incurred
b) Revenue earned only
c) Expenses incurred only
This is a financial statement that measures the company’s performance over time.
2. The income statement also includes which of the following?

a) How the company incurs it expenses over time
b) How the company earns it revenue over time
c) How the company incurs its expenses and earns its revenue over time
This is a financial statement that measures the company’s performance over time.
3. How many financial statements are there?

a) 2
b) 6
c) 4
d) 7
The four financial statements are: Cash flow, Balance Sheet, Income Statement, and Statement
of Retained Earnings.
4. Cash flow statements show what?

a) How the money comes into the company
b) How the money flows out of the company
c) How the money comes in and flows out of the company
As its name states, this statement shows the activity of money in both directions (in and out of
the company).
5. Capital statement keeps track of items that last for longer than ___ year(s).
a) 10
b) 7
c) 5
d) 1
Items that last longer than 1 year are considered long-term items. Buildings are an example of
such items.
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6. What is an example of something that would be on a capital statement?
a) Ream of paper
b) Pens and pencils
c) Building
d) Printer cartridge
Items that last longer than 1 year are considered long-term items. Buildings are an example of
such items.
7. What is budget, in regards to financial statements?

a) The amount planned for ahead of time
b) The amount that was actually realized
c) Both A & B
The budget is the amount planned for ahead of time and the actual, the amount that is realized.
8. What is actual, in regards to financial statements?

c) Both A & B
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I don't really care about money. I find
money boring and accounting boring, so
I'm probably not going to ever make a lot
of money.
Module Eight: Payroll Accounting / Terminology
In this unit, we will be discussing many terms which involve dealing

with the financial aspects of your business. We will also be
discussing the accounting methods and terms used in reference to
your employees, by briefly going over the following terms: gross
wages, net wages, employee tax withholdings, employer tax
expenses, salary deferrals, employee payroll, employee benefits,
tracking accrued leave, and government payroll returns and reports.
After this unit, you will be familiar with all of the terms listed above
and possibly ready to hire new employees. So look at it like this, you
can spread joy to a few of the unemployed hopefuls out there, given
the state of our current economy. Oh Joy!
Gross Wages
The amount of compensation paid to employees for work before taxes have been
removed. The gross wage is based on the number of hours worked multiplied by the
rate of pay per hour. Hourly wages are usually paid to those in non-managerial
positions as well as other positions.
Net Wages
The amount of compensation paid to employees for work after taxes have been
removed. The net wage is based on the number of hours worked multiplied by the
rate of pay per hour (gross wage) minus taxes and other fees. Hourly wages are
usually paid to those in non-managerial positions as well as other positions.
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Employee Tax Withholding’s
The tax amount deducted each time an employee is paid. Law requires that each
taxpayer pay their estimated income tax throughout the year. This withholding
tax is usually the responsibility of the employer before rendering payment to an
employee. The function of withholding taxes is to allow for proportionate
amounts of tax payments to the IRS rather than a lump sum. This method can
make the IRS collection less noticeable and therefore less “painful” for some.
Employer Tax Expenses

Several payroll taxes are levied by both state and federal government. Some
of these taxes will be paid by the employees and are known as employee tax
withholdings. In addition to these withholdings, employers must pay
additional taxes which add an employer tax expense to the cost of labor.
There are three general forms of such taxes: Social Security tax, State
Unemployment tax (SUTA), and a Federal Unemployment tax (FUTA).
Salary Deferrals
A provision within a retirement plan approved and sponsored by an employer that
allows eligible employees to elect to have a fraction of their compensation to be
deducted and contributed to the employer’s retirement plan. This deferral often
occurs before taxes are deducted. Such employer-sponsored retirement plans
include 401(K) plans, 403(b) arrangements, and 457 plans.
Employee Payroll
The wages paid to any employee who performs work for an entity and is paid
directly by that entity is an employee of that entity and is on its payroll. It is
important for a business to keep very accurate records of all wages paid to
employees mainly for tax purposes. Whether the pay occurs weekly, monthly, or just
periodically, it is all considered part of an employee payroll.
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Employee Benefits
Employer-provided compensation received by employees in addition to wages
or salary. Such compensation includes but is not limited to health care, child
care, and life insurance. These benefits, also known as fringe benefits are
meant to increase the economic security of employees.
Tracking Accrued Leave

