Session 3: The Entrepreneur Tracking His Resources

MODULE 3
SESSION 3:
THE ENTREPRENEUR TRACKING HIS RESOURCES
Geniva Nario, CAR MEntrep & Mar Belgica, Entrep Module in The Entrepreneurial Mind Bicol University
August 2020 College of Business, Economics, and Management – Entrepreneurship Department
What is This Session About?
Have you ever observed after buying something, let’s say a store in the mall, the cashier or the store
owner immediately record what you bought? Then, they will give you an official receipt of the items you
bought from them. Or have you ever bought something in a sari-sari store and ask a favor “Pa lista na lang
po muna”? Then, the store owner immediately said “Utang na naman!” and get his logbook to record the
item you bought in credit. The cashier or store owner simply record the transaction (i.e. items you bought
from them). That transaction will now be kept in a book through a process of what we called “bookkeeping”.
This session re “Entrepreneur Tracking His Finances” is about bookkeeping i.e. (keeping business
records of what is bought, sold, owed and owned and records of money IN, money OUT and what is
LEFT). We will also shed light on how to calculate the cost and price of a product or service and some
saving tips for the business.
What Will You Learn?
At the end of this session, you should have achieved the following:
• Understood how to keep records of business transactions.

• Calculate price of a product or service.
• Know how to prepare profit and loss statement and balance sheet
• Understand the importance of:
o Keeping records of the money amounts that come in and go out is vital to control the
profitability of the business.
o Pricing determines directly our income and thus our profit.
o Income and expenditures determine the profit we make in our business and profit is one
of the ultimate reasons for operating our business.
o A balance sheet provides information on the financial position of your business.
What Do You Already Know?
What do you think is the most powerful statement from this quotation? I’ll give you one (1)
minute to think and give me your answer by encircling it. One (1) minute starts now!
60, 59, 58, 57 ………………………
…………………………………………….
30, 29, 28, 27 ………………………
…………………………………………….
10, 9, 8, 7 ……………………………
……………………………………………
3, 2, 1 …………………………………
……………………………………………
Time’s up!
What is your answer?
…….. That’s a good answer!
If you will ask me what is the most powerful statement from the quote, my answer is, “double
entry bookkeeping was a hell of invention!” Yes, that’s right! Ask an accounting or business student if
they know “Debit, Credit”, you will see a change in their facial expression. It’s like “I was in hell” facial
expression! Phew! Just kidding! Ok on a serious note, double entry or debit-credit is the key language in
bookkeeping. You have to understand double entry or debit-credit to do bookkeeping
Let’s Reflect
The main question that we want to answer in this session is “Why do entrepreneurs keep books?”
It is most appropriate, therefore, to start Bookkeeping with the questions, “Why is there a need to
keep books?” and “For what purpose?”.
Think these questions over. And then read the statements below and tick those that you agree with:
____ 1. Monitor the progress of the business
____ 2. Identify sources of receipts
____ 3. Keep track of expenses
____ 4. For preparation of financial statements
____ 5. Tax purposes
____ 6. For credit transactions
Let’s Study!
An Introduction to Bookkeeping
• BOOKKEEPING: What it is?

➢ Keeping records of:
a. What is BOUGHT, SOLD, OWED, and OWNED.
b. Records of money IN, money OUT, and what is LEFT (In minus OUT)
Note: Maintaining documents, which are the source of information about the business, is
critically important.
• WHY AN ENTRERENEURS SHOULD KEEP BOOKS?
Monitor the progress of your Identify sources of receipts

Keep track of expenses
business
Let’s Think About This
Prepare your financial

Tax assessment
statements Facilitate credit transactions
➢ Monitor the progress of your business

(Are my sales today better than yesterday? Is my business growing fast or slow?)
➢ Identify sources of receipts
(Who bought my product? What product or service giving me big sales?)
➢ Keep track of expenses
(Where did I spend the money?)
➢ Prepare your financial statements
(I need the records of my sales and expenses to prepare my balance sheet, income statement
and cash flow statement)
➢ Tax assessment
(Woah! I’m contributing a lot of money to the society!)
➢ Facilitate credit transactions
(Can I buy these things in credit? Can I sell these things in credit?)
• COMMONLY USED DOCUMENTS

