small fam bs

Cash Flow Statement

-A statement of the sources and uses of cash in a business for a specific period of time. -There are six items that must be reported in the statement of cash flows: 1. Cash flows from operating activities. 2. Cash flows from investing activities. 3. Cash flows from financing activities. 4. Net effect of foreign exchange rates. 5. Net change in cash balance during the period. 6. Non-cash investing and financing activities.

Balance Sheet

-A statement of what a business owns (assets), what it owes to others (liabilities), and how much value the owners have invested in it (equity). -The information in the balance sheet is used to determine the liquidity, financial flexibility, and financial strength of the business, which are detailed below. These measures of a business's financial position are used by owners, lenders, and equity investors in making financial and investment decisions.

Method Funding

-Bootstrapping is how the great majority of small business start-ups are funded. -Various studies completed over the last several years have reported that anywhere from 90 to 95 percent of all start-up businesses are initially funded by the entrepreneur's resources and cash flows from the business.

Financial Statements

-Formal summaries of the content of an accounting system's records of transactions. -Financial statements should include (1) a balance sheet, (2) an income statement, and (3) a statement of cash flows. -There are five common financial statements: ∙ Income statement ∙ Statement of retained earnings ∙ Statement of owners' equity ∙ Balance sheet ∙ Cash flow statement

disadvantage and advantage of equity vs debt

-It can be short-term, long-term or revolving. Debt always involves some form of repayment with interest that must be made whether the company is making a profit or not. Equity financing involves the owner giving up a share of the business. Unlike debt, equity financing doesn't require repayment -Debt loan repayments take funds out of the company's cash flow, reducing the money needed to finance growth. Long-term planning: Equity investors do not expect to receive an immediate return on their investment. They have a long-term view and also face the possibility of losing their money if the business fails.

cash flow management

-Money presents two big problems to owners and managers of small businesses. First is how much money the business has, will receive, and must pay to others. Second is when the money will be received and when the money must be paid -

Growing Concern Concept

-The accounting concept that a business is expected to continue in existence for the foreseeable future. -The assumption that a successful business will stay in business enables long-range planning and strategy. -Accounting assumes that this year's business results will affect next year's, and that the intent of business is to make money over a period of many years. -The going concern concept also implies that, as a separate entity, the business may continue in business even if it is sold to other owners

Business Entity Concept

-The concept that a business has an existence separate from that of its owners. -Thus we can distinguish between money that your business borrows, and money that you borrow for personal needs. -It is the business entity concept that underlies the legal forms of establishing businesses such as corporations, limited partnerships, and limited liability companies. -The business entity concept is implicit in all business regulation. -Violating it can be a criminal offense.

The accounting equation

-The statement that assets equal liabilities plus owners' equity (Assets = Liabilities + Owners' Equity). -The entire system of accounting entries, reports, and financial statements is developed from this simple equation. -The primary value that accounting produces for owners and managers is that of keeping records. -The accounting equation is the method that is used to place these records into understandable categories that are useful for managing your business.

Statement of Retained Earnings

-The sum of all profits and losses, less all dividends paid since the beginning of the business. -The monthly bank statement gives you the check and deposit information as well as any fees the bank charged you or interest it paid into your account

Book Balance

-The sum of cash inflows and cash outflows recorded in the firm's accounting records.

small claim court

-There is also a legal option available to entrepreneurs that does not involve an attorney -Small-claims courts work only when you are owed money, can prove it (proof you did the work, and that your customer did not pay—think of purchase orders, contracts, invoices, pastdue letters, etc.), and have exhausted other procedures like calls and letters to the customer -a local court in which claims for small sums of money can be heard and decided quickly and cheaply, without legal representation.

Sole Proprietorship

-This is a business run by one individual for his or her own benefit. It is the simplest form of business organization. -The liabilities associated with the business are the personal liabilities of the owner, and the business terminates upon the proprietor's death. -The proprietor undertakes the risks of the business to the extent of his/her assets, whether used in the business or personally owned. -Single proprietors include professional people, service providers, and retailers who are "in business for themselves." -Although a sole proprietorship is not a separate legal entity from its owner, it is a separate entity for accounting purposes. -Financial activities of the business (e.g., receipt of fees) are maintained separately from the person's personal financial activities (e.g., house payment).

Gift

-Valuable assets or services donated to the business without any obligation to repay or give up any ownership interest -Gift Capital: Capital resources that neither provide any ownership nor require any repayment to the giver.

Equity Debt

-With debt finance you're required to repay the money plus interest over a set period of time, typically in monthly installments. -Equity finance, on the other hand, carries no repayment obligation, so more money can be channelled into growing your business.