Leave that has been earned and taken should be tracked at the end of each month.
Vacation days that have not yet been taken are a liability to the business until they
are taken. A business should keep accurate records of all days taken off and/or
vacation days fulfilled by its employees.
Government Payroll Returns/Reports

Payroll returns are those that are required to be submitted with one’s payroll tax. It
must be submitted within a certain timeframe known as the return period.
Topic Objective To demonstrate knowledge of payroll terminology.
Use the knowledge obtained to match each term with the appropriate
Topic Summary
definition
Divide one sheet of flip chart paper into two sections. On one side of the flip
chart, list the terms defined in this unit. On the other side, randomly write
Planning Checklist
the definitions of the terms taught with corresponding letters of the
alphabet.
Recommended Activity Let’s see which group can match the definition to the term fastest.
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Write the definitions on the board, have participants gather in groups and
Delivery Tips
write the term taught in this unit next to the appropriate definition.
Review Questions None.
Module Eight: Review

You should now be familiar with a few of the general accounting terms most often associated with
businesses and their employees. Remember the basics of: gross wages, net wages, employee tax
withholdings, employer tax expenses, salary deferrals, employee payroll, employee benefits, tracking
accrued leave, and government payroll returns/reports.
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Debt is like any other trap, easy to get into,
but hard to get out of.
Henry Wheeler Shaw
Module Nine: End of Period Procedures
Ok take a deep breath, relax. As we start winding down to the

last few units, we can also look at how much we’ve learned thus
far. Now you can consider yourself to be almost as
knowledgeable as that person who went to an accounting
seminar in Japan last year. See what you can accomplish if you
just put your mind to it? One thing about accounting, it’s hard to
fake it until you make it without first learning the basics. So in
this unit, we will be providing you with some basic knowledge
with regard to depreciating your assets, reconciling cash,
reconciling investments, working with the trial balance, bad
debt, as well as posting adjustments and corrections.
Depreciating Your Assets

As you have probably heard, when you drive your brand new vehicle off that car lot,
it automatically depreciates in value. This same concept can be applied in accounting.
If you buy something that has a life expectancy of over one year, and it is not
expected for resale, it is considered a depreciable asset. Depreciation is taken at a
fixed rate. The portion allowed for that current year can be deducted as an expense.
Topic Objective Demonstrate your comprehension of depreciating assets.
Topic Summary Use a flip chart and write down examples of depreciable assets.
Recommended Activity Have participants take turns speaking examples of depreciable assets.
Instructor: write them on the flip chart
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Review as a large group.
Allow participants to work in pairs and take turns speaking depreciable

Delivery Tips
assets.
What would cause depreciation of your assets?

Review Questions The portion of depreciation allowed for a current year can be deducted as
what?
Reconciling Cash
Cash reconciliation, is whenever you need to compare two lists of data and find
either differences or the similarities, reconciling two accounts that represent the
same information, or when migrating data from an old system to a new one. For
example, when you compare your bank statement with amounts of money you
deposited or have withdrawn to make sure they match. You will need to compare
daily deposits on a cash activity report. You will also need to compare summary
totals.
Topic Objective To obtain a better understanding of reconciling cash.
Review the video at the link below about reconciling cash.

Topic Summary
http://www.youtube.com/watch?v=gO5nETgXyZE
Watch and discuss the video on reconciling cash.

http://www.youtube.com/watch?v=gO5nETgXyZE
Delivery Tips None
What are you looking for in cash reconciliation?

Review Questions
What would be an example of cash reconciliation?
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Reconciling Investments
When reconciling investments, you will be basically doing the same thing as reconciling cash, only using
investments. You will be comparing all documents making sure everything matches appropriately. Some
items that can be reconciled are: interest from stocks, bonds, and mutual funds.
Demonstrate your knowledge of the difference between reconciling cash and

Topic Objective
reconciling investments.
Learning the difference between reconciling investments and reconciling