The following documents are commonly used in business transactions. The details from these
documents like document number, date and time, amount, etc. are recorded in a book.
➢ Receipts
➢ Invoices
➢ Payment slips
➢ Checks
➢ Purchase orders
➢ Delivery notes
➢ Bank slips
To properly record your transactions in the book, you must:
a. COLLECT ALL documents (receipts, invoices, etc.) for every transaction.

b. If you don’t get any receipts or invoices after a transaction, you MUST have a list of items
purchased indicating the date, items and amount. This serves as a document for purchases.
c. SEPARATE the kinds of documents where possible for easy access. (Example: Folder A for
Receipts and Folder B for Purchase Orders)
d. Place or pile them in a CHRONOLOGICAL ORDER. (A good practice is to arrange
alphabetically “Documents from” or by date)
e. DO NOT LEAVE loose documents lying around.
f. Keep all your documents in a SECURE PLACE - by filing in a cabinet.
• KEEP KEY SEPARATE BOOKS

To start recording your transactions, you should have five (5) hard cover books with the
following labels:
1. CASH BOOK
2. DEBTOR’S BOOK
3. CREDITOR’S BOOK
4. INVENTORY BOOK
5. INCOME AND EXPENSES
These are the key basic books you MUST have to record all your business transactions.
• KEY ACTION PRINCIPLE: Separate Business from Private Transactions!

To be able to determine business profits:
1. Remember: the owner and the business are two separate entities.
2. Separate private transactions (like paying fees, buying food for home use, etc)
3. Pay yourself a salary. This enables you to cater for your private transactions.
4. Resist from using business money for private transactions.
! KEEP THIS IN MIND! You must separate business transactions from private transactions! I
will repeat! You MUST SEPARATE business transactions from private transactions!
Now you have been introduced to the world of bookkeeping. You know now the definition of
bookkeeping, why do we keep books, what are the commonly used documents for bookkeeping, what are
the key basic books to perform bookkeeping and the key principle to do bookkeeping.
Ok let’s continue! Let us now define and learn how to use the first three (3) basic books for
bookkeeping i.e. Cash Book, Debtor’s Book and Creditor’s Book.
• CASH BOOK
This is the book in which you will record all the cash money that COMES IN and GOES OUT.
It helps you answer the following questions:
➢ How much were my receipts this day/week/month/year? (MONEY COMES IN)
➢ How much were my payments this day/week/month/year? (MONEY GOES OUT)
➢ How much cash do I have at hand this day/week/month/year? (WHAT IS LEFT)
➢ Which month posted higher receipts?
➢ Which month posted higher payments?
In Cash Book, record transactions that is received or paid in cash only.
• SIMPLE CASH BOOK FORMAT

Take a look of the cash book format. It captures the date, details and amount received of the
business transaction (either from receipts or payments).
Example:
Scenario A: You are selling a bottle of lemonade juice for 15 pesos. On July 1, 2020, a student
bought five bottles of lemonade juice. (15 pesos x 5 bottles = 75 pesos)
Scenario B: Your lemonade business is doing so good. You checked your inventory and you
don’t have any more lemonades. On the same day, July 1, 2020, you went to the store and
purchase 5 kilos of lemonade amounting to 100 pesos.
On July 1, 2020, you have two transactions (one money IN and one money OUT). You have to
record these in your cash book. This is how you record the two transactions.
Let’s Try This!
1. List 3 items that bring money into the business and 3 items on which you think the business
spend money.
2. Draw a simple cash book using the information from the list.
Activity 1. Cash Book
Left Side Receipts (Money in) Payments (Money out) Right Side
Date Details Amount Date Details Amount

received paid
• KEY POINTS
For effective keeping of a cash book, you should do the following:
1. Record only the cash receipts and payments related to the business in this book. Buying and
selling on credit will be recorded in a separate book.
2. Record the receipts and payments in the chronological order of occurrence and on a daily
basis.
3. Total up the figures at the close of the day on a daily basis. These figures enable you determine
the day’s cash at hand.
• CASH CONTROL TIPS

