Financial Management - The resources you need, in  By analyzing the profit and loss statement, the

order to run your business and produce the goods or entrepreneur can better control business
services, are manpower, methods, materials and expenditure and thereby potentially increase
machines. profits.

Accounting - The resources you need, in order to run Balance sheet - is a snapshot of company’s financial
your business and produce the goods or services, are condition at any particular time.
manpower, methods, materials and machines.  It is the heart of double-entry accounting
 Each side equals the other
Bookkeeping - refers to the process of accumulating,  The central equation of a balance sheet is:
organizing, storing, and accessing the financial base of ASSETS = LIABILITIES + OWNER’S EQUITY
an entity  Assets include everything the company owns,
such as cash, inventory, buildings, equipment
Purposes of Bookkeeping and vehicles.
 Facilitating the day to day operations of the  Liabilities include everything the company owes
entity to others, such as vendor bills, credit card
 Preparing financial statements, tax returns and balances and bank loans
internal reports to managers  Equity includes the claims owners have on the
assets based on their portion of ownership in
Bookkeeping is the recordation of basic accounting the company.
transactions, such as:
 Issuing invoices to customers Cash Flow - refers to generating or producing cash
 Recording invoices from suppliers (cash inflows) and using or consuming cash (cash
 Recording cash receipts from customers outflows).
 Paying suppliers  Lifeblood of the business and keep that blood
 Recording changes in inventory
circulating at all times in order to avoid failure.
 Processing payroll
 Cash flows in the statement are divided into the
 Processing petty cash transactions
following three areas
These transactions are mechanical in nature
 Operating activities, constitute the revenue
generating activities of a business such as cash
KEEPING GOOD RECORDS IS VERY IMPORTANT TO
received and disbursed for product sales,
ONES’ BUSINESS. GOOD RECORDS WILL HELP YOU DO
royalties, commissions, fines, lawsuits, supplier
THE FOLLOWING:
and lender invoices and payroll.
 Monitor the progress of ones’ business
 Investing activities, constitute payments made
 Prepare financial statements
to acquire long-term assets, as well as cash
 Identaify sources of income
received from their sale such as purchase of
 Keep track of deductible expenses
fixed assets and the purchase or sale of
 Keep track of the basis of property
securities issued by other entities.
 Prepare your tax returns
 Financing activities, constitute of activities that
 Support items reported on your tax returns
will alter the equity or borrowings of a business
such as the sale of company shares, the
Financial statements - are the backbone of the business. repurchase of shares and dividend payments.
The profit and loss statement- is a summary of the
financial performance of a business over time
 If income exceeds business expenses, the
business will have effectively made a profit.
 If expenses exceed income, a loss would have
been made.
 A profit and loss statement is a great tool for
identifying items of high expenditure or
expenses that were unproductive in producing
profit.