ENTREPRENEURSHIP REVIEWER
MODULE 02
Forecasting the Revenues of the
Business
-Revenue is a result when sales exceed the cost to produce goods or render
the services. Revenue is recognized when earned, whether paid in cash or charged to
the account of the customer. Other terms related to revenue includes Sales Service Income. Sales is used
especially when the nature of business is
merchandising or retail, while Service Income is used to record revenues earned by
rendering service
These factors should serve
as basis in forecasting revenues of the business. These factors are:
1. The economic condition of the country. When the economy grows, its
growth is experienced by the consumers. Consumers are more likely to buy
products and services.
2. The competing businesses or competitors. Observe how your
competitors are doing business. Since you share the same market with
them, information about the number of products sold daily or the number of
items they are carrying will give you the idea as to how much your
competitors are selling. .
3. Changes happening in the community. Changes’ happening in the
environment such as customer demographic, lifestyle and buying behaviour
gives the entrepreneur a better perspective about the market.
4. The internal aspect of the business. Another factor that affects
forecasting revenues in the business itself. Plant capacity often plays a very
important role in forecasting.
Forecasting the Costs to be
Incurred
-Cost of Goods Sold / Cost of Sales refer to the amount of merchandise or
goods sold by the business for a given period of time.
-Merchandise Inventory, beginning refers to goods and merchandise at the
beginning of operation of business or accounting period.
-Purchases refer to the merchandise or goods purchased.
-Merchandise Inventory end refers to goods and merchandise left at the
end of operation or accounting period.
-Freight-in refers to amount paid to transport goods or merchandise
purchased from the supplier to the buyer.
MODULE 03
Computation of Gross Profit
-The profitability ratios are a group of financial statement that primarily
determine the profitability of the business operation.
The gross profit rate on a product is computed as:
Net Sales xxxxxxx
Less: Cost of sales. xxxxxxx
Gross profit. xxxxxxx
By using the formula, the gross of XYZ Trading in the year 2017
Net Sales. P 734, 000.00
Less: Cost of Sales. P 577, 000.00
Gross Profit. P 157, 000.00
Profit is the gross income. The amount of gross profit provides information to
the entrepreneur about revenue earned from sales.
The term Cost refers to the purchase price of the product including of the
product including the total outlay required in producing it.
Gross profit rate
-measures the percentage of gross profit to sales, indicating the profit that the business realizes from the sale of
the product.
Gross profit margin is computed as follows:
gross profit gross profit rate = _______
net sales
Operating profit margin
-is the second level of revenue in the income
statement. At this stage, not only the cost of buying or making the product that has
been deducted is included but also the operating expenses.
Operating the profit margin is the excess of gross profit from operating
expenses:
Gross profit. xxxxx
Less: Operating Expenses. xxxxx
Operating profit margin. xxxxx
Net profit margin & the third level in the revenue.
-The business is only given consideration like interest expense and income tax.
Net Profit Margin Rate
Operating profit margin. xxxxxxx
Add: Interest Income. xxxxxxx
Total
Less: Interest Expense. xxxxxx
Income Tax. xxxxxx xxxxxx
Net Profit margin. xxxxxx
Analyse the Liquidity Status of the Business
Liquidity Ratios
Current ratio = Current assets / Current liabilities
Quick ratio = (Current assets – Inventories) / Current liabilities
= (Cash and equivalents + Marketable securities + Accounts receivable)
/ Current liabilities
The quick ratio measures its short-term obligations with its most liquid assets
and therefore excludes inventories from its current assets.
Financial statements are important in a company management as a means of
communicating past successes as well as future expectations. The financial statement
records all the operating results such as sales, expenses and profits or losses
Return of Investment (ROI)
The Return of investment (ROI) measures the amount of net income per peso
invested to the business.
MODULE 04
BUSINESS IMPLEMENTATION
Guidelines for successful business plan implementation:
1. Objectives- the entrepreneur should have a clear idea on what is his purpose of
putting up his enterprise.
2. Tasks- this means that the entrepreneur must know what the tasks are he has to
perform in order that his objectives will be realized.
3. Time allocation- This means that the entrepreneur should have a timetable or a
schedule to follow every task, so that it will be accomplish on time and
realize his objective.
4. Progress- This means that the entrepreneur should monitor the development of
the tasks and the accomplishment of the objective.
The following are the basic requirements to start a business in the Philippines:
• Securities and Exchange Commission (SEC) Registration - for partnership
or Corporation
• Department of Trade and Industry (DTI) Registration - for your business
tradename
• Mayor’s Business Permit - for getting the license to operate in the city or
municipality and payment of your local business taxes
• Bureau of Internal Revenue (BIR) Registration - for getting TIN, official
receipts and invoices, registering your books of accounts and paying your
national Internal revenue taxes
• SSS, PhilHealth, and Pag-Ibig Fund registration - for registering yourself or
company as an employer and for remitting your employees’ contribution
together with your employer’s share
Other steps to follow before operating a Business are as follows:
1. Set up an accounting system or hire an accountant. Knowing how the
business is doing financially is important for planning and survival.