1. Write all money that comes in and goes out immediately in your cash book.
2. Count your cash when the day begins and again when the day ends.
3. Write in the cash book only the items that are paid for in cash. Buying and selling on credit
will be recorded in a separate book.
4. You can calculate the balance regularly. That is, cash left every day, every week or every
month, whenever it is most convenient for your business. Remember the previous balance
should always be written at the start of a new page.
5. Bank your cash every day.
• CREDIT TRANSACTIONS
➢ Why would you sell your goods on credit?
➢ What problems would you encounter when you sell on credit?
➢ Why would you buy on credit?
➢ What problems would you encounter when you buy on credit?
➢ How would you keep track of your debts?
Buying or selling on credit means you obtain the item now but you don’t need
to pay in cash right now.
• SELLING ON CREDIT
Always transact on cash basis to avoid complications of collecting debt. But if you have to sell on
credit, keep the following rules:
✓ Only sell on credit to regular customers who you are sure will pay you back on time.
✓ Demand a deposit.
✓ Keep records of the people to whom you sell on credit.
✓ Always keep sufficient cash money to buy new stock.
• DEBTOR’S BOOK
This book is used to record the sales on credit.
➢ Key points:
✓ Get the book labeled “debtors’ book”.
✓ Allocate a page to individual debtors.
✓ Record all your credit sale immediately.
✓ Compute total credit sales on a daily basis.
✓ Give the debtors defined and clear credit terms.
✓ Keep checking the debtors figures weekly or monthly.
✓ Follow up the debtors promptly.
• SIMPLE DEBTOR’S BOOK FORMAT
• DEBTOR’S BOOK – HOW YOU DO IT?

➢ Every time a customer buys something on credit, you write down the date, the goods and the
part payment.
➢ Every time the customer repays or pays part of the debt, you record it under amount received.
➢ After each amount received, you have to adjust the balance to see whether the customer has
paid all his debts or whether he still has to repay you some amount.
➢ Request the customer to sign or make a thumbprint each time she buys on credit or repays you.
Example:
On the 2nd day of July 2020, a Customer A bought 10 bottles of lemonade juice worth 150 pesos.
The customer promised to pay 50% on July 10, 2020 and the remaining 50% on July 30, 2020.
Note: If an Official Receipt is present in the transaction, write the OR # in the

details.
Let’s Try This!
Record the following transactions in the Debtor’s Book.
Lemonade stand has a regular client (who owns a canteen) to whom you sell bottles of lemonade juice.
This client is called Tycoon Z.
1. On 07/07/20 Tycoon Z buys 1000 bottles at P15 each (1000 x P15 = P15,000) on credit.
2. On 15/07/20 Tycoon Z makes a partial payment of P5,000. On the same day Tycoon Z buys 500
bottles at P15 each on credit again.
3. On 30/07/20 Tycoon Z pays all the remaining debts.
Activity 2. Debtor’s Book

CUSTOMER’S NAME:
Date Details Qty Amount Amount Balance Sign
sold on received
credit
• BUYING ON CREDIT
Buying on credit may help you in your business in the following cases:
- to buy stock in a season when it is cheap (like fish, cassava), preserve and store it and sell
it when the prices are high.
- to enable you to buy cheaper in bulk (like raw materials).
- to cover seasonal high expenses (like fuel).
• CREDITOR’S BOOK
Use a creditors’ book to record all credit purchases or accrued expenses. How?
➢ Key points to note:
✓ Get the book labeled “creditors’ book”.
✓ Allocate a page to individual creditors.
✓ Record all your credit purchases and other expenses immediately.
✓ Compute total credit purchases and other expenses on a daily basis.
✓ Keep checking the creditors’ figures weekly or monthly, to assure that they are
maintained at a low level as possible.
• SIMPLE CREDITOR’S BOOK FORMAT
• CREDITOR’S BOOK – HOW YOU DO IT?
➢ Every time YOU buy something on credit, you write down the date, the goods and the partial
payment.
➢ Every time YOU repay or pay part of the debt, you record it under amount paid.
➢ After each amount paid, you have to adjust the balance to see whether you paid all your debts
or whether you still have to repay some amount.
➢ Sign or make a thumbprint each time you buy on credit or repay.
Example:
On the 2nd day of July 2020, you bought 100 empty bottles worth of 1,000 pesos from Bottler B
Manufacturer. You promised to pay 50% on July 10, 2020 and the remaining 50% on July 30, 2020.
Note: If a document is present in the transaction, write the document used and
its document # in the details.
Let’s Try This!
Record the following transactions in the Creditor’s Book.
Bottle Cup Ltd. usually buys bottles from the Bottler B Manufacturer on credit, and clears the debts after
selling the products.
- On 15/7/20 bought 8,000 bottles at P 10 each.