Topic Summary
cash
Materials Required Sheet of paper, writing utensil
Planning Checklist Plan to work in small groups.
In small groups of two to four, create some mock investments that must be
reconciled and practice reconciling them.
Delivery Tips If you are short on time, complete the exercise as a large group.
Review Questions None
Page 61
Working with the Trial Balance
A trial balance simply entails making a list of all accounts that have a balance other
than zero. It is basically a list of all the accounts that still owe money. The balances
of each account will be shown, along with their debits and credits and totaled.
Topic Objective To obtain a better understanding of working with the trial balance.
Topic Summary Use the handout as a tool for discussing the trial balance.
Materials Required Handout Five: Trial Balance
Recommended Activity Review the trial balance document and discuss its components
Divide the group into small groups or pairs and review and discuss the trial
Delivery Tips
balance document.
Review Questions What is a trial balance document used for?
Bad Debt
Every now and then a company will accumulate some bad debt, for example, debt
from customers who have not paid their bills (You know who you are). Information
is retrieved so that an attempt to collect can be pursued. Most times it is very
difficult to collect the bad debt, so it should be removed from the books.
Collection accounts should be pursued after a certain period of time (usually 90
days). Un- collectible accounts should be written off, only if they are legitimate.
Topic Objective Demonstrate your understanding of bad debt.
Topic Summary Give some examples of what might be considered bad debt.
Materials Required Paper, writing utensil
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Allow participants to independently list items that may be considered bad

debt. Discuss as a large group.
Delivery Tips Complete the exercise as a large group by writing the items on the flip chart.
Review Questions What is bad debt?
Posting Adjustments and Corrections

It is important to post any corrections or adjustments to the general ledger. Such a posting may consist
of a simple entry which summarizes the corrections that were needed and those which were made.
Adjustments and corrections should be made when necessary in order to create
uniformity in all journals and other transaction documents for a business.
Topic Objective Learning about posting adjustments and corrections
Topic Summary Adjustments and corrections
Materials Required Paper, writing utensils, copies of a blank general ledger form
Planning Checklist Bring copies of a blank general ledger form
Create entries in the general ledger and practice making corrections. Let the
person next to you check your work.
Delivery Tips None
Review Questions None.
Page 63
Module Nine: Review Questions
1. Depreciation is taken at what type of rate?
a) Fixed
b) Variable
c) 10%
d) 30%
Depreciation is taken at a fixed rate.
2. What can be done with the amount the item has depreciated?
a) Nothing. It’s a lost cause
b) It can be deducted as an expense
c) The business can take it as a credit
Depreciated values can be deducted.
3. In order to reconcile cash, there should be a minimum of how many lists?

a) 1
b) 10
c) 6
d) 2
Reconciling is comparing one list to another to check for inaccuracies.
4. 4. When reconciling cash, what type of information should be on the lists?

a) The same
b) Different
c) It doesn’t matter
It’s not possible to reconcile cash if the information is not the same.
5. What is the main difference between reconciling cash and investments?

a) It is acceptable to have some discrepancies when reconciling cash, but not when reconciling
investments
b) The item that is being reconciled
c) It is acceptable to have some discrepancies when reconciling investments, but not when
reconciling cash
The purpose of reconciling cash and investments is to ensure the accuracy of all figures on the
statements.
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6. Which of the following is not mentioned as an item that can be reconciled?
a) Interest from stocks
b) Interest from bonds
c) Interest from mutual funds
d) Interest from certificates of deposits
Certificates of deposit invest in the bank, brokerage firm, or individual who sells them. They
were not mentioned in the section on “Reconciling Investments.”
7. A trial balance is making a list of accounts that have a balance other than what?
a) $0
b) $100
c) $50,000
d) $10,000
In order for the trial balance to be effective, the account must have an amount other than $0.
8. The trail balance of an account will show what?

a) Credits only
b) Debits only
c) Debits and credits
The trial balance shows credits and debits and is totaled.
9. What is the usually time period at which collection should be pursued?

a) 90 days
b) 30 days
c) 60 days
d) 120 days
Although different companies follow different rules with regard to pursuing collections, 90 days
is the usual timeframe.
10. When should un-collectible debts be written off?

a) Whether they are legitimate or not
b) Only if they are legitimate
c) They should never be written off
After efficient attempt, uncollectable debts must sometimes be written off. This should only be
done in cases of legitimacy.
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11. What is the purpose of making corrections?
a) To ensure all transaction documents have the same data
b) To avoid being fined by the IRS
c) To avoid being fined by the state
d) All of the above
It does not make sense to keep financial transaction data unless it is accurate.
12. When should adjustments and corrections be made?

