Accounting for the Microbusiness - A Teaching Manual (Peace Corps, 1975, 105 p.) Aids Accounting interview The object of accounting Balance statement Assets = Capital Assets - Liabilities = Capital Profit and loss statement Cost of goods sold Trial balance Initiation sheet Definition of debit and credit The evolution of debit and credit Transactions Cash voucher Sales voucher Receipt Diagram of the system Cash book Guide to accounting entries Cash transactions Credit sales book Credit purchases book Credit sales Credit purchases Payments Loans to employees section Loans to employees list Book of accounts: Title of account pages Monthly inventory listing Guide to financial statement elaboration Uniterrupted working capital flow Interrupted working capital flow Inventory control - page examples Control of postdated checks Auxiliary cash on hand sheet Credit payments with merchandise Alternative Acc/Rec section

Accounting for the Microbusiness - A Teaching Manual (Peace Corps, 1975, 105 p.)

Aids

Accounting interview

Company____
Owner____
Address____
Telephone____
1. How did you start your business?
a. How many years ago
b. What previous experience had you had?
c. With how much capital did you begin?
d. What factors hare had positive and negative effects upon your business?

2. Accounting
a. Have you paid an accountant in the past? How much?
b. What books, files, or account lists do you use?
c. What paper work do you use (receipts, vouchers, etc. )?
d. Do you save receipts, vouchers, orders, etc.?

3. I am interested in knowing the financial state and business policies of your company to have an idea of its condition ant manner of doing business.

a. Where do you have your bank account? More than one?
- How much money is there in the account at this moment?
- Have you borrowed money from this bank?

b. Is there a petty cash system?
- Who controls it? How much cash is kept on hand?
- Do you use personal cash for expenses?

c. Is there a savings account? Where?

- How much do you have saved?
Do you take funds out of the account? Why?
Amount of annual interest?

d. Clients - Receivables
- How many firm clients do you have?
- Where are they located?
- Who pays transportation costs?
- Credit terms?
- What percentage of sales are credit sales?
- Discounts?
- Payment period?
How does this compare to the industry?
- Do you receive postdated checks?
- What do you do with these checks?

- Wait till due- date?
- Pay supplier?
- Sell them to broker? Rate of Commission

- Do you receive orders?

- Is money advanced?
- What percentage?
- Are orders met on time?

- Are there sporadic clients?

- all locals or from farther away also?
- Orders?
- Postdated checks?

- Is there production without firm orders?

- Why?
- What percentage?

- Are the orders in small or large quantities?
- Do you have salesmen?

- Commission policy?
- Base wage?
- Travel expenses?
- Percentage of all sales due to salesmen?

e. Do you loan money to friends?
- How much?
- For how long?
- At what interest rate?

f. How many employees are there?
- When are they paid?
- What social benefits do they receive?
- Is there much turnover?
- More than one shift?
- What are their hours? Overtime?
- Paid by the hour or contract?
- Do you loan them money?

- Often?
- Are these loans reduced from their salary?

g. Do you have investments?
- Stocks, bonds, certificates, etc..?
- Parts of other business?

h. Fixed Assets
- What machines are there? Value?
- Tools? Value?
- Plant

- Mortgage? Monthly payment?
- Rented or loaned? Monthly payment?

- Do you have a house car, farm, motorbike, etc.?

i. Suppliers
- Have you firm suppliers? How many?
- Where?
- Who pays transportation?
- Credit terms? Limit?
- Do you pay them with postdated checks?
- Are there sporadic suppliers?

- can you obtain credit?
- What percentage of purchases?

- What materials do you purchase? % of total?

- Which are scarce?
- Which have risen dramatically in purchase cost?

j. Do you have bank loans? More than one?
- Name of Bank
- Amount?

k. Other financial obligations?
- Finance Companies? Amount? Term?
- Private loan? Amount? Term?

l. Are there reserves to pay social benefits?
- How much do you owe your workers?

m. Sales
- Which months have more sales?
- The least sales?
- Your monthly average? Can you immediately increase your selling price to meet rises in purchasing costs?
- Why not?

n. Personal expenses?
- Do you have a salary?
- How much do you spend per week? Month?

o. Are there income or expenses outside of your normal business?
- What kind?
- How much per month?

