3 MONTH ACCOUNTING COURSE OVERVIEW
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3 MONTH ACCOUNTING COURSE OVERVIEW
Index Introduction 4 Weekly Assignments
5
Training Video
5
Study Time
5
Supporting Website
6
Sitting the Final Exam
7
Overview 8 Detailed Summary
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Profit & Loss
10
Balance Sheet
11
Other Topics
12
Version 7.0
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3 MONTH ACCOUNTING COURSE OVERVIEW
Introduction Welcome to this ‘accounting course for nonaccountants’, developed by UBT. The whole aim of this course is to enable anyone to better understand their business financial statements, in view of making educated decisions that will positively influence profits, cash flow and equity growth. The differences between this course and other accounting courses are:
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• It has been written using the unique “topdown” approach, meaning you can study it using your own financial reports; ‘normal’ accountancy courses spend months (or even years) on theory, and it is only then that you would start to refer to a set of financial reports as part of your study. • Easy reading – we have made every attempt to make the course easy to understand, regardless of your level of education.
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• Business development focused – rather than just a study course, we are pointing out ways to become more financially secure.
This course is broken up into 12 weeks — here is a summary: WEEK
ITEM
Introduction and Overview
1
2-4
Trading Performance (Profit & Loss)
5-7
Balance Sheet Management
8
Assets and Depreciation
9 Classification & Validation of Transactions
10
Budgets and Planning
11
Projecting Cash Flow
12
EXAM!
Weekly Assignments At the end of each week there is an online assignment. The idea is that each week you get to test yourself on the new skills and knowledge that you have learnt. Once you have completed the assignment, it will be automatically marked and your results advised online.
Study Time The time required to study each week and to complete the assignment will vary from person to person, however in approx. terms you should plan to set aside between 3 – 6 hours for each module. You will need to allow the following each week: a) 1 to 3 hours to read the workbook b) ½ to 1 hour to watch the supporting webinar
When you enrolled there were two options you needed to be aware of:
c) 1 to 2 hours to complete and lodge the assignment
a) If you were enrolled through a business your manager will be able to find out when you submitted each assignment and what mark you received.
d) You may also like to further explore a topic (beyond what is covered in the course); an example of this would be to further investigate tax in your region.
b) the option to complete the course at your own pace. Some complete it in 12 weeks, others take the whole 6 months. We encourage everyone to use the ‘Assignment Submission Tracker’ tool in order to develop a study timeline that will work for you. Above all, be a finisher!
e) Make sure you also allow time to apply your new knowledge and ideas to your own financials. This will greatly accelerate your learning, and give you maximum benefit (and return on investment!) from this course.
Training Video Each chapter is supported by a ‘video’ lesson, delivered by internet - based ‘webinar’ recording. To access these webinars you will need to log onto the UBT Financial Resources website. There are ‘Notes Pages’ provided on the website for each supporting video. Print these off PRIOR to viewing, for taking notes at the time. If you are having any difficulty understanding a topic, or would like to see some area covered in more detail, please send your questions / suggestions to UBT.
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If you have had no ‘exposure’ to business financials previously, and find that the course is taking longer than this, it would be better not to rush it, but rather to ensure that you understand each section before moving on. Each module is like a building block, and you will need to understand each one before studying the next module. If you have been involved in business finances and/or accounting before you may find that you can complete the course faster than the times suggested. SUGGESTION: Add a recurring appointment in your Weekly Schedule now to ensure you set time aside to complete this course; be a finisher! MS Excel Download - as a Business Advisory subscriber you can download the Assignment Submission Tracker tool as an Excel template and keep your records up to - date.
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3 MONTH ACCOUNTING COURSE OVERVIEW
Supporting Website The www.ubtfinancialresources.com website is the learning resource centre for 3MAC Students and Subscribers.
