Is there a structural procedure to manage and track our finances in EggInc? How to know the variables needed to compute the saleable price? How many pastries should EggInc sell in a day, a month, a year and in three (3) years in order to assess EggInc to be profitable?
What information can be most needed to be collected? How to interpret these pieces of information into an effective analysis? When is the right time to consult an Accounting related field in order for these activities be effectively undertaken?
Well, when I first encounter Financial Management from the book on Financial Basics by Schmidgall, Hanes, and Ninemeier I was stuck especially talking about numbers which I am not so passionate about after the flashback of my university days of solving lots of Math problems in Calculus, Strength of Materials, Trigonometry and Algebra makes me want to quit this book.
I wonder how can I read this book with excitement? It’s so hard for me to read and write on the things that don’t express much of my interest. All I know is that I am passionate about making EggInc profitable. That’s a “BIG” concern. So whenever I’m talking about Accounting 101, I want to think about:
Now, we’ll see the Basic Accounting Activities for EggInc’s Money Management:
What is FINANCIAL MANAGEMENT?
The process of organizing, analyzing, interpreting, summarizing and reporting information in ways that are meaningful for owners, managers and other users also referred to as Accounting. Financial information to manage which involves money to operate EggInc are:
What is BOOKKEEPING?
The task of “ANALYZING” + “RECORDING” financial transactions of a specific type:
As EggInc grows, a bookkeeper may handle only one type of transaction. The Accountant of EggInc later will then summarize the Bookkeeper’s work and further interpret the results for EggInc’s management.
What is FINANCIAL ACCOUNTING?
The process of developing and using Accounting information to make EggInc’s business decision which involves organizing and presenting financial information in Financial Statements. The major focus is on the PAST. The deliverables are:
- FINANCIAL STATEMENTS
- BALANCE SHEET
- INCOME STATEMENT (Profit and Loss)
- STATEMENT OF CASHFLOWS
What is AUDITING?
It involves studying EggInc’s internal controls and analyzing basic accounting systems to assure that all financial information is properly recorded. Auditors evaluate:
- FINANCIAL POSITION
- OPERATING RESULTS
- CASHFLOW (Inflow and Outflow by Activity)
- ACCOUNTING PRINCIPLES ARE APPLIED
What is MANAGERIAL ACCOUNTING?
The process of using historical and estimated information to help managers of EggInc plan the future. The examples are:
- IMPACT OF ALTERNATIVES
- WILL EGGINC OPEN/CLOSE ON A SPECIFIC DAY/SPECIFIC MEAL PERIOD
- ESTIMATE INFORMATION FOR RECOMMENDATIONS
What is TAX ACCOUNTING?
An accounting that involves planning and preparing for taxes and filing to government agencies.
Also deals with:
- TANGIBLE ASSETS (the useful life of an equipment/asset)