- On 16/7/20 bought 15,000 bottles at P 10 each.
- On 17/7/20 bought 20,000 at P 10 each.
- On 18/7/20 paid P300,000.
How much money does Bottle Cup Ltd owe to Bottler B Manufacturer?
Activity 3. Creditor’s Book
• CREDITOR’S BOOK - KEY POINTS TO REMEMBER
✓ Keep one page in the credit book for each person buying regularly on credit.
✓ If you are always buying on credit from the same supplier, you should also keep one
page for each supplier in the book.
✓ When a particular customer/supplier page is full you continue the record on the next
available free page.
✓ If you do not have regular customers or suppliers, then you should enter each transaction
as it occurs on a day to day basis. Then you will have to add an extra column for the
names of the different people.
Good job! Now you can do bookkeeping using the 3 basic books i.e. cash book, debtor’s book,
and creditor’s book. Now, let us learn how to price and cost your products or services.
• PRODUCTS/ SERVICES COSTING
How do you determine Why do you need to
the costs of your goods / determine the costs of
services? goods / services?
To effectively cost your products you should:
✓ List the components that make up your product (e.g. raw materials). Attach costs to them.
✓ Identify other cost elements (e.g. transport, taxes). Attach costs to them.
✓ Aggregate all the costs involved in having a ready-to sell product(s) / services.
• VARIABLE COST AND FIXED COST

There are two types of costs – variable and fixed.
- Variable cost – company’s costs which vary with the volume of production.
- Fixed cost – company’s costs which do not vary with the volume of production. It remains
the same regardless of whether goods or services are produced or not.
Example:
Assuming Lemonade Stand incurred the following costs:
a. P2,500 pesos for the 500 bottles

b. P2,500 pesos for the 10 kilos of lemonades (can make 500 lemonade juices)
c. Overhead costs per month (salaries, rent, telephone) total to P5,000.
Item A and B are variable costs while Item C re overhead costs are fixed costs. The total cost is
equal to P10,000 (Item A + B + C).
• PRICING
To price your product or service. Here are the following tips:
1. Convert only the variable costs into unit cost. Leave the fixed cost.
2. Mark-up your product or service. (Price = [Unit Cost + (Unit Cost x Markup Percentage)])
To set a price, the basic method is “cost-based pricing”. In cost-based pricing,

marking
Example:up is widely used to price a product or service.
Using the same example above, our total variable cost is P5,000. To get the unit cost, we have to
divide it by 500 (the volume of production).
Unit cost of bottled lemonade juice = P5,000/500
Unit cost of bottled lemonade juice = P10
Assuming we want to mark up the product by 50%, the price of the lemonade juice would be:
Price of bottled lemonade juice = Unit Cost + (Unit Cost x Markup Percentage)
Price of bottled lemonade juice = P10 + (P10 x 50%)
Price of bottled lemonade juice = P10 + P5
Price of bottled lemonade juice = P15
Congratulations! You have completed the first part of the session! What’s next? You are right!
We will discuss the remaining two (2) basic books for bookkeeping and these are the inventory book and
income and expenditure book. Further, you will learn how to prepare profit and loss statement and balance
sheet as well as some saving tips and keeping records of the business assets through fixed asset register.
Are you ready? Of course, you are!
• INVENTORY
➢ Define as the goods available for sale and raw materials used to produce goods available for
sale. This is also called as “stocks”.
• INVENTORY BOOK
➢ This is the book used to keep records of your inventory.
• SIMPLE INVENTORY BOOK FORMAT
• HOW TO KEEP RECORDS FOR INVENTORY? WHY KEEP RECORDS FOR

