Introduction to Introduction to Financial Financial ManagementManagement

Financial ManagementFinancial Management

Conducting all financial matters of the Conducting all financial matters of the organization in a way that ensures that organization in a way that ensures that funds are used in a proper and efficient funds are used in a proper and efficient mannermanner

Financial Management System

Budgeting

Record Keeping – Accounting

Reporting – Income Statement, Balance Sheet, Cash Flow

Budget FoundationsBudget Foundations

strategic plan strategic plan numerical representations numerical representations benchmark Done on a yearly cyclebenchmark Done on a yearly cycle Bottom-up/Top Down BudgetingBottom-up/Top Down Budgeting Coordination/controlCoordination/control

Methods of Budgeting

Program-Planning-Budgeting System ((PPBS )

Line Item

Incremental Zero Based

Record Keeping:The General Leger (GL)

Purpose: Income/expenses sources

Components of a General Components of a General LedgerLedger

Assets Liability Revenue Expense Gain Loss

General Leger

Principles of the General Leger

IN OUT # Consulting Expenses GST Auto Rent Phone Hydro Gas (Heat) GST

$1,070.00 $1,000.00 $70.00$432.00 $403.75 $28.25$750.00 $750.00$57.00 $53.27 $3.73

$210.00 $196.26 $13.74$7,500.00 $7,000.00 $9.34 $490.66

$119.00 $111.20 $7.80

$8,570.00 $1,568.00 $8,000.00 $9.34 $560.66 $403.75 $750.00 $53.27 $111.20 $196.26 $53.52

Two Types of AccountingTwo Types of Accounting

Management Accounting Financial Accounting

Reports : Financial Reports : Financial AccountingAccounting

Financial reports include the following Financial reports include the following components:components:

Balance SheetBalance Sheet Income StatementIncome Statement Statement of Retained EarningsStatement of Retained Earnings Statement of Changes in Financial Statement of Changes in Financial

PositionPosition

Balance SheetBalance Sheet

The financial position of an entity The financial position of an entity AssetsAssets

Reporting – Balance SheetAssets = Liabilities (debt) + Owners Equity

Assets (has $ value) Liabilities (debt)

Current Assets Current Liabilities

Fixed Assets = Long Term Liabilities

Other Assets +

Equity

value of investment of

owners plus profit left

to accumulate

Income StatementIncome Statement

an organization’s operationsan organization’s operations personal Income statementpersonal Income statement

Income StatementSample - Sorority Swimwear

SalesDirect (cash)RetailInternet

Cost of Goods Sold

Royalties

ExpensesSalariesPayroll TaxesDepreciation on “equipment”Workers CompensationHealth InsuranceAdvertisingOffice SuppliesRentUtilitiesBad debtsTravelMiscellaneous

InterestTaxes

Gross Profit

Net Income

Statement of Retained Statement of Retained EarningsEarnings

NetNet incomeincome Explains the changes.Explains the changes. Breaks down changes.Breaks down changes.