a) 10 days after the form’s last entry
b) As soon as the error is located
c) 20 days after the form’s last entry
d) 30 days after the form’s last entry
It does not make sense to keep financial transaction data unless it is accurate.
Page 66
A budget tells us what we can’t afford, but
it doesn’t keep you from buying it.
William Feather
Module Ten: Financial Planning, Budgeting and Control
Now that we’ve learned all of these terms, let’s put some of them
to use by exploring reasons for budgeting, creating a budget, and
comparing budgets to actual expenses. For many of us who have
tried to use a budget at home to curtail that internet shopping
obsession, you have either discovered how difficult it is to stay
within a budget or how much easier it is to stay within your means,
using a budget.
Reasons for Budgeting

A budget, in the business world, is like an owner’s plan of action. Such a
budget allows for better planning of the business’ expenditures which
can be matched to the sales revenue. It is a set of financial goals which
can be used in evaluation of the performance of a business, based on
whether or not the goals have been met. The budget will also project
expectations of cash inflow and outflow as well as other items that are
often found on a balance sheet.
Budgets should be used to look back at previous time periods in order to look forward and make any
changes to future time periods before they happen. A master budget should first be developed to
include numbers that are based on the expected sales and expenses, and should reflect a specific time
such as a month, a quarter, or a year. Budgets also allow for control of spending, which in turn will help
prevent overspending.
Page 67
Topic Objective Demonstrate your knowledge of the reasons why a budget is necessary.
List at least three reasons for budgeting. Try to come up with at least one
Topic Summary
reason that was not mentioned in this unit.
Refer to the section above for a few reasons why budgeting is needed in
Planning Checklist
business.
Recommended Activity List the reason in order of importance.
Delivery Tips Have participants share aloud the reasons they have come up with.
What would you evaluate with a budget?

Review Questions
What can a budget help a business control?
Creating a Budget
Past financial statements are often the best references when creating a budget. Any bank statements,
utility bills, and records of income and expenses will help. A list of all sources of
income should be kept and updated at all times. Knowing the possible ways that
income might be gained will allow a business to create a realistic budget. It might be
helpful to combine all sources of income and create a grand total for each month
and each year. Expenses should be considered as either fixed expenses or variable
expenses. A fixed expense is one that usually does not or should not change, such as
rent. A variable expense is one that may vary from time to time, such as a utility bill.
Check the expected monthly income against the expected monthly expenses. Do the same for the year.
If the income turns out to be less than the expenses, adjust your expenses. Eliminate any unnecessary
expenses if possible. If the income equals more than the expenses, great! Plan to save some of the
money your business will have left after expenses. This saved money can be used if ever the income
does in fact equal less than the expenses. Once your budget has been created, this is not the end. A
budget should be reviewed and updated periodically as changes in income and/or expenses occur.
Demonstrate your understanding of what must be considered when creating

Topic Objective
a budget.
Topic Summary Create a year’s budget for an electronic repair company called Kardonn & Co.
Page 68
Repair, Inc.
Be sure you understand the thoughts and considerations that must go into
Planning Checklist
planning a budget for a business.
Use the story below to create the actual budget (for the beginning of the
year time period)of Kardonn & Co. Repair, Inc.
Kardonn & Co. Repair, Inc. is an electronic repair company. It has been open
for about five years. With the constant release of new forms of electronic
Stories to Share technology, the business has yet to see the need for their services slow
down. Their services include repair of cameras, laptops, desktops, tablets,
cell phones, smart phones, and televisions, to name a few.
Business owners often create their budgets with the help of others such as a
business partners or an accountant. Allow individuals to break into small
Delivery Tips
groups to create the budget and actual expenses of the company listed
above.
What should be done if the income turns out to be less than the expenses?
Review Questions
What should be done if income equals more than expenses?
Comparing Budget to Actual Expenses