INVENTORY?
➢ Inventory is composed of homogeneous type of stocks. Each item of type of stock must have
separate leaf to represent the inventory. Keeping tracks of the stocks guides you to identify
which stocks sells fast and which sells slow. It also identifies remaining quantity of stocks and
help you decide which stocks to be reordered.
➢ Key Points:
• Each type of stock is one inventory. One leaf for each inventory.
• Every transaction - purchase and sale of stocks, must be recorded in the book. Small size
but voluminous number of stocks can be recorded in a summary every end of the day.
• Column A is for purchase transactions
• Column B is for recording sale but based on the cost of items sold. The sale record based
on price is recorded in Income and Expenditure Book under in “Income” column.
• For every transaction, complete the row of the details need, at least the date, description,
quantity, amount and balance.
Example:
You have two (2) products – Product A and B. Transactions for the day (July 1, 2020) are
as follows:
a. Purchase Products A and B at 100 units per product. Product A’s unit cost is P20 while
Product B’s unit cost is P25.
b. 50 units of Product A was sold at P30 each.
c. 30 units of Product B was sold at P35 each.
How to record in Inventory Book?
- one leaflet per inventory
- Then record the transactions per product.
Let’s Try This!
• PREPARE AN INVENTORY BOOK

3. Column A is for purchase transactions
4. Column B is for recording sale but based on the cost of items sold. The sale record based
on price is recorded in the Income and Expenditure Book under in “Income” column.
5. For every transaction, complete the row of the details need, at least the date, description,
quantity, amount and balance.
Transactions:
a. Lemonade stand has a new product i.e. Iced Lemonade Juice 12 oz

b. On July 2, 2020, Lemonade stand produced 100 bottles of Iced Lemonade Juice 12 oz.
The company spent P1,000 to produce 100 bottles.
c. On July 3, 2020, the company sold 90 bottles (OR# 01) and decided to restock and
increase the production. The company produced 200 bottles on the same day.
d. On July 4, five (5) retailers bought 40 bottles each with the following OR#:
- OR#002: 40 bottles bought by Retailer 1
Activity 1. Inventory Book
Inventory Book
Inventory:
(A) (B) (A less B)
Date Description Purchase Cost of Sales Balance
Quantity Amount Quantity Amount Quantity Amount
Beg,
• INCOME AND EXPENDITURE BOOK
Refer to the cash book (from session 03 on cash book preparation):

✓ Which items in the cash book relate to money earned by the business operations?
✓ Which items in the cash book relate to money spent on running the business operations?
✓ What is income?
✓ What is expenditure?
• INCOME
➢ Income is the money that is:
a. Received as a result of the normal business activities of an individual or a business.
b. Earned from business sales (chapati) or offers of service (collecting someone’s
rubbish).
Remember that there are cash and credit incomes.
• IMPORTANCE OF RECORDING INCOME
Helps you answer the following questions:

• What are your sales items / sources of income?
• How much sales did I make this day / week / month / year?
• Did I achieve my set sales target?
• Which month posted higher sales?
• Which of the items sales frequently?
• KEY POINTS
For effective keeping of income records, you should do the following:

✓ Record all your incomes immediately, for cash sales record in the cash book, and for the
credit sales record in the debtor’s book.
✓ Record the sales transaction in the chronological order of occurrence and on a daily basis.
✓ Total up the figures at the close of the day on a daily basis. These figures enable you
determine the day’s sales/income.
• HOW TO COMPUTE FOR TOTAL SALES OR INCOME?
You need to extract total income from the cash book and the debtors’ book. This figure will
be used to compute profits made. How?
• Get the book labeled ‘Income and Expenditure Book’.
• At the end of the month, obtain the total sales figure. This is the amount to use
when computing the profits for the month.
INCOME less EXPENSES = PROFIT
• EXPENDITURE
➢ Refers to any costs incurred in any form, it can be capital expenditure (purchase of fixed
assets) or revenue expenditure (costs incurred in running the business).
➢ Our focus here is the revenue expenditure.
Remember to sum up cash expenses and credit expenses to get total expenses.
• IMPORTANCE OF RECORDING EXPENDITURE
Helps you answer the following questions:

• What are my business expenditure items?
• How much were my expenditures this day/week/month/year?
• Which month posted higher expenditures?
• Which expenses are frequently incurred?
• KEY POINTS
For effective keeping of expenditure records, you should do the following:
✓ Record only the expenses related to running of your business. Exclude private expenses.
✓ Record the expenses in the chronological order of occurrence and on a daily basis.
✓ Total up the figures at the close of the day on a daily basis. These figures enable you
determine the day’s expenditure.
• HOW TO COMPUTE FOR TOTAL EXPENDITURES?
You need to extract total operating expenses (only those expenses incurred in running the
business) from THE cash book and the creditors’ book. This figure will be used to compute
profits made. How?
• Get the book labeled as the “Income and Expenditure Book”! On a fresh page next
to the day’s income page:
• At the end of the month, obtain the total expenditure figure. This is the amount to
use when computing the profits for the month.
Let’s Try This!
1. Divide your book into two columns!

2. Extract the items from the cash book, debtor’s book and creditor’s book (see next page) which are
income and expenditures.
3. Place in the Income column all the items that bring in money to your business (income)!
4. Place in the Expenditure column all the business items that you spend your money on (expenditure)!
Activity 2. Income and Expenditures Book
FOR THE MONTH OF JULY 2020
Income Expenditures
TOTAL P_____________ TOTAL P_____________
- Extract income and expenditures from these books:
• PROFIT OR LOSS
What is your income?
What is your profit?
How do you compute for profit or loss?
The simple formula is:
PROFIT/LOSS = INCOME less EXPENSES
If income is greater than the expense, the result is PROFIT.
If income is lesser than the expense, the result is LOSS.
• KEY POINTS
To be able to compute whether you made a profit or loss, do the following:

a. Compute total income (sales).
b. Compute total expenses.
c. Deduct the expenses from the income. (Income – expenses = Profit or Loss)
• SIMPLE FORMAT FOR PROFIT AND LOSS STATEMENT
Let’s Try This!
Compute the profit or loss made. Use the Income & Expenditure template and Profit or Loss Statement
template below:
Cash sales amounted to P 24,450,000.00
Credit sales:
Cash expenditure amounted to P12,000,500
Credit expenditure:
Activity 3. Profit and Loss Statement
Income and Expenditure Book
Income Expenditures
TOTAL P_____________ TOTAL P_____________
Profit or Loss Statement
Is it a profit or a loss? ________________.
Good job! You made it this far! That’s a big achievement my friend! Before we continue with the
last topic i.e. keeping records of what you owned, let’s learn some important tips about savings.
• WHAT IS SAVING?
Saving (income not spent or postponed consumption)

✓ What can you do with the money if you made a profit?
✓ What are savings?
✓ For what purpose do we save?
• YOU NEED TO SAVE MONEY
Develop a saving culture. Reasons:
✓ Expand your business.
✓ Replacement and repairs.
✓ Prepare for unforeseeable events e.g. changes in prices of fuel, commodities, tax rise and
strikes that affect the business as a whole.
Ok done! Let’s go to the last topic of this session. Aja!
• ASSET REGISTER
➢ This is a book used to record fixed assets that are used to facilitate business operations.
These are items that are used in operating the business for periods over one year.
➢ Examples include furniture and fittings, computers, motor vehicle, buildings, machines and
so on.
• DEPRECIATION OF FIXED ASSETS
When fixed assets have been used over time, they wear out and decline in value. This decline
in value as a result of wearing out is referred to as depreciation.
Reasons for providing for depreciation:
• Reduce on tax liability
• Provide true and fair value of assets
• Plan for maintenance and replacement
One good example of depreciation of fixed assets is your brand-new smartphone. After a few
years, your smartphone is not brand-new anymore. Thus, the value or the price of it is lesser
than the price when you bought it.
• SAMPLE OF A LEAF OF A FIXED ASSET REGISTER
• HOW TO COMPUTE DEPRECIATION?
A simple way to compute depreciation would be by going through the following steps:
o Determine the cost of the asset (e.g pick up) at the time of purchase.
o Estimate how much the asset would cost at the end of that particular financial period.
o Determine the difference – this difference is the depreciation amount for the year.
o Depreciation = (cost – resale value)/estimated useful life
• DEPRECIATION SCHEDULE FORM
One Depreciation Schedule Form per Fixed Asset
• FINANCIAL POSITION – BALANCE SHEET
➢ It is a financial statement that reports company’s ASSETS, LIABILITIES, and