Small Business Corporation (S-Corporation)

-are special closed corporations (limits exist on the number of members) created to provide small corporations with a tax advantage, if IRS Code requirements are met. -Corporate taxes are waived and reported by the owners on their individual federal income tax returns, avoiding the "double taxation" of regular corporations.

Owners eq

In simple terms, owner's equity is defined as the amount of money invested by the owner in the business minus any money taken out by the owner of the business. -For example: If a real estate project is valued at $500,000 and the loan amount due is $400,000, the amount of owner's equity, in this case, is $100,000.

what happens when you mixed business and personal affairs

Mixing business and personal finances may seem like a practical way to manage a new or growing venture. But this approach can quickly cause headaches for business owners. Having just one set of accounts means more exposure to risk. A financial issue at your business could impact your personal assets, and vice versa.

Difference btw overdraft and receivables

OVERDRAFT: -A negative balance in a depositor's bank account. -Banks differ in how the ledger balance and available balance are used. Some banks will allow established customers to overdraft their accounts by paying a check when the available balance is not sufficient to cover the check amount, although the ledger balance is. RECEIVABLES: -Amounts that are owed to a business for merchandise that was sold on credit (see payables) -The money you collect will then be used to buy the things necessary to run your business, and thus the cycle repeats.

Accounting Philosophy

The discipline of accounting insists that transparency is achievable. Fairness has an important role in the practice of accounting. -Accordingly, it seems appropriate that philosophy as a relevant way of understanding truth and fairness in accounting is well considered.

Angel Fund

a fund that pools capital for investment in new businesses : a fund of investment capital from a network of angel investors Cook should collect money from alumni for an angel fund aimed at Harvard undergraduate startups.

Independent Contractor Characterstics

independent contractors: -Persons working to achieve a certain goal without being subjected to substantial controls by another. -According to the IRS, to be an independent contractor the person has to display three characteristics: 1.Behavioral: The contractor solely decides how the work is to be done. 2. Financial: The contractor pays his or her own expenses (e.g., benefits, tools, purchases) directly rather than having the employer pay them. 3. Relational: The independent contractor is employed for a project or a distinct term and the service the contractor provides is not central to the operation of the business.

Partnerships-General and Limited

-A general partnership is an agreement, expressed or implied, between two or more persons who join together to carry on a business venture for profit. Each partner contributes money, property, labor, or skill; each shares in the profits and losses of the business; and each has unlimited personal liability for the debts of the business. -Limited partnerships limit the personal liability of individual partners for the debts of the business according to the amount they have invested. Partners must file a certificate of limited partnership with state authorities.

Income Statement

-A statement that lists revenues and expenses and shows the amount of profit a business makes for a specified period of time. Revenues-Expenses= Net Income

Sales forecast (12 day), when you put together a sales forecast which one of these things you should not do

-dont spend too much time on it

bootstrapping pros and cons

-get (oneself or something) into or out of a situation using existing resources. Pros: total control, pick the pace, able to adapt, divisive/disciplined. leverage resources, equity not diluted Cons: slower rate of growth, fewer resources, personal/financial risk

Cash Controls

-the vast majority of business theft is committed by employees. This is so for two reasons. First, employees have access to cash in the course of doing their jobs. Second, employees are often in a position to be able to hide the theft. -three categories of theft: (1) larceny and embezzlement, which are methods employees use to steal cash after it has been received and recorded in your books; (2) skimming, which is the practice of "pocketing" money from customers and hiding the theft by not recording the sale; and (3) phony disbursements, which are most commonly accomplished by making fake invoices that are subsequently paid by your ordinary cash disbursement procedure. -To protect your business from having its cash drained by employees, you need to take specific steps, the first and most important of which is to hire honest and ethical people into your business.

Hold Harmless

A hold harmless clause is used to protect a party in a contract from liability for damages or losses. In signing such a clause, the other party accepts responsibility for certain risks involved in contracting for the service. In some states, the use of a hold harmless clause is prohibited in certain construction jobs.

Non-Compete

A non-compete agreement is a legal agreement or clause in a contract specifying that an employee must not enter into competition with an employer after the employment period is over. -working at HEB and getting a job at Target

Angel Investor

A wealthy individual who invests in companies in relatively early stages of development.

income statements work with the other financial statements.

Also referred to as the statement of financial position, a company's balance sheet provides information on what the company is worth from a book value perspective. A company's income statement provides details on the revenue a company earns and the expenses involved in its operating activities.

Exculpatory Clause

An exculpatory clause is part of a contract that prevents one party from holding the other party liable for damages related to the contract. Exculpatory clauses are used quite often in purchases such as the ones included with an amusement park or plane ticket.

Preparing business financials, first step that you do in preparing any kind of business budget

Assess your financial resources. The first step is to calculate how much money you have coming in each month. This might be investment income, government assistance, student loans, employment income, disability benefits, retirement pensions or money from other sources.