While budgets are a projected or expected amount in terms of spending, “actual expense” is the realized
amount that was ultimately spent by the end of the period. Expenditures can easily change from the
budgeted amount, and revenues (income) might also not reflect what was
previously forecasted. For this reason, it is important for businesses to recognize
the differences in their budgets as compared to their actual expenses. It is very
rare that actual expenses will match exactly with the budget at the end of a
period. However, this does not mean that budgets are unnecessary; they still
provide limits and guidelines to spending before the spending actually occurs.
Remember, it can be hard to stop a spending spree once it has begun (all you
shoppers should know this quite well) thus, a budget can aid a business in controlling its spending.
Looking at actual expenses and comparing them to the initially planned expenses can allow a business to
improve its budgeting plans for the future.
Topic Objective Demonstrate your understanding of the difference between a budget and
Page 69
actual expenses.
Use the story below to create the actual expenses of Kardonn & Co. Repair
Topic Summary
Inc. at the end of year period.
Materials Required Paper, Writing utensil
Keep in mind the budget you created for Kardonn & Co. Repair Inc. in the
Planning Checklist previous activity. You will be comparing it to the actual expenses of the
business.
Compare the budget you created for Kardonn & Co. Repair, Inc. in the
Recommended Activity previous activity to the actual expenses you create for the business after
reading the story below.
Kardonn and Co. Repair, Inc. is a popular electronic repair business. This
year, the business suffered from losses in equipment due to a few pipes
bursting within their facility, which also rendered the location temporarily
Stories to Share uninhabitable. They were forced to rent out a new location, while still
making payments on the initial facility. Around the same time, a popular new
electro-gadget which had recently hit the market was proving to be full of
glitches, causing many to seek out the repair services of this company.
Business owners often create their budgets with the help of others such as a
business partner or an accountant. Allow individuals to put their heads
Delivery Tips
together by breaking into small groups to create the budget and actual
expenses of the company listed above.
What is a budget?
Review Questions
What is an actual expense?
Page 70
Module Ten: Review Questions
1. What can budgets project?
a) Cash inflow only
b) Cash outflow only
c) Cash inflow and outflow
Budgets can project other items on the Balance sheet as well.
2. What can a budget help a business control?

a) Loss of employees
b) Loss of customers
c) Spending
d) Revenue earned
Understanding what comes into the business as well as what must go out, can give the business
a clear financial picture which can help avoid overspending.
3. What is the best reference when creating a budget?

a) The company’s past financial statements
b) Other company’s past financial statements
c) Verbal input from employees
d) Other company’s current financial statements
Only the information of the company in question is relevant to the budget. Verbal input may be
helpful, but is not a reliable source.
4. What should be done if income equals more than expenses?
a) The excess should be saved

b) The excess should be used to purchase inventory for the company
c) The excess should immediately be paid to the IRS
d) There will never be excess
If there is excess, it should be saved for the future event of the expenses exceeding the income.
Page 71
5. What is a budget?
c) Both A & B
6. What is an actual expense?

c) Both A & B
Page 72
The trick is to stop thinking of it as “your
money.”
IRS Auditor
Module Eleven: Auditing
Almost done …..WOO HOO! For this unit, we will be discussing what
an audit is, when and why you audit, as well as internal and external
audits. I hope you’ve enjoyed learning this vital information and
we’re sure you will find much use for it in the near future.
What is an Audit?
An audit is basically an examination of the accumulation of financial records, in
order to determine if such records and, or financial statements are in accordance
with the rules of Generally Accepted Accounting Principles or (GAAP). An audit can
also help to determine if all records are free from any errors or material
misstatements, or fraud. Any discrepancies may be reported to the Internal
Revenue Service (IRS).
Interestingly enough, the practice of auditing is not only unique to present day government structures.
Auditing was first introduced under the reign of Queen Elizabeth I in 1559, who established the Auditors
of the Empress. They were responsible for auditing the exchequer payments. But even before then,
there is said to have been a public official charged with auditing government expenditure as an Auditor
of the Exchequer in 1314 England. Queen Elizabeth’s system, however did not sustain. Then finally in
1780, statute appointed the Commissioners for Auditing the Public Accounts
Topic Objective To use humor to get a closer look at how auditing works.
Topic Summary Comprehend the information presented in this unit to understand the facts
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presented in the video behind the humor.
Materials Required Lap top / PC
Watch the video at this link:

http://www.youtube.com/watch?v=cFW7yTOmRM8
Delivery Tips None
Review Questions What is an audit?
When and Why Would You Audit?

