Preparing a Business Report

Competencies:
To discuss and explain the important points in
business reporting,
To enumerate and explain the steps in generating a
business report,
To emphasize the point of upward communication,
and
To discuss on point the parts of a business report.
 INTRODUCTION
• Business reporting on a regular basis such as monthly,
quarterly, semi-annually or yearly is a must for those who
owns/manages the business.
• Business report also serve the purpose of showing what the
business has achieved compared to what was planned for a
particular period, normally on an annual basis.
• Business report can be used for securing additional capital by
attracting new investor or for loans purposes in the bank as
well as adds to the good reputation of the company.
According to Thompson (2005), in generating a
business report, the following steps should be
considered:
1. Determine the scope (purpose) of the report;
2. Consider the target audience (readers);
3. Gather and organize the supporting information
(research);
4. Analyze and weigh the supporting information;
5. Determine the solutions, findings and/or
recommendations; and
6. Determine the report format.
 Important Points to Remember:
• Business reports facilitate the evaluation of
progress and decision-making process for
business purpose. It is usually a type of
upward communication in which
communication process starts from lower level
to upper level.
UPWARD COMMUNICATION
 Important Points to Remember:
• Thompson (2005) further said that before actually writing,
organize the information into an outline form, and formulate an
outline for the report by choosing the major supporting ideas,
developing the details and eliminating the unnecessary ideas
that were gathered.
• A report could be represented as a memo report, a
standardized form report, or a formal report.
• The report must be accurate and objective.
The business report format can be as
follows :
1. Executive summary
2. Purpose and Rationale
3. Context which includes the vision-mission statement,
strategies, organizational structure and staffing
4. Actual performance versus plans/targets with the
corresponding remarks of why it happened that way
5. Facilitating and hindering factors in the achievement of
plans
6. Issues and concerns that were addressed
The business report format can be as
follows :
7. Financial statements with its corresponding
summaries and interpretations
8. Conclusions and recommendations
Bookkeeping
Competencies:
To define and explain the purpose of doing
bookkeeping;
To enumerate and explain the possible help or
in preparation of keeping good records;
To enumerate and explain the different
records that must be kept in a business.
GUIDE QUESTIONS:
1. What is the importance of bookkeeping?
2. What do you think is the main purposes of
keeping the records up-to-date especially the
different records that must be kept in a
business?
 Bookkeeping
• Bookkeeping is the science of recording history. It is the
physical recordkeeping of someone’s transactions as they
relate to assets, liabilities, income and expenses (Stern, 1993)
• Bookkeeping is an indispensable subset of accounting.
• Bookkeeping refers to the process of accumulating,
organizing, storing and accessing the financial information
base of an entity, which is needed for two (2) basic purposes
(dummies.com) :
(a.) facilitating the day-to-day operations of the entity and
(b.) preparing financial statements, tax returns and internal
reports to managers.
The following are the possible help or in
preparation of keeping good records:
1. Monitor the progress of a business
2. Preparation of financial statements
3. Identification of sources of income
4. Keep track of deductible expenses
5. Keep track of basis in property
6. Preparation of tax returns
7. Support items reported on tax returns
 The following are some of the types of
records that should be kept:
1. Gross receipts- are the income receive from a business. The owner
must keep the supporting documents that show the amounts and
sources of these gross receipts.
Documents for gross receipts include the following:
• Cash register tapes . Deposit information(cash and credit sales)
• Receipt books .Invoices
2. Purchases – are the items that an owner buy and resell to customers.
If you are a manufacturer or producer, this includes the cost of all raw
materials or parts purchased for manufacture into finished products.
The supporting documents should show the amount paid and that the
amount was for purchases. Documents for purchases include the
following:
• Cash register tape receipts . Cancelled checks or other documents that identify
payee, amount and proof of payment/ electronic funds transferred
• Credit card receipts and statements .Invoices
 The following are some of the types of
records that should be kept:
3. Expenses – are the costs you incur (other than purchases) to
carry on the business. The supporting documents should show the
amount paid and a description that shows the amount was for a
business expense. Documents for expenses include the following:
• Cash register tapes . Cancelled checks or other documents that
identify payee, amount and proof of payment/ electronic funds transferred
• Account statements .Invoices
• Credit card receipts and statements . Petty cash slips for small cash payments
4. Travel, Transportation, Entertainment and Gift Expenses. If you
deduct travel, entertainment, gift or transportation expenses, you
must be able to prove (substantiate)certain elements of expenses.
 The following are some of the types of
records that should be kept:
5. Assets are the property, such as machinery and furniture, that you own
and use in a business. One must keep records to verify certain
information about the business assets. The owner needs records to
compute the annual depreciation and the gain or loss when you sell the
assets. Documents for assets should show the following information:
When and how you acquired the assets
Purchase price
Cost of any improvements
Deductions taken for depreciation
Deductions taken for casualty losses, such as losses resulting from
fires or storms
How you used the asset
 The following are some of the types of
records that should be kept:
When and how you disposed of the asset
Selling price
Expenses of sale