The object of accounting

THE OBJECT OF ACCOUNTING IS:
______________________________

Balance statement

Company:		Date:
Assets
Current
Cash on hand
Banks
Loans to employees
Receivables
Inventory
Short-term investments
Total Current Assets		____(a)
Fixed Assets
Investments
Machinery, equipment, tools, etc.
TOTAL ASSETS			____(1)
Liabilities
Current
Accounts Payable
Current Obligations
Total Current Liabilities		____(b)
Long Term
Accumulated Social Benefits
Bank Obligations
Finance Obligations
Others
TOTAL LIABILITIES			____(2)
Capital
Beginning Capital
Profit/Loss from previous years
Profit/Loss this year (see P&L Statement)
TOTAL CAPITAL			____(3)
Working Capital		____(c)
	1 - 2 = 3 = CAPITAL
	a - b = c = WORKING CAPITAL

Assets = Capital

THE COMPANY WITHOUT DEBT

Assets - Liabilities = Capital

THE COMPANY WITH DEBT

Profit and loss statement

Company:		Period:
SALES
Less Coat of Sales
NET SALES			____(1)
Cost of Goods Sold
Beginning Inventory
Plus: purchases of materials	+
Subtotal
Less: Ending inventory	-
Cost of Goods Sold			____(2)
+ Marginal Utility ( 1 - 2 )			____(3)
Other Revenues & Expenses
Labor
Social Benefits
Personal Expenses
Other Expenses
Interest
Other Revenues or expenses
Total Costs			____(4)
++Profit			= = = = =
+++Lose			= = = = =
+ Net Sales less Cost-of Goods Sold
(1) - (2) = Marginal Utility (3)
++ If marginal utility is greater than expenses
(3) - (4) = Profit
+++ If marginal utility is less than expenses
(4) - ( 3) = Loss

Cost of goods sold

Inventory - June 1, 1976	= 60 oranges	= $30
Plus: Purchases during the month	= +100 oranges	= $ 50
Available during the month	= 160 oranges	= $80
Inventory - June 30, 1976	= - 30 oranges	= - $15
Cost of oranges sold in the month	= 130 oranges	= $65

Trial balance

Company:		Date
	COLUMN I		COLUMN II
Cash on Hand
Banks
Loans to employees
Receivables
Inventory (previous month)
Investments
Fixed Assets
Depreciation
Accounts payable
Current Obligations
Accumulated Social Benefits
Bank Obligations
Financial Obligations
Others
Beginning Capital
Profit/Loss from previous years	( Loss)		(Profit)
Profit/Loss this year	(Loss)		(Profit)
Sales
Cost of Sales
Raw Materials Purchases
Labor
Social Benefits
Personal expenses
Other expenses
Interest
Other revenue or expenses
TOTAL (Must be equal)	= = = = =		= = = = =

Initiation sheet

To start the accounting system in your company, you have to obtain the following information:

1. All clients and their outstanding debt.

2. All suppliers and the outstanding debt.

3. All creditors and their payment schedules

a. Banks
b. Finance Corporations
c. Individuals

4. All fixed assets and their value.

5. Employees and any loans outstanding.

6. Starting date of work for each employee.

Also ...

1. The last bank statement and the outstanding balance at system's initiation.

2. All pending receipts, vouchers, orders, etc.

3. An inventory at the value of raw materials (not labor) in:

a. Raw materials
b. Products in process
c. Finished Products

Definition of debit and credit

A Transaction is an interchange of two things of value.

There is more of one thing while there is less of another.

MORE (+) is a DEBIT
LESS (-) is a CREDIT

The evolution of debit and credit

APPLES
More (+)	Less (-)

APPLES
Debit (+)	Credit (-)

CASH ON HAND
Debit	Credit

ORANGES
More (+)	Less (-)

ORANGES
Debit (+)	Credit (-)

RAW MATERIAL	SALES
Debit	Credit

Transactions

THERE ARE TWO TYPES OF TRANSACTIONS:
______________________________________

Cash voucher

No. 8	Value $ 50. 00
	Date: November 6, 1975
To the favor of	Richard Goldstein
For the sum of	Fifty dollars
To purchase	Thread
	Mike Mullally

Sales voucher

Voucher No. 17	Date: June 30, 1975
Mr. David Rosson
Address	62 Walbridge Road
Payment Terms	50% down/the balance in 60 days

No.	Units	Article	Unit Value	Total
1	6	Boys Shirts Ref. 3212	1. 00	$ 6. 00
2	12	Boys Shirts Ref. 2406	1.00	12. 00
			Total	$18. 00