Business Advisory Subscribers have access to a wealth of finance-related resource. In addition to the items offered to 3MAC Students, there are:
As a 3MAC student, you will have access to:
•
•
3MAC Workbooks 1 – 11
•
3MAC Assignments 1 – 11
• An Accounting Glossary of Terms used in the industry
• Webinar recordings to assist you with your 3MAC studies
• Frequently Asked Accountancy related questions to review
•
• Regional Information (Specific to your region)
•
Finance Seminar Packs & Recordings
•
White Papers on specific issues/topics
Excel Tools, Calculators & Templates
The ability to lodge your own question
The UBT website has been built for YOU and YOUR Finance Team!
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Sitting the Final Exam Once you have passed all of the 11 weekly assignments, you can apply to sit the final exam - however, this is optional, unless your employer insists on it. This is an online exam, which is OPEN BOOK, meaning you can refer to your 3MAC resources during the exam. UBT is testing your ability to do work correctly, not just your ability to store information in your memory.
It must be completed in 3 hours. Refer to 3MAC ‘Week12 Exam FAQ’s & Declaration’ for Conditions. You cannot take the exam question booklet with you (after the exam), and as the questions may be reused in later exams, you will not get your answer booklet returned to you. You will receive a comprehensive report, showing any areas that you need to study further.
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3 MONTH ACCOUNTING COURSE OVERVIEW
Overview This course has been written for NONACCOUNTANTS, including business owners’ and managers’ feedback to UBT. It has been written using a practical approach (‘top - down’). You will learn how to pick up a set of financial reports, analyse them, be intelligent as to cause & effect, and be able to plan events to result in improved financial performance and results.
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If you know nothing about accounting, but you are prepared to sit down and look at your monthly figures and then look at a full set of figures every three months, within two years you can just about rate yourself as an accountant.
INTRODUCTION: WEEK 1: THE FINANCIAL REPORTS PROFIT & LOSS: WEEK 2: TRADING PERFORMANCE WEEK 3: BREAK EVEN POINT WEEK 4: PROFIT & LOSS KPI’s & Key Ratios BALANCE SHEET: WEEK 5: EQUITY GROWTH WEEK 6: BALANCE SHEET KPI’s & Key Ratios WEEK 7: BALANCE SHEET – How to Manage it OTHER TOPICS: WEEK 8: ASSET REGISTER & DEPRECIATION WEEK 9: CLASSIFICATION & VALIDATION OF TRANSACTIONS WEEK 10: BUDGETING FOR GROWTH WEEK 11: PROJECTING CASH FLOW WEEK 12: EXAM WEEK!
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Detailed Summary INTRODUCTION:
WEEK 3: BREAK EVEN POINT
WEEK 1: THE FINANCIAL REPORTS
1.12
How to calculate your Break Even Point
1.1
1.13
Sustainable Business Model
1.2 Generally Accepted Accounting Principles
1.14
Fixed and Variable COGS
1.3
Bookkeeping vs Accounting
1.15
Contribution Margin
1.4
The suite of Financial Reports
1.5
How these Reports interact
1.16 How to use the UBTA Sales & Equity Tracker (SET)
1.6
Double Entry Bookkeeping
Introduction
PROFIT & LOSS:
1.17
Break Even Unit Sales
1.18
How to use this knowledge
1.19
How to increase Sales & Profits
WEEK 2: TRADING PERFORMANCE – The Profit & Loss Statement 1.7
Understanding your P&L
1.8
What is EBIT?
1.9
Calculating your Cost of Goods Sold
1.10
Inventory
1.10.1
Periodic
1.10.2
Perpetual
1.11
Introduction to Tax
9 How to create a sales graph with trend line in MS Excel: 1.
Highlight your data in Excel:
Why trend analysis is important: Based on actual results, the accountant can then identify what direction the finances are heading in. This could be as simple as comparing the Sales for the last 12 Months, and commenting on the general movement (increase or decrease) of Sales.
2010 2011 2012 2013 2.
On the tool bar at the top click the ‘Insert’ menu, and then in the ‘Charts’ section, select ‘Line’ and the preferred graph:
Better still, the business owner or manager can learn how to read the reports and make appropriate decisions that will have a positive impact on the PERFORMANCE of the business, as well as continue to improve the health of the Balance Sheet. Furthermore, as he makes these decisions he can continue to monitor and interpret the results to ensure that they have the desired result.