The following documents may show this information:

Purchase and sales invoices
Real state closing statements
Cancelled checks or other documents that identify payee, amount
and proof of payment/ electronic funds transferred
 The following are some of the types of
records that should be kept:
6. Employment taxes. These are specific employment
tax records you must keep. Keep all records of
employment for at least four years.
 SOUND FINANCIAL MANAGEMENT
PRACTICES
Competencies:
1. To define and explain the concept of financial management;
2. To enumerate and discuss in detail the sound financial
management practices;
3. To enumerate and explain the cash management strategies that
you could be applied to better guarantee that the entrepreneur
will have cash whenever he/she needs it by DTI-BSMED.
 INTRODUCTION
The resources you need, in order to run your business
and produce the goods or services, are men, materials
and machine.
To have all these resources, you need MONEY.
It is important that you know how to gather, organize,
coordinate and record the money or financial
resources of your business. This is called FINANCIAL
MANAGEMENT.
 SOUND FINANCIAL MANAGEMENT
PRACTICES
ADOPT EFFECTIVE FINANCIAL PLANNING. Financial planning is
perhaps the most difficult task of the owner-manager. Planning is
important because the funds of the enterprise are limited and used
properly for the good of the business.
OBSERVE SOUND FINANCING. Most of the time an entrepreneur
does not have enough money to start or operate the business. When
this happens, the owner may decide to borrow money. In borrowing,
one must be careful not to borrow too much. (40%- borrowed money
for the operation of the business; while 60% must come from ones
own pocket.)
 SOUND FINANCIAL MANAGEMENT
PRACTICES
Businesses that are funded by 40% debt is burdened with having to pay
very high interests.
RECORD AND MONITOR CASH FLOW. Cash flow is the actual
movement of cash within a business. The entrepreneur needs to record
the “sources-and-uses-of-funds” in order to knowhow much cash is
needed, and when that money is required by a business within a period
of time.
KNOW THE BUSINESS COSTS. Costing is calculating the total money
spent in making and selling the product, or completing a service to be
offered, in the market. Costing helps the entrepreneur set prices, make
better decisions about business and plan for future operation of the
company.
 SOUND FINANCIAL MANAGEMENT
PRACTICES
Some examples of costs are raw materials bought to make
products or complete services; salaries and wages of factory
workers or service crew; and electricity for the machines, light and
office equipment.
REDUCE COSTS. It will make the business more profitable when
the costs are minimized.
Some ways to reduce costs can be by recycling(e.g. papers,
containers); using energy-saving device or materials(e.g. energy-
saving lamps, rice hulls, electric fans); buying second-hand
equipment or renting instead of buying; and asking family
members, like children and spouse, to help in the business.
 SOUND FINANCIAL MANAGEMENT
PRACTICES
RECORD ALL BUSINESS TRANSACTIONS. Anything that are
owned by the owner and used for business, proceeds(sales) from
selling the products or services, and at the same time the
expenses incurred in operating the business, should be written
down. This will give the entrepreneur a fairly accurate picture of
how the business is doing. (Handle well the bookkeeping and
accounting system, record-keeping, tax payments, collecting of
money, insurance, budgeting, and managing of risks). This will
keep the business financially stable and enable it to stay in
operation for a long time. There is nothing like knowing how to
keep track of your business, how is doing and if it is going as
planned.
 SOUND FINANCIAL MANAGEMENT
PRACTICES
PREPARE INCOME STATEMENTS. The income statements will
show whether the business made a profit or suffered a loss for a
given period. Generally, the entrepreneur should know if revenues
are greater than expenses for a given month, quarter, or year.
SEEK THE SERVICES OF A GOOD ACCOUNTANT. If the
entrepreneur is not an accounting graduate or does not have any
background in accounting, it is best to avail of the services of a
good accountant to set up the firm’s books of accounts and to
initiate him/her into recording process. Once the entrepreneur gets
used to it, recording will almost be mechanical and routine. Doing
it regularly will be very helpful in many instances, like payment of
taxes, meeting cash requirements, payment of debts in time and
business expansion in the future.
 SOUND FINANCIAL MANAGEMENT
PRACTICES
MANAGE ENTERPRISE FUNDS PROPERLY. Managing funds is
not simply maintaining sufficient cash for the business operations,
but entails a more comprehensive approach than just having ready
cash. Part of this is knowing the possible sources of funds, like
friends, family members, banks and other lending institutions. It is
also important to budget the cash properly and that there is an
internal control, so that cash is available whenever it is needed.
THE DTI-BSMED has also
enumerated the following cash
management strategies that you
could be applied to better guarantee
that the entrepreneur will have cash
whenever he/she needs it:
 BARTER
• If paying cash can be avoided, consider barter.
• In common Filipino business language, this is often called “ex