As stated above, an audit is usually done to make sure everybody is on the same
page and appropriately and legally preparing their records in accordance with
the proper rules and regulations of the (GAAP). Let’s not also forget about “BIG
BROTHER" "UNCLE SAM" or whatever you choose to call that big government
agency in the sky......... (No, not that one yet, let’s assume you’re still alive and
kicking for the purposes of this training), but yes we are talking about the IRS. An
audit, unlike accounting, is not concerned about the preparation of the proper documents, but is
most concerned if they were prepared correctly and according to the guidelines of (GAAP) and free of
fraud. There are six parts of every audit report, which include: the report title, the report address, the
introductory paragraph, the scope paragraph, opinion paragraph, and the lastly the signature of CPA
firm. Keep in mind the order may vary from auditor to auditor, but for the most part, the audit should
contain all the elements listed above.
The best time to do an audit would probably be, when you are prepared to handle the stress of actually
going through one. For the people who took this course, no worries, because you have all been taught
to do everything the right way. For the rest, they might need to take a towel to collect all the sweat their
going to accumulate during the audit. All joking aside, an audit is usually done before the release of the
financial statements, but typically on an annual basis, before the end of each year.
Topic Objective When and why you audit
Topic Summary Auditing
Materials Required Flip chart, markers
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Accounting hangman: using clues from the unit pick five to ten words to play
the game. Play as a large group.
Delivery Tips None
Why are Audits done?

Review Questions
How many parts are there to an audit?
Internal
There are two kinds of audits, internal and external. An internal audit is usually done
by someone hired by a company or within the company, and doesn’t necessarily have
to be a CPA (Certified Public Accountant). For the purposes of internal audits, some
companies may have CIA's, no not the Central Intelligence Agency, but a
Certified Internal Auditor.
There is also a governing agency called (IIA), which is called the Institute of Internal
Auditors. An internal audit is designed to add value and improve an organization’s operations, as well as
improve the effectiveness of risk management, control, and governance processes. When there is room
for improvement, an internal auditor may make suggestions, or recommendations for enhancing,
processes, policies, and procedures.
Topic Objective To listen to and understand the results of an internal audit.
Comprehend the information presented in this unit to understand the type

Topic Summary
of information presented as the result of an internal audit.

http://www.youtube.com/watch?v=aDezw_ozIzw
Delivery Tips None
Page 75
Review Questions What is an internal audit?
External
An external audit is an audit that is done periodically by an independent entity, one outside of a
company, to determine if accounts are accurate and complete, prepared in accordance with the
regulations of the GAAP, and that the financial records have been done fairly, and
appropriately.
Topic Objective To listen to and understand how to perform an external audit.
Comprehend the information presented in this unit to understand the steps

Topic Summary
taken to perform an external audit.

http://www.youtube.com/watch?v=uz-TSaCL3LQ&feature=related
Delivery Tips None
Review Questions What is an external audit?
Page 76
Module Eleven: Review Questions
1. Audits are done in order to be in compliance with what/whom?
a) GAAP
b) FEMA
c) FMLA
d) AHA
GAAP stands for Generally Accepted Accounting Principles.
2. What is a financial audit concerned with?

a) Financial records
b) Employee records
c) Employee and financial records
As its name states, a “financial audit” is only concerned with the finances of a company. It seeks
to uncover incidences of misstatements and/or fraud.
3. What does the IRS stand for?

a) International Revenue System
b) Internal Revenue Service
c) Investigational Revenue System
d) Impactful Revenue System
The IRS serves many functions. One of these functions may be to audit a company if it finds just
cause.
4. What is the first part of the audit mentioned?

a) The report address
b) The introductory paragraph
c) The scope paragraph
d) The report title
The parts of the audit include: the report title, the report address, the introductory paragraph,
the scope paragraph, opinion paragraph, and the lastly the signature of CPA firm.
5. What type of audit is conducted by someone in the company?

a) Internal
b) Focused
c) External
d) Non-focused
There are two types of audit: internal and external. Internal audits are conducted by someone
from within the company or someone the company hires. External audits are conducted by
third-party agencies.
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6. Who would conduct an internal audit for a company?
a) Certified Internal Auditor
b) Administrative assistant
c) Telephone representative
Certified Internal Auditors are credentialed to perform this task.
7. What type of audit is conducted by a third party agency?

a) Internal
b) Focused
c) External
d) Non-focused
There are two types of audit: internal and external. Internal audits are conducted by someone
from within the company or someone the company hires. External audits are conducted by
third-party agencies.
8. How often is an external audit conducted?