EQUITY.
Assets = what your business OWNED
Liabilities = what your business OWED
Equity = what your business OWNED after paying off the liabilities.
BALANCE SHEET FORMULA: ASSETS = LIABILITIES + EQUITY
• KEY POINTS
✓ Obtain summaries from the business books.

✓ Classify your information into assets, liabilities and capital
• SIMPLE BALANCE SHEET FORMAT
Note: Current assets means assets are expected to be converted into cash within one year while
current liabilities are expected to be paid within one year.
Non-current assets are long term investments (with value more than a year) while non-current
liabilities are long term obligations (due for more than a year).
Let’s Try This!
Determine the financial position!

• On the left side record all the assets
• On the right side record all the liabilities and capital
• Add up both sides. The total on the left side should automatically equal the total on the right
side. If this doesn’t it shows some transactions were omitted in the computations
• The totals refer to the business worth or value or financial position
Details:
1. Company Name: XYZ
2. Period: January 1, 2020 to December 31, 2020
3. Cash = P10,000
4. Cash in Bank = P50,000
5. Debtors = P20,000
6. Stock = P5,000
7. Furniture & Fixtures = P5,000
8. Equipment = P10,000
9. Liabilities to Suppliers = 20,000
10. Bank Loan = P50,000
11. Initial Investment = P10,000
12. Profit = 20,000
Activity 4. Balance Sheet
Name of Company
As of ___________________
Assets Equity & Liabilities

Current assets Current liabilities
Stock Suppliers
Debtors Utilities
Bank Subtotal
Cash
Non-Current liabilities
Non-Current assets Bank Loan
Machinery &
Tools
Equipment & Capital
Fittings
Buildings Initial Investment
<…> Add: Profit for the Month
Less: Drawing during the
month
Subtotal
TOTAL ASSETS TOTAL EQUITY & LIABILITIES
Congratulations! You have finished the session! Now you are more ready to get into the next
module. But before that, let’s assess how much have you learned from this session.
LET’S REFLECT
You have learned in this module to manage properly your finances. This is the focused of Module
Three the Entrepreneur and His Finances. This about finding start-up capital, managing your finances, and
acquiring skills on tracking your resources this is what you need to respond and to exploit to a given
opportunity.
As Jean-Baptiste Say said, “The best scheme of finance is, to spend as little as possible; and the best tax is
always the lightest.” This is your challenge after you finished this module make sure that money hatches
the money. You need this module to create your business plan, followed after this module. Enjoy Writing
on your next module!
DEFINITION OF TERMS
Asset - Something that an entity has acquired or purchased, and that has money value.
(Current) Assets - An asset such as cash, raw materials, parts, or products that are still being made, which
a company will use up or sell during the same year.
(Fixed) Assets - A long-term tangible piece of property that a firm owns and uses in its operations to
generate income. Fixed assets are not expected to be consumed or converted into cash within a year.
Balance sheet - A condensed statement that shows the financial position of an entity on a specified date.
Business Angels - Individuals who use their personal wealth to provide capital to start-up and early-stage
businesses in return for a share of the company’s equity.
Boot Strapping - Refers to a self-starting process that is supposed to proceed without external input.
Bootstrapping means less or no money has to be borrowed to start a business.
Capital - Money invested in a business to generate income.
Cash - At hand & in bank: Ready money. For accounting purposes, cash includes money in hand, petty
cash, bank account balance, customer checks, and marketable securities.
Creditors (payables) - People who are owed money by the business.
Debtors (receivables) - People and organizations that owe the business money.
Depreciation - Reduction in the value of an asset over time.
Equity - The difference between the value of the assets and the value of the liabilities.
(Less) Drawings - Withdrawal of owners’ capital or other assets for personal business.
Liabilities - Liability refers to the state of being responsible for something, and this term can refer to any
money or service owed to another party.
(Current) Liabilities - Obligations arising in the normal course of a business and due for payment within
a year.
(Long-term) Liabilities - Financial obligations of a company that are due after a year or more.
Financial Year - Any annual period at the end of which a firm's accounts are closed.
Liability - Liability refers to the state of being responsible for something, and this term can refer to any
money or service owed to another party.
Liquidity - The state of having enough money or assets to pay any money that is owed.
Negotiation - The process of discussing something with someone in order to reach an agreement.
Persuasion - To make someone do or believe something by giving them a good reason to do it.
Profitability - The situation in which a company, product, etc. is producing a profit.
Return on Investment - A performance measure used to evaluate the efficiency of an investment or to