deal” or exchange deal or “trade-in.” This is a usual practice
in trading, which sometimes involves exchange of goods, even
between competitors.
• Mobile phone retailers and tire supply merchants exchange
items in their stocks with those not found in their inventory,
but are nonetheless available from their neighboring
competitors, either with little or no cash involved.
 Once-a-week disbursement
• As much as possible, allow disbursements only
once a week for easier monitoring of the inflow and
outflow.
 DISALLOWANCE OF PREPAYMENT
• Simply put, do not make payments even before the
obligations become due.
• It is a different picture, though, if paying
beforehand will save the entrepreneur more money.
 Taking advantage of non-
interest bearing payables
• Postpone payment by all means.
• You can use the money for income-generating
activities like adding to the business working
capital.
 Some tricks with regard to
issuing a check
• If the entrepreneur’s creditor will allow it, issue a
post-dated check to pay one’s debt. In banking,
there is such a practice called ”playing the float” or
funding the checking account only at the moment
of check encashment between or among different
banks.
• Take advantage of the period between the time a
check is issued and the moment the creditor will
cash it.
 Some tricks with regard to
issuing a check
• The entrepreneur can also mail the check to buy
even more time. Be wary, though, of the law
penalizing issuance of bouncing checks.
• Just be sure that the company has sufficient funds
in the bank at the moment of encashment.
 CONCENTRATION BANKING
• If the entrepreneur maintains different accounts at
different banks, it is suggested that he/she also
maintain a “main” bank account, where all deposits
are transferred to facilitate bank reconciliation.
 “lock box system”
• Sometimes, the distance of the entrepreneur’s
debtors prevents them from paying. A good way to
resolve this is to rent a post office box (P.O. Box).
• Cluster your debtors into one area and select a
central post office closest to them.
• Rent a P.O. Box maintained by that post office and
notifies the debtors that they can also send their
payments to that P.O. Box.
 “lock box system”
• An alternative to this is opening an account at a
bank branch nearest to the debtors. The payment
payments made by these customers to that
account will be remitted by the bank to the branch
where you maintain your account.
 REQUIREMENT OF DOWN PAYMENT
• Finally, require your customer to make a
down payment if paying in full is not
possible.
 Something to Ponder
“In business, keeping accounts of
transactions implies excellent record-
keeping.”
“A business can be profitable for a long
time, but it can also incur losses
anytime.”
“It pays to exercise prudence when
handling one’s finances.”
 Interpreting Financial
Statements
Competencies:
1. To define financial statements and
discuss its important points;
2. To enumerate and explain the sets of
financial statements;
3. To assess and analyze the given sets of
financial statement and interpret each.
 Introduction
Financial statements provide information
about the financial position,
performance and changes in financial
position of an enterprise that is useful to
a wide range of users in making
decisions.
 Important point/s in the
stated definition
• Provide information about the financial position-
based on the evidences which are balance sheets,
income statements and cash flow statements; the
financial manager can interpret whether the business
is earning or not; and/or in the verge of bankruptcy.
• Performance- by the help of financial statements we
can tell that if the company is earning in the previous
year and to compare to the present financial
statement, the management will have the chance to
create a plan that is suitable to prevent or just
continue with their processes of operation in the
business.
 Important point/s in the
stated definition
• Changes in financial position- we mean here that
whether the company is evidently performing and
earning, the management has the obligation to
plan for maintaining the financial condition of the
company or create a counter plan if the company
is not doing well (some will resort to cost cutting
and employee lay-off)
• That is useful to a wide range of users in making
decisions- When we talk about wide range of
users we mean people who are internally and
externally involved in the operation of the
business.(Examples: investors and creditors)
 SETS OF FINANCIAL
STATEMENT
1. Income statement (profit and loss)
2. Balance sheet [ Assets = Liabilities +
Owner’s Equity)
3. Statement of cash flow { Operating
activities, investing activities and
financing activities}
Income Statement (Profit
and Loss Statement)
It is a summary of the financial
performance of a business over time
(monthly, quarterly or annually is most
common).
 It reflects the past performance of the
business.
The report most often used by small
business owners to track how their
business is performing.
 Income Statement (Profit and
Loss Statement)
It lists all the company’s income and
then subtracts all of its expenses.
The resulting amount left at the bottom
is the profit (loss) that the company
experienced.
Significant Formula:
Profit = Revenues earned - Expenses incurred
Example of Income Statement
BLUE MOON COMPANY
Income Statement
For the year ended December 31, 2018