a) Every week
b) Every year
c) Every month
d) Periodically
The periodical external audit is generally sufficient.
Page 78
A conclusion is the place where you got
tired of thinking
Arthur Bloch
Module Twelve: Wrapping Up
Although this workshop is coming to a close, we hope that your

journey to improve your bookkeeping skills is just beginning. We
wish you the best of luck on the rest of your travels! You survived!
Now it is landing time. Don’t you feel a whole lot smarter? Your brain
cells have absorbed so much, we can almost see them bulging
through your head! Take a look at the person sitting next to you and
see if they learned just as much as you. Doesn’t their head look
bigger?
Words from the Wise

 Yogi Berra: In theory there is no difference between theory and practice. In
practice there is.
 Dwight Eisenhower: Plans are nothing; planning is everything.
 Jonas Salk: The reward for work well done is the opportunity to do more.
Parking Lot
Review the items on the parking lot. Some items may need one-to-one participant follow up. You may
be able to clear other items up now. Follow-up workshops may even be appropriate.
Action Plans and Evaluations

Do a quick round robin and ask everyone to share one thing that they learned today. Then, ask
participants to make sure their action plans and evaluations are complete.
If possible, ask participants to buddy up and set up a follow-up system, so that they can check up on
each other in the coming days, weeks, and months. If appropriate, provide your contact information in
case they have any questions.
Page 79
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PROJECT MANAGEMENT TRAINING Instructor Guide

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Basic Bookkeeping

How Do I Customize My Course?.............................................................................................................5

Maximizing Your Training Power............................................................................................................7

Module One: Introduction......................................................................................................................9

The Parking Lot.....................................................................................................................................10

Module Two: Basic Terminology (I)......................................................................................................12

Cost of Goods Sold................................................................................................................................15

Module Two: Review.............................................................................................................................16

Module Three: Basic Terminology (II)...................................................................................................18

Module Three: Review..........................................................................................................................21

Module Four: Accounting Methods......................................................................................................23

Differences between Cash and Accrual.................................................................................................25

Module Four: Review Questions............................................................................................................26

Module Five: Keeping Track of Your Business.......................................................................................28

The General Ledger...............................................................................................................................33

Module Five: Review Questions............................................................................................................35

Module Six: Understanding the Balance Sheet.....................................................................................37

Module Six: Review Questions..............................................................................................................44

Module Seven: Other Financial Statements..........................................................................................46

Cash Flow Statement............................................................................................................................47

Budget vs. Actual..................................................................................................................................49

Module Seven: Review Questions.........................................................................................................51

Module Eight: Payroll Accounting / Terminology.................................................................................53

Employee Tax Withholding’s.................................................................................................................54

Employer Tax Expenses.........................................................................................................................54

Tracking Accrued Leave........................................................................................................................55

Government Payroll Returns/Reports...................................................................................................55

Module Eight: Review...........................................................................................................................56

Module Nine: End of Period Procedures...............................................................................................57

Working with the Trial Balance.............................................................................................................60

Posting Adjustments and Corrections...................................................................................................61

Module Ten: Financial Planning, Budgeting and Control......................................................................65

Comparing Budget to Actual Expenses.................................................................................................67

Module Ten: Review Questions.............................................................................................................69

Module Eleven: Auditing......................................................................................................................71

When and Why Would You Audit?........................................................................................................72

Module Eleven: Review Questions........................................................................................................75

Module Twelve: Wrapping Up..............................................................................................................77

Action Plans and Evaluations................................................................................................................77

Our courseware packages offer you top-quality training materials that

How Do I Customize My Course?

We recommend these additional materials for all workshops:

 Laptop with projector, for PowerPoint slides

 Quick Reference Sheets for students to take home

 Timer or watch (separate from your laptop)

Maximizing Your Training Power

And now, time for the training!

Module One: Introduction

Suggestions for the trainer:

By the end of this workshop, participants will be able to:

 Understand basic accounting terminology.

 Use a journal and general ledger to document business financials.

 Utilize the balance sheet.

 Identify different types of financial statements.

 Uncover the reasons for and actually create a budget.

 Be familiar with internal and external auditing.

Module Two: Basic Terminology (I)

Current Assets $ Current Liabilities

Cash $ Accounts Payable $_____________

Prepaid Expenses $ Payroll Accrual $_____________

Land (Valued at Cost) $

Improvements $ Total Liabilities $_____________

Other Assets $ Total Net Worth $_____________