Networking

Interacting with others in order to build relationships useful to a business.

mixing business assets with persona

Mixing business and personal finances may seem like a practical way to manage a new or growing venture. But this approach can quickly cause headaches for business owners. Having just one set of accounts means more exposure to risk. A financial issue at your business could impact your personal assets, and vice versa

"" what is deducted from employee's paycheck (don't choose taxes, go more in depth)

Payroll deductions are wages withheld from an employee's total earnings for the purpose of paying taxes, garnishments and benefits, like health insurance. These withholdings constitute the difference between gross pay and net pay and may include: Income tax. Social security tax. Social Security tax at a rate of 6.2% with a wage-based contribution limit and they pay Medicare tax at 1.45% without any cap. This equals 7.65% in FICA taxes per paycheck

The Premise of Revenue and Expense

Revenue is an increase in owners' equity that is the result of selling your product or service. -Expenses are reductions in owners' equity that recognize the value of goods (inventory) and services (labor) used to produce your product or service. When ColterDurham sold the StowCarts, the business received the customer's promise to pay, which is called "accounts receivable." The business gave up the value of the inventory used and the value of labor expended.

Risk Management

Risk management is the process of identifying, assessing and controlling threats to an organization's capital and earnings. These risks stem from a variety of sources including financial uncertainties, legal liabilities, technology issues, strategic management errors, accidents and natural disasters

Legal Entitty

Sole proprietorship corporation, LLC -A legal entity is any company or organization that has legal rights and responsibilities, including tax filings. It is a business that can enter into contracts either as a vendor or a supplier and can sue or be sued in a court of law.

about franchise/margin tax and who files

The Texas Franchise Tax is levied annually by the Texas Comptroller on all taxable entities doing business in the state. The tax is based upon the entity's margin, and can be calculated in a number of different ways. Each business in Texas must file an Annual Franchise Tax Report by May 15 each year.

What are the 3 most commonly used financial statements , they are 6 which are not

The income statement, balance sheet, and statement of cash flows are required financial statements -There are five common financial statements: ∙ Income statement ∙ Statement of retained earnings ∙ Statement of owners' equity ∙ Balance sheet ∙ Cash flow statement

Basic Accounting Concepts

The most basic concepts of accounting are: 1. The idea that a business has an existence that is separate from its owner, called "business entity concept." 2. The expectation that a successful business will stay in business, or the "going concern concept." 3. An extremely simple equation called the "accounting equation." 4. The premise of revenue and expense. 5. The principle that accounting information must be useful to the owners and managers of businesses.

Bank Ledger Balance

The sum of deposits and withdrawals recorded in a bank's accounting records

Bank Available Balance

The sum of money that has actually been received and paid out of a depositor's account.

Different types of accounting and what their purpose are

There are three types of accounting: managerial accounting, which is used by managers for planning and control; tax accounting, which is used for calculating and reporting taxes; and financial accounting, which is used by banks and outside investors. -Managerial Accounting: accounting methods that are specifically intended to be used by managers for planning, directing, and controlling a business -Tax Accounting: An accounting approach based on specific accounting requirements set by governmental taxing agencies. -Financial Accounting: A formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators.

your employee is responsible not business what is it called

Torts: Responsibility for Your Actions and the Actions of Employees -Torts can arise when a person's legal rights are violated in ways other than from a breach of contract. -For example, where a person is hurt in a car accident caused by your driver, the tort issue is that the victim's right to travel down the road was impaired by the wrongful actions of your driver. -Often when this happens the driver faces direct liability for causing the accident, but the employer can also be sued by the injured party for what is called vicarious (indirect) liability. -Vicarious liability against a business is possible if the employee involved was an agent of the business and at the time of the accident doing work for the employer

Difference between payable and receivable

Whereas accounts payable represents money that your business owes to suppliers, accounts receivable represents money owed to your business by customers.

Limited Liability Company (LLC)

is a hybrid between a partnership and a corporation. -Members of an LLC have operational flexibility and income benefits similar to a partnership but also have limited liability exposure. -While this seems very similar to a limited partnership, there are significant legal and statutory differences. -Consultation with an attorney to determine the best entity is recommended.

Corporation

is a legal entity, operating under state law, whose scope of activity and name are restricted by its charter. -Articles of incorporation must be filed with the state to establish a corporation. -Stockholders' are protected from liability and those stockholders who are also employees may be able to take advantage of some tax-free benefits, such as health insurance. -There is double taxation with a C corporation, first through taxes on profits and second on taxes on stockholder dividends (as capital gains).

BUSINESS Entities

sole proprietorship, partnership, corporation lcc