Unit 8
Financial Issues &
Accounting Records
Small Business Operations
Determine Start-up Capital Needs
 Every business is
different and has its own
specific cash needs at
different stages of
development.
 Some businesses can be
started on a shoestring
budget, while others may
require considerable
investment in inventory or
equipment.
Source: www.sba.gov
It is vital to know whether or not you
will have enough money to launch
your business venture.
Frameworks 8.2.1
Determine Start-up Capital Needs
 To determine your startup costs,
you must identify all the expenses
your business will incur during its
startup phase.
 Some of these expenses will be
one-time costs, such as the fee for
incorporating your business and
the price of a sign for your
building.
 Some expenses will be ongoing,
such as the cost of utilities,
inventory, insurance, etc.
Source: www.sba.gov
Frameworks 8.2.1
Capital Expenses Vs. Operating Expenses
 Capital expenses are
long-term investments in
land, buildings, and
equipment.
 Operating expenses
are the costs of day-today operations. These
include wages, utilities,
insurance, supplies, and
advertising.
Source: Marketing, 3e, pages 559-560
Frameworks 8.2.2
Sources of Start-up Capital
 Equity capital or owner
capital is the small
business owner’s
personal financial
contribution to the
business.
 Debt capital or creditor
capital is money that
others loan to the small
business.
Most small business owners will use a
combination of equity capital and debt
capital to start their business.
Source: Business Principles and Management, 12e, page 421
Frameworks 8.2.3
Create a Start-up Budget
 A start-up budget projects income and
expenses from the beginning of a new
business until it becomes profitable.
– Create a start-up budget for the school based
enterprise.
Source: Business Principles and Management, 12e, page 421
Frameworks 8.2.4
The Importance of Finances
 The small business will generate revenue – the
money received from the sale of products and
services.
– Revenue minus All Costs = Profit or Loss
– If the School Based Enterprise generated $478 in
sales during the week and all expenses were $276
what would the profit be for the week?
$202
Source: Marketing, 3e, page 556
Frameworks 8.3.1
What is the “Z” Report?
 The “Z” report is created by the
point-of-sale terminal and lists all
cash sales, credit sales, and total
revenue for the completed shift.
 Interpret a “Z” report for the School
Based Enterprise.
– What was the amount of the beginning
change fund?
– What was the amount of credit sales?
– What was the amount of cash sales?
– What was the total sales for the day?
– How much money should be in the
cash drawer?
Frameworks 8.4.2
Financial Statements
 A financial statement is a
detailed summary of the specific
financial performance for a
business or a part of a business.
– An income statement reports on
the amount and source of revenue
and the amount of and type of
expenses for a specific period of
time.
– A balance sheet describes the
type and amount of assets,
liabilities, and capital in a business
on a specific date.
Source: Marketing, 3e, pages 564-565
Frameworks 8.4.1
The Balance Sheet
 The balance sheet includes
3 categories:
– Assets include the things
the business owns.
– Liabilities are the amounts
the business owes.
– Capital is the difference
between the amount of
assets and the amount of
liabilities, this is the value of
the business.
Source: Marketing, 3e, page 565
Frameworks 8.4.1
Accounts Receivable Vs. Accounts Payable
 Accounts receivable
are sales for which the
small business has not
yet been paid – this is
money owed to the
business. Marketing, 3e, page
576
 Accounts payable is the
record of money owed
and paid to other
businesses/vendors or
creditors. Business Principles
and Management, 12e, page 390
Frameworks 8.5.1
End of Unit 8
 Visit the website www.quizlet.com to review the
terms associated with this unit of instruction.
 If you have not already done so, create an account with
Quizlet.com.
 Use your first and last name (without a space) as your
login.
 Use your first name (or anything you can remember!) as
your password.
 Using the Quizlet.com search feature, search for
cdorman and find Mr. Dorman’s dashboard.
 Open the Subjects folder “Small Business Operations.”
 Study the flashcards.
 Use the test feature and use the scatter feature.