Because you’ll learn by watching the figures, you’ll see trends. ...if there is a trend that shows deterioration you can correct it quickly.
2010 2011 2012 2013
3.
Once you have your graph, right click on the data line and select ‘Add Trendline…’
2010 2011 2012 2013
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3 MONTH ACCOUNTING COURSE OVERVIEW
Profit & Loss WEEK 4: PROFIT & LOSS KPI’s & Key Ratios
1.31
Net Profit Percentage
1.20
Analysis & Management Decisions
1.32
Interest Cover
1.21
What are Ratios?
1.33
Trend Analysis
1.22
Gross Profit
1.34
Business Overhead Expenses Check
1.23
Gross Profit Percentage
1.35
Monitoring Expenses by Percentage
1.24
Cost of Goods Sold
1.36
Trend Analysis - Supply of Goods
1.25
Management Decisions
1.37
Part - year Figures
1.26
‘Spoilage’
1.38
Markup vs. Margin
1.27
Work in Progress (WIP)
1.28
Productivity Factor
1.29
Expense Ratio
1.30
Net Profit
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Balance Sheet WEEK 5: EQUITY GROWTH
WEEK 7: BALANCE SHEET – How to Manage it
1.39
Main Entity Structures
1.62
Financial Management Pathway
1.40
Assets vs. Liabilities
1.63
Balance Sheet Audit
1.41
Owner’s Equity
1.64
Cycle of Continual Improvement
1.42
The Accounting Equation (A - L = E)
1.65
Need for Planning
1.43
Understanding your Balance Sheet
1.66
Financial Operating Cycle
1.44
The Balancing Act!
1.67
Sustainable Growth
1.45
Current vs. Non-current
1.68
Strategic Financial Plan (SFPTM)
1.46
Managing by Net Worth
1.47
Realisable Value 3 MONTH ACCOUNTING COURSE
WEEK 6: BALANCE SHEET KPI’s & Key Ratios 1.48
The need for Analysis
1.49
Under or Over Trading
1.50
Balance Sheet Ratios
1.51
Equity Ratio
1.52
Debt to Equity Ratio
1.53
Liquidity Ratios
1.54
The Working Capital Cycle
1.55
Current Ratio
1.56
Quick Ratio
1.57
Debtor Days
1.58
Creditor Days
1.59
Stock Turn days
1.60
Return on Investment
1.61
Return on Assets
TRADING PERFORMANCE
Week 2 – Key Terms
Break Even Sales - the level of sales required at a predetermined Gross Profit percentage that covers the COGS, the overheads, the loan repayments, owner’s remuneration and tax, but leaves no extra funds for reinvestment. Refer also to Survival Break Even and Incentive Break Even. Cost of Goods Sold (COGS) - the cost to the business to buy or produce the goods that are being sold. With purchased items, it is the cost from the supplier including any inwards freight, duty etc. With manufactured items it could include factory wages, machinery depreciation, rent of factory space etc. Cost of Sales (COS) - refer to COGS.
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FIFO - First in First out method of valuing Inventory when multiples of goods are purchased allows you to average your cost (most recent plus previous cost average). GP - see Gross Profit. Gross Profit - the amount of money left over from sales of goods or services, after the cost of the goods has been removed. Incentive Break Even - the level of sales required at a predetermined Gross Profit percentage that covers the COGS, the projected (increased) overheads, loan repayments, owner’s remuneration and tax etc. Compare Survival Break Even. For example if the owners wanted more remuneration from their business than they are currently receiving, this figure would be covered by the IBES, but not in the SBES. Interest - a ‘fee’ charged by the lender to the person / business borrowing the money for the ‘privilege’ of having the money on ‘loan’. Typically an Annual Rate (eg. 7.5%) is quoted, with a portion of this added to each repayment.