Income
Sales Revenue ₱41,000.00
Other income ₱12,300.00
Total Income ₱53,300.00

Expenses
Advertising ₱7,000.00
Equipment ₱4,400.00
Legal services ₱2,800.00
Office supplies ₱5,500.00
Rent ₱4,000.00
Salaries ₱11,000.00
Utilities ₱5,200.00
Total expenses ₱39,900.00

NET INCOME ₱13,400.00

 Interpretation of Income
Statement
The income exceeds business
expenses, the business will have
effectively made a profit.
 Balance Sheet
 It measures what the company owns
and subtracts what it owes.
It is a snapshot of a company’s
financial condition at any particular
time.
It is also the heart of double-entry
accounting. Each side equals the other.
 Balance Sheet
 The central equation of a balance
sheet is:
Assets = Liabilities + Owner’s Equity
 Balance Sheet
A balance sheet has two (2) formats:
1. Account form balance sheet- it is just
like a T-account listing of assets on the
debit side and equity and liabilities on
the right hand side.
2. Report form balance sheet – lists
assets followed by liabilities and equity
in vertical format.
 Example of Balance
Sheet ( Account Form) BLUE MOON COMPANY
Balance Sheet
As of December 31, 2018

ASSETS LIABILITIES & EQUITY

Current Assets Liabilities
Cash ₱12,000.00 Accounts Payable ₱26,100.00
Inventory ₱22,500.00 Loan Payable ₱12,400.00
₱34,500.00 Total Liabilities ₱38,500.00

Non-current Assets Owner's Equity

Equipment ₱16,000.00 Paid-in Capital ₱12,000.00
Total Assets ₱50,500.00 Total Liabilities & Equity ₱50,500.00
 Example of Balance Sheet
( Report Form)
BLUE MOON COMPANY BLUE MOON COMPANY
Balance Sheet Balance Sheet
As of December 31, 2018
As of December 31, 2018
A SSETS
Current Assets
Cash ₱12,000.00
Inventory ₱22,500.00
₱34,500.00

Non-current Assets
Equipment ₱16,000.00
Total Assets ₱50,500.00

LIA B ILITIES & EQUITY

Liabilities
Accounts Payable ₱26,100.00
Loan Payable ₱12,400.00
Total Liabilities ₱38,500.00

Ow ne r' s Equity
Paid-in Capital ₱12,000.00
Total Liabilities & Equity ₱50,500.00
 Cash Flow
It refers to generating or producing
cash (cash inflows) and using or
consuming cash (cash outflows).
It is the lifeblood of the business and
keep that blood circulating at all times in
order to avoid failure.
 Cash Flows (3 Areas)
The (3) three areas of cash flow
statement:
1. Operating activities. These constitutes
the revenue-generating activities of a
business.
Examples: cash received and
disbursed for product sales, royalties,
commissions, fines, lawsuits, supplier
and lender invoices and payroll.
 Cash Flows (3 Areas)
The (3) three areas of cash flow
statement:
2. Investing activities. These constitutes
payments made to acquire long-term
assets, as well as cash received from
their sale.
Examples: purchase of fixed assets and
the purchase or sale of securities issued
by other entities.
 Cash Flows (3 Areas)
The (3) three areas of cash flow
statement:
3. Financing activities. These constitute
activities that will alter the equity or
borrowings of a business.
Examples: are the sale of company
shares, the repurchase of shares and
dividend payments
 Example of Statement of Cash
Flow BLUE MOON COMPANY
Statement of Cash Flow (direct approach)
For the year ending December 31, 2018

Cash flows from operating activities:

Cash receipts from customers ₱45,100.00
Cash paid to suppliers -₱36,600.00
Net cash provided by operating activities ₱8,500.00

Cash flows from investing activities:

Proceeds from sale of equipment ₱29,300.00
Net cash provided by investing activities -₱20,800.00
Legal services ₱2,700.00

Cash flows from financing activities:

Cash received from issuing stock ₱6,000.00
Cash paid for dividends -₱10,000.00
Net cash provided by financing activities -₱4,000.00

Net increase in cash ₱7,200.00

Cash balance at January 1, 2018 ₱11,300.00
Cash balance at December 31, 2018 ₱18,500.00
 Interpretation of Statement
of Cash Flow:
In this example, we used direct approach that
requires to present cash flow information
that is directly associated with the items
triggering cash flows.

The company is most involved with operating

activities than investing activities. The
company needs an improved financing
activities to settle its financial obligations
whether inside or outside the company.