Module 6
Financial Statements
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Aboriginal Banking
Module 6 - Purpose
> Shows Financial “health” of business over a given period of
time
> Provides history of business performance
> Will highlight any changes in costs, sales, business strategy,
ect...
If you have any difficulties understanding this Module please refer to the Module 6 guide on how to
do the module or glossary for quick definitions of terms.
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Aboriginal Banking
Module 6 - Projected Outcomes
> Increased awareness of accounting role and importance in
small business
> Understand the “accounting equation”
> Increase awareness of basic financial statements; Start-up
Schedule, Income Statement, Balance Sheet, and Cash Flow
Projection.
> Increased Awareness of accounting terminology
> Increased awareness of financial statement preparation.
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Aboriginal Banking
Requirements in Module 6
> Start Up Expenses
> Loan Calculations
> Cash Flow Forecast
> Four-month Projected Income Statement
> Balance Sheet
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Aboriginal Banking
What is Accounting?
> Accounting is the process of recording, processing,
classifying, summarizing, and interpreting financial
transactions.
> Essentially how you manage, record, organize, and deal with
the money you have coming in and out of your business.
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Aboriginal Banking
What are Financial Statements for?
> Shows the business is able to pay back debts to any and all
sources while still making profit
> Shows potential financers (banks or other lenders) how
financially strong your idea is, this allows them to decide
whether or not to finance your idea.
> Shows that your business is able to still make money after
paying any monthly bills or other expenses
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Aboriginal Banking
The Accounting Equation
> The fundamental accounting equation, which resides at the
core of all financial transactions is:
ASSETS = LIABILITIES + OWNER’S EQUITY
This comes into play largely in the Balance Sheet section of the
Module
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Aboriginal Banking
Module 6 - Start-Up Costs
We will now start to look at the various financial statements found in Module 6, each one is mandatory
for the competition. A step-by-step guide can be found on the E-Spirit website.
> The goal of the Start-Up costs section is to show potential
financer’s how much it will take to get your business off the
ground.
> It shows what you need to start-up your business along with
detailing costs for doing so.
For the purpose of example we will now look at Lizzy’s Insurance Brokerage
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Aboriginal Banking
Module 6 – Start-Up Example
Start-Up Costs for Lizzy’s Insurance Brokerage
$4,500.00
$4,000.00
$2,000.00
$2,000.00
$800.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$150.00
$130.00
$1,000.00
$0.00
$0.00
$0.00
$14,580.00
Office Furniture
Office Equipment
Stationery Supplies
Rent (1st & last month)
Insurance
Land
Building
Improvments (Mechanical, Electrical, Construction)
Machinery & Equipment
Installation of equipment
Tools & Supplies
Vehicles
Stating Inventory
Utility hook-up & installation
Licences & permits
Advertising & promotion
Cash for unexpected expenses
Other cash requirements
Total
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Aboriginal Banking
Module 6 - Financing
> The purpose of this is to determine how much money you will
need to borrow and how you intend to pay it back
> It shows your lending amount (principal), monthly payments,
loan term, interest rates, and the financing options you’ve
pursued.
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Aboriginal Banking
Module 6 – Financing Examples
Equity, Other Contributions, Loan Amount, and Repayment
Terms
Our total start-up costs are:
$14,580.00
Our equity contribution should be:
$1,458.00
We are eligible for an ABC contribution of:
$1,458.00
Our loan amount should be:
$11,664.00
We have investigated the loan and monthly payments of:
$240.24
over a 60-month term at 7.5% Rate of Interest
Loan Calculator
Principal
Interest
Number of Years
Monthly Payment
$11,664.00
7.50%
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$240.24
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Aboriginal Banking
Module 6 - Cash Flow Forecast
> A cash flow forecast shows how much money have coming in
per month (inflow) vs. money going out per month (outflow),
along with total profit or lose at the end of the period.
> It also shows where your spending your money and how
much money in sales your are making.
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Aboriginal Banking
Module 6 – Cash Flow Examples
Four Month Cash Flow for Lizzy’s Insurance Brokerage
Owners Equity
Sales
ABC Grant
Bank Loan
$0
4,000
0
0
$0
7,000
0
0
$7,425
$10,600
$4,500
4000
2,000
2,000
800
1,000
130
150
185
240
150
0
0
0
$0
0
0
1,000
100
0
0
150
185
240
150
0
0
0
$0
0
2,000
1,000
100
1,000
0
150
185
240
150
0
0
0
0
1,000
100
0
0
150
185
240
150
0
0
0
Total Expenses
$15,155
$1,825
$4,825
$1,825
Cash Ending
$5,425
$5,600
$5,774
$10,449
Owners Draw
$2,000
$2,000
$2,500
$2,500
Total Cash
$1,458
6,000
1,458
11,664
$20,580
$0
9,000
0
0
$12,274
Expenses
Furniture
Equipment
Supplies
Rent
Insurance
Advertising
Legal
Telephone
Utilities
Debt Service
Bank fees
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$0
Aboriginal Banking
Module 6 - Projected Income Statement
> Your projected or estimated Income statement is a financial
statement that tries to give a reasonably accurate idea of
what your financial situation is in a fairly condensed form.
> It gives a fairly quick snapshot of profits, spending, and gross
and net income.
Recommended Video:
http://www.youtube.com/watch?v=VlGHoPv8BBQ
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Aboriginal Banking
Module 6 – Income Statement Example
Lizzy’s Insurance Brokerage
Projected Income Statement
For 4-month period ending
April
Sales
Cost of Sales
Gross Profit
$26,000.00
$0.00
$26,000.00
Expenses
% of sales
0.00%
15.38%
19.23%
4.23%
7.69%
2.31%
2.31%
3.70%
32.69%
2.85%
Wages & Benefits
Office Supplies
Rent
Insurance
Advertising
Telephone
Bank Fees
Loan Payment
Owner's Drawings
Heat & Hydro
Total Expenses
Income before taxes
Taxes (33% Assumed)
Net Income
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$0.00
$4,000.00
$5,000.00
$1,100.00
$2,000.00
$600.00
$600.00
$960.96
$8,500.00
$740.00
$0.00
$23,500.96
$2,499.04
$833.01
$1,666.03
Aboriginal Banking
Module 6 - Balance Sheet
> A balance sheet is a “snapshot” of a company’s financial
condition. It essentially measures how much money your
business has in comparison to how much it owes.
> An asset is something your business has either acquired or
obtained that has monetary value.
> Liabilities are money that you owe and have going out of your
business
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Aboriginal Banking
Module 6 – Balance Sheet Example
Balance Sheet
For Period Ending
April
Current Assets
Cash
Accounts Receivable
Inventory
Prepaid Expenses
Investments
Total current assets
Fixed assets
Equipment
Accumulated depreciation
Total fixed assets
Total Assets
Current Liabilities
$300.00 Accounts payable
$3,000.00
1,400.00 Current portion of LTD
2,800.00
0.00
0.00
2,800.00
0.00
2,500.00
0.00
0.00
0.00
$7,000.00 Total current liabilities
$5,800.00
$8,500.00
700.00
0.00
0.00
0.00
0.00
0.00
0.00
$7,800.00
Long term liabilities
Loan
$9,000.00
Retained earnings
0.00
0.00
Owner's Equity (see notes)
Lizzy
$0.00
0.00
0.00
0.00
Total owner's equity
$9,000.00
Aboriginal $14,800.00
Banking
$14,800.00 Total17
Liability & Equity
E-Spirit
www.bdc.ca/en/espirit
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Aboriginal Banking