Paid $9. 00	Balance	$9. 00
Check x	Cash
		Salesman Leslie Dow

Receipt

		No. 0015
NATIONAL FURNITURE
City:	Richmond
Received from	Robert Moeller
The sum of	Two hundred dollars
Purpose	Round livingroom table
Paid $200. 00		Balance $100. 00
Check	Cash X	Sup. Roy Cramer

Diagram of the system

Diagram of the system

Cash book

					Bank			Cash on Hano			The credit accounts
	Date	Description		# of Check	Debit Deposits	Credit Withdrawls	Balance	Debit Deposits	Credit Withdrawls	Balance	Cash Sales	Client Payments	Discounts from Salaries	Deduction Soc. Sec.	Others
1	June 30	Initial Balancis					2500			350
2	July 1	Payment from Bob's Shop	Paca # 100					1000		1350		1000
3	July 1	Purchase of Glue and Nails	Voulnic # 864	198612		500	2000
4	July 1	Rent Payment	Rec # 374	198613		1800	200
5	July 1	Cash Sale	Voucher # 200					300		1550	300
6	July 1	Deposit from Cash on Nand	Rec # 18345		1300		1500		1300	250
7	July 2	Loans to Employees	Voucnir # 76						60	190
8	July 2	Payment from fashion first	Rec # 101		2500		4000					2500
9	July 2	Payment to Stan's Hardware	Rec # 098	198614		2000	2000
10	July 3	Labor Costs	Vouchee # 77	198615		600	1400						130	20
11	July 3	Social Security Payments		198616		467	933
12	July 5	Payment from the local Store	Rec # 103		8500		9433					8500
13	July 5	Payment to Zappa and Sons	Rec # 0278	198617		1117	8316
14					12300	6484		1300	1360		300	12000	130	20
15														130
16														12000
17														300
18														1360
19														6484
20														20294	Total Credits
21
22
23
24
25
26
27
28	July 31	Final Balances at months end			17800	19467	833	1900	1860	290	4000	12000	130	20
29														130
30														12000
31														4000
32														1860
33														19467
34														37477	Total Credits
35
36
37
38
39
40
41
42
43

		The Debit Accounts							The Debit Accounts
	Raw Materials	Payments to Suppliers	Loans to Employees	Labor Costs	Social Benefit Costs	General Costs	Personal Expenses	Interest Payments	Liquidation of DEBT	Fixed Assets	Investments	Liquidation of Social Bene.	Commissions	Discounts	Transportation
1
2
3	300
4						1800
5
6
7			60
8
9		2000
10				750
11					467
12
13		1117
14	5000	3117	60	750	467	1800
15	3117
16	60
17	750
18	467
19	1800
20	1300	Cash on Hand Deposits
21	12300	Bank Deposits
22	20294	Total Debits
23
24
25
26
27
28	2500	3117	60	3800	467	1800	4700	333	1000
29	3117
30	60
31	3800
32	467
33	1800
34	4700
35	333
36	1000
37	1900	Cash on Hand Deposits
38	17800	Bank Deposits
39	37477	Total Debits
40
41
42
43

Guide to accounting entries

1. Save all receipts, vouchers, orders, etc. together by date with a paper clip.

2. Every transaction must have paper work as evidence.

3. In each transaction debits equal credits.

4. Always write entries from left to right.

5. Sales are entered at the date of delivery.

6. Cash transactions are entered in the Cash Book.

7. Credit transactions are registered in one of the two credit books: Sales or Purchases.

a. In the Amount Section
b. In the Individual Account Section.
c. In the Summary Section.

8. Advances (money received before delivery of merchandise) and payments (money received after merchandise delivery) are registered:

a. In the Cash Book.
b. In one of the credit books: Sales or Purchases.

1) In the Individual Account Section
2) In the Summary Section.

9. After entering the transaction, file the paper work.

Cash transactions

July 1	Payment from Bob's Shop Receipt # 100 - $1,000
July 1	Purchase of glue and nails for $500 Paid with check # 198612 Voucher # 864
July 1	Paid rent with check # 198613 of $1,800. Receipt # 374
July 1	Cash sale of $300, 00 Voucher # 200
July 1	Deposited $1,300 in the bank. Receipt # 18345
July 2	Loans to employees Cash voucher # 76 for $60
July 2	Received a payment from Fashion First of $2, 500 that was deposited in the bank. Receipt # 101
July 2	Payment to Stan's Hardware, $2,000, with check #198614. Receipt #098
July 3	Labor costs of $750 discounted to $600 with check #198615 due to loan payments of $130 and Social Security payments of $20. Voucher # 77
July 3	Paid Social Security $467. 00 with check # 198616.
July 5	Payment from The Ideal Store. Receipt # 103. $8,500 that was deposited in the Bank.
July 5	Paid to Zappa and Sons with check # 198617 for $ 1,117. Receipt # 0278.

