This document outlines key concepts in financial accounting, including: 1) How business activities and decisions are recorded as transactions that are then classified and summarized in financial statements. 2) Transactions from a sample business in one week are used to demonstrate how an income statement and balance sheet can be generated from this data. 3) Key assumptions are listed, such as no depreciation or interest, to simplify the example financial statements.

1. FINANCIAL
CONCEPTS -
TRANSACTIONS

2. 2
MODULE 7 – FINANCIAL CONCEPTS
COURSE OUTLINE
Business
activities/decisions
1
what does not get
taught
2
how do transactions
get classified
3
Assumptions made
4
How do they get
summarised
5
Reading financial
statements
6

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MODULE 7 – FINANCIAL CONCEPTS S2/2
BUSINESS ACTIVITIES/DECISIONS/TRANSACTIONS
Basic activities are decisions which then get to be written down as
transactions
You (entrepreneur) decide to i.e you make a conscious choice
 Invest in a specific industry
 Sell goods or services to a specific person
 Buy goods and services from a specific person
Aim of business is to buy less than what u will sell… that leads to profit.
No profit….means going concern of the business is compromised and it is
not sustainable

4. 4
TEACH A COURSE

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MODULE 7 – FINANCIAL CONCEPTS S2/2
BUSINESS RULES THAT ARE NOT TAUGHT IN BUSINESS CLASSES
1. Sell before buying
2. Business is built from trust
3. Your network will determine your earnings
4. Your self worth will determine your price in the marketplace
5. You grow your income based on your personal growth, invest in yourself daily
6. The market determine price based on your positions and affordability of your target market
7. No one can build a business alone, you need a tribe and community
8. You are what you believe and you become what you think about
9. Business is built over time, plan for atleast 3 years to see real value
10. Business is about systems and processes, if you don’t build

6. 1. Basics of the World of Finance
(where it fit?)
© 2014 The Essential Finance
Handbook for entrepreneur

7. Measure of success of the
business
FINANCIAL
STATEMENTS
MODULE 7 – FINANCIAL CONCEPTS – S2/2 7

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MODULE 7 – FINANCIAL CONCEPTS
MAKE DECISIONS ON 4 AREAS – PERFORMANCE
Income Expenses

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MODULE 7 – FINANCIAL CONCEPTS
MAKE DECISIONS ON 4 AREAS – POSITION
Assets Debt - Liabilities

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MODULE 7 – FINANCIAL CONCEPTS S2 OF 2
SIMPLE EXAMPLE :
BUSINESS ACTIVITIES AND TRANSACTIONS
This is how typical events or economic activities will flow in just one week:
a) Bought a till machine for R500 cash.
b) Paid a rental deposit of R1 000 and a monthly rent cost of R300.
c) Bought 100 stock items for pairs of shoes, R2 000 cash.
d) R10 000 contributions, i.e., share capital
e) Shoes have been sold either for cash or on credit. The cash total is R2 325; the credit total is R1 000.
f) Stock left is 5 pairs of shoes at R20. So, you sold 95 pairs at R35 each.
g) Salaries and wages are R100

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MODULE 7 – FINANCIAL CONCEPTS S2/2
INCOME STATEMENT I.E FINANCIAL PERFORMANCE
Sales [1] (R1 000+R2 325) R3 325
Cost of Sales [2] (R2 000 – R100) or Sold Units (R95 x 20) R1 900
Gross Profit R1 425
Operational Expenses
Rent R300
Salaries and wages R100
Net profit R1 025

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MODULE 7 - FINANCIAL CONCEPTS S2 OF 2
BALANCE SHEET – FINANCIAL POSITION
Share capital/contribution [1] R10 000
Retained Income [2] R1 025
Total R11 025
Property, Plant Equipment [3] (Fixed Assets) (R 500) R 500
Current Assets [4] (Prepaid Expenses or Advance, Accounts Receivable +
Inventory) (R1 000+R1 000+R100)
R2 100
Bank [5] (R10 000-R500 – R1 300-R2 000+R2 325-R100) R 8 425
Total R11 025

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MODULE 7 – FINANCIAL CONCEPTS
KEY ASSUMPTIONS
 No depreciation
 No VAT implication
 No inflation impact
 No interest on capital
 No income tax implication

14. No Such thing called stupid
questions!!
LEAVE US
QUESTIONS
MODULE 7 FINANCIAL CONCEPTS 14

15. NGIYABONGA !
Asifunde, sithuthuke ,
Imfundo iletha ukuphila
- Asifunde and siphile
15
MODULE 7 FINANCIAL CONCEPTS