2. Advertise the business. No one will buy the products or services if the customers do not know that the
company exists. You can make use of the social media.
3. Secure insurance for the business. Liability insurance protects the business
in the event of litigation. Consider life and disability insurance, health insurance
and fire insurance when you are leasing an office or storefront.
Keeping Business Records
- good record keeping can help protect the business, measure the performance and
maximize profit.
Records are the source documents, both physical and electronic, that specify
transaction dates and amounts, legal agreements and private customer and business
details.
A systematic recording allows you to;
A. Plan and work more efficiently
B. Meet legal and tax requirements
C. Measure profit and performance
D. Protect your rights, and
E. Manage potential risks
MODULE 05
Perform Bookkeeping Tasks
-bookkeeping is the process of recording business transactions in a systematic
and chronological manner.
The book of accounts are composed of the Journal and Ledger. It depends on
the type of business, some businesses used special journals when they are engaged
merchandising type of business to records business transactions.
There are two types of books used in recording business transactions:
1. General journal
-is the most basic journal which provides columns for date, account titles and explanations, folio or references
and a separate column for debit and credit entries.
2. General Ledger
-is a grouping of all accounts directly traceable to chart of accounts. These accounts will be reflected in the
financial statements as a summary of all financial activities that have taken place as recorded in the general
journal
Subsidiary ledger
-is a group of accounts directly associated from the general ledger. This record is created to maintain individual
accounts for customers
and vendors whose cash is not being used as a medium of exchange when purchasing
or selling merchandise.
The Rules of Debit and Credit
In the process of journalization, following the rules of Debit and Credit are
essential part to ensure accurate recording and sound decision making. Debit is
abbreviated as DR while CR for Credit.
When to Debit?
When cash or non-cash items are received, the said cash or non-cash items must be
recorded in the debit column. This means that the debit balance increased. It is called
Value Received.
When to Credit?
When cash or non-cash items are given, the said cash or non-cash items must be
recorded in the credit column. This means that the credit balance is increased. It is
called Value Parted
TRIAL BALANCE
-is a list of all ledger accounts with closed or final balances on a certain
period arranged according to the rules of debit and credit.
Adjusting Entry?
-making an adjusting entry helps the bookkeeper capture all financial events
happened over a period of time within the accounting cycle.
Outlined below are the five basic sources of adjusting
entries:
1. Depreciation expense - a method of allocating the cost of an asset to an expense over the
accounting periods that make up the asset’s useful life
2. Deferred expenses of prepaid expenses
-these are items that have been initially recorded as assets but are expected to
become expenses over time or through the operations of the business.
3. Deferred income of unearned income- these are items that have been initially recorded as liabilities but are
expected
to become income over time or through the operations of the business .
4. Accrued expenses of accrued liabilities- these are items of expenses that have been incurred but have not
been
recorded and paid.
5. Accrued income or accrued assets- These are income items that have been earned but have not been
recorded
and paid by the customer. In short, these are receivables of the business.
Prepare an Income Statement
and a Balance Sheet
-this statement is one of the major financial report. Also known as profit and loss
statement or statement of comprehensive income. This statement summarizes the
results of company’s operations for a specific period of time. If the result of operation
is positive, then the business earns net income otherwise, net loss.
The different parts of income statement are:
• The heading or title of report
• Name of the company
• Date or period covered Major parts are:
• Income or revenues - consist of all income received within the period upon
provision of services for service-concern business and sales for
merchandising
• Expenses – money spent during the conduct of business operations Net
income / net loss – the outcome of business operations.
The different parts of balance sheet are:
• The heading or title of report
• Name of the company
• Date or period covered
Major parts are:
• Assets (Current and Non-current)
•Current Assets – Assets that can be realized (collected, sold, used up) one
year after year-end date.
(liquidity). Current assets and current liabilities are also called short term
assets and shot term liabilities.
•Noncurrent Assets – Assets that cannot be realized (collected, sold, used up)
one year after yearend date.
•Liabilities (Current and Non-current)
Current Liabilities – liabilities that fall due (paid, recognized as revenue)
within one year after year end date.
•Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as
revenue) within one year after year-end date.
Noncurrent assets and noncurrent liabilities are also called long term
assets and long-term liabilities.
•Owner’s Equity or Capital
Capital is an item of balance sheet wherein the capital or interest of the owner
of the business is listed. Initial withdrawal of capital will be recorded in a drawing
account of the owner and will be reflected as a deduction to the capital balance.
Identify where there is a Profit
or Loss for a Business
-profitability has always been the overall goal of the business. It is of great
achievement in a successful implementation of strategic, operating and other plans.
In identifying the profit or loss of a business, the business will record every detail
of all business transactions and translate it into financial report. An income statement
is a financial report that reveals the total revenue or income, total expenses incurred
during the conduct of the business and, most of all the net profit or net loss as a result
of business operations over a specified period of time.
Below is the basic equation of income statement of a service-concern business:
Net Income/Loss = Service Income - Total Expenses