compare the efficiency of a number of different investments.
Stock (inventories) - The total amount of goods or the amount of a particular type of goods available in
a shop.
Turnover Period - Ratio showing how many times a company‘s inventory is sold and replaced over a
period of time.
Venture Capitalists - Investor, who provides capital to start-up ventures or supports small companies that
wish to, expand.
REFERENCE
Banares C., Lorenzana E., Ansano M.,Redoblado R.,Agonos E, (2015) Philippine - Student Training for
Entrepreneurship Promotion (P-STEP). Bicol University Legazpi City.

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MODULE 3

THE ENTREPRENEUR TRACKING HIS RESOURCES

What Will You Learn?

• Understood how to keep records of business transactions.

What Do You Already Know?

30, 29, 28, 27 ………………………

What is your answer?

…….. That’s a good answer!

____ 1. Monitor the progress of the business

____ 2. Identify sources of receipts

____ 3. Keep track of expenses

____ 4. For preparation of financial statements

____ 5. Tax purposes

____ 6. For credit transactions

• BOOKKEEPING: What it is?

• WHY AN ENTRERENEURS SHOULD KEEP BOOKS?

Monitor the progress of your Identify sources of receipts

Prepare your financial

➢ Monitor the progress of your business

• COMMONLY USED DOCUMENTS

To properly record your transactions in the book, you must:

a. COLLECT ALL documents (receipts, invoices, etc.) for every transaction.

• KEEP KEY SEPARATE BOOKS

• KEY ACTION PRINCIPLE: Separate Business from Private Transactions!

In Cash Book, record transactions that is received or paid in cash only.

• SIMPLE CASH BOOK FORMAT

Let’s Try This!

Date Details Amount Date Details Amount

• CASH CONTROL TIPS

• SIMPLE DEBTOR’S BOOK FORMAT

• DEBTOR’S BOOK – HOW YOU DO IT?

Note: If an Official Receipt is present in the transaction, write the OR # in the

Let’s Try This!

Record the following transactions in the Debtor’s Book.

Activity 2. Debtor’s Book

Let’s Try This!

Record the following transactions in the Creditor’s Book.

- On 15/7/20 bought 8,000 bottles at P 10 each.

Activity 3. Creditor’s Book

• PRODUCTS/ SERVICES COSTING

To effectively cost your products you should:

• VARIABLE COST AND FIXED COST

Assuming Lemonade Stand incurred the following costs:

a. P2,500 pesos for the 500 bottles

To set a price, the basic method is “cost-based pricing”. In cost-based pricing,

Unit cost of bottled lemonade juice = P5,000/500

Unit cost of bottled lemonade juice = P10

Price of bottled lemonade juice = P10 + (P10 x 50%)

Price of bottled lemonade juice = P10 + P5

Price of bottled lemonade juice = P15

➢ This is the book used to keep records of your inventory.

• SIMPLE INVENTORY BOOK FORMAT

• HOW TO KEEP RECORDS FOR INVENTORY? WHY KEEP RECORDS FOR

c. 30 units of Product B was sold at P35 each.

How to record in Inventory Book?

- one leaflet per inventory

- Then record the transactions per product.

TOTAL P_ TOTAL P_

TOTAL P_ TOTAL P_