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Glossary Inventory - goods held by a business to be sold to customers. LIFO - Last in First out method of valuing Inventory may be illegal in your region, because it may mean that you value stock too low. Market Value - another valuation method of Inventory, where you can reduce the value to what you could reasonably expect to get on the open market. Net Profit - the amount of money left over from sales of goods or services, after the cost of the goods has been removed and all the expenses in running the operation have been deducted; (and before Tax has been paid on these Profits) [Sales – COGS = GP; GP – Expenses = NP] NP - see Net Profit. NPAT - Net Profit After Tax; this is the NP from the business less the tax that was paid on this profit. Periodic (Stock Calculation Method) - see below. Perpetual (Stock Calculation Method) - see below.
The difference between periodic inventory systems and perpetual systems is that using a perpetual system, the value of the stock is recalculated and known after every transaction, whereas in a periodic inventory system the value of the stock is calculated (based on opening stock add purchases subtract sales) at the end of the period.
3 MONTH ACCOUNTING COURSE OVERVIEW
Other Topics
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WEEK 8: ASSET REGISTER
WEEK 10: BUDGETING FOR GROWTH
1.69
Asset Control
1.89
What is your financial target?
1.70
Asset (Capital Item) or Expense?
1.90
Survival vs. Incentive Break Even
1.71
Depreciation: what is it?
1.91
Fixed & Variable COGS
1.72
Depreciation Schedule (Asset Register)
1.92
Analysing your Costs
1.73
Asset Cost
1.93
Fixed & Variable Overheads
1.74
Calculating Depreciation
1.94
Economic cycle
1.74.1
Straight Line
1.95
Effects of Inflation
1.74.2
Diminishing Value
1.96
Business Planning
1.74.3
Units of Use
1.97
Divisional Budgets & Analysis
1.75
Accounting for Depreciation
1.98
Budget vs. Actual Comparison & Analysis
1.76
Gain or Loss on Disposal
1.99
Business Mathematics
1.77
Log books
1.78
Low Value Pool
WEEK 9: CLASSIFICATION & VALIDATION OF TRANSACTIONS
WEEK 11: PROJECTING CASH FLOW 2.00
What is Cash Flow?
2.01
Profit does not Equal Cash
2.02
Working Capital Cycle - Revisited
2.03
Cash Affecting Activities
2.04
Source and Application of Funds
2.05
The Cash Flow Statement
1.79
Your Chart of Accounts
1.80
Tax Codes
1.81
How to correctly classify Transactions
1.82
Expense... or Capital Purchase?
1.83
Work Expense... or Private?
2.06 Cash Effect from the Sale of Non - current Assets
1.84
Verification & Auditing
2.07
How to Estimate Cash Requirements
1.85
Only Valid Transactions!
2.08
Cash Flow Projections
1.86
Bank Reconciliation
2.09
Monitoring Results
1.87
End of Period Adjustments
2.10
Budgeting for Tax
1.88
Office Procedures for Accurate Financials WEEK 12: EXAM WEEK!
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• Frequently Asked Questions (FAQ’s) - if you are a subscriber, the answers are available to you and your team. Examples include:
> What is the difference between the current and non-current areas of my Balance Sheet? > Why does my Accountant say that I need to show a partner’s salary in my Profit & Loss Statement? It makes my performance look much worse!
> Could you recommend a way to get my Key Staff intelligent as to the financial side of the business without completing a full Accounting Course?
> To grow this business we will need to borrow extra funds; how can we work out a suitable level of borrowings that is manageable?
> How can I stop my sales team over discounting product to customers?
> Why do I need to know my current ratio? And how do I calculate this?
> What is the correct way to obtain accurate costings on items we import?
> What is the difference between cashbased and accruals-based accounting?
> How can I predict what a sustainable growth rate for my business is?
> We have identified that we have excess stock, a lot has been here over two years. What do you suggest we do?
> Is there any suggested formulas for staff incentive bonuses?
> My business has been operating profitably but I seem to be short on Cash in the business. What are some areas I could look at to free up Cash?
Visit: www.ubteam.com - it’s free to register!
Business Advisory Gold & Silver subscriptions include the 3MAC Accounting Course for all your team!
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3 MONTH ACCOUNTING COURSE OVERVIEW
Notes:
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