Credit sales book

NOTE: Reproduce without numbers for the lesson.

Amount Section

Date		Description	Voucher	Sale	Returns	Balance
7	2	Ideal Store	011	9, 000		9, 000
7	3	Fashion First	3,000	12,000
7	4	Bob's Shop	013	14, 000		26, 000

Individual Account Section

THE IDEAL STORE

Date		Description	Voucher	Sale	Returns	Balance
6	30	Initial Balance				- 0 -
7	2	Sale	011	9, 000		9, 000
7	5	Payment	103		8, 500	500

FASHION FIRST

Date		Description	Voucher	Sale	Returns	Balance
6	30	Initial Balance				3,500
7	2	Payment	101		2, 500	1, 000
7	3	Sale	012	3, 000		4, 000

BOB'S SHOP

Date		Description	Voucher	Sale	Returns	Balance
6	30	Initial Balance				2,100
7	1	Payment	100		1, 000	1,100
7	3	Sale	013	14,000		15, 100

Summary of Accounts Receivable

Date		Client	Voucher	Sales	Payment	Balance
6	30	Initial Balance				5, 600
7	1	Bob's Shop	100		1,000	4, 600
7	2	Ideal Store	011	9,000		13, 600
7	2	Fashion First	101		2, 500	11, 100
7	3	Fashion First	012	3,000		14, 100
7	3	Bob's Shop	0 1 3	14, 000		28, 100
7	5	Ideal Store	103		8, 500	19, 600

Credit purchases book

NOTE: Reproduce without numbers for the lesson,

Amount Section

Date		Supplier	Voucher	Purchases	Returns	Balance
7	1	Zappa & Sons	0161	5,700		5 700
7	2	Stan's Hardware	038	7,800		13,500

Individual Account Section

STAN'S HARDWARE

Date		Supplier	Voucher	Purchases	Payment	Balance
6	30	Initial Balance				2,000
7	2	Payment	098		2,000
7	2	Purchase	038	7,800		7,800

ZAPPA & SONS

Date		Supplier	Voucher	Purchases	Payment	Balance
6	30	Initial Balance				3,400
7	1	Purchase	0161	5,700		9,100
7	5	Payment	0278		1,117	7,983

Summary of Accounts Payable

Date		Supplier	Voucher	Purchases	Payment	Balance
6	30	Initial Balance				5,400
7	1	Zappa & Sons	0161	5 700		11,100
7	2	Stan's Hardware	098		2,000	100
7	2	Stan's Hardware	038	7,800		16,900
7	5	Zappa & Sons	0278		1,117	15,783

Credit sales

July 2	Sold to the Ideal Store $9,000 credit - Voucher 011
July 3	Credit Sale to Fashion First $3.000. Voucher 012
July 3	Sold Bob's Shop with Voucher # 013, $14,000 with a term of 12 months.

Credit purchases

July 1	Bought from Zappa & Sons with Voucher # 0161, $5, 700 in raw materials,
July 2	Purchase of raw materials from Stan's Hardware - $7,800 - Voucher # 038 with a term of 3 months.

Payments

July 1	Payment from Bob's Shop - Receipt # 100 for $1,000.
July 2	Received payment from Fashion First for $2, 500 that was deposited in the Bank. Receipt # 101
July 2	Paid Stan's Hardware $2,000 with check # 198614. Receipt # 098.
Jul. 5	Payment from The Ideal Store - Receipt # 103 for $8, 500.
July 5	Paid Zappa and Sons $1, 117 with check # 198617 - Receipt # 0278.

Loans to employees section

NOTE: Reproduce without numbers for the lesson.

Individual Account Section

ANTONIO LOFASO

Date		Supplier	Voucher	Loan	Payment	Balance
6	30	Initial Balance				120
7	2	Loan				150
7	3	Discount			50	100

CHIP CHANDLER

Date		Supplier	Voucher	Loan	Payment	Balance
6	30	Initial Balance				60
7	2	Loan	76	30		90
7	3	Discount	77		80	10

Summary - Loans to Employees

Date		Supplier	Voucher	Loan	Payment	Balance
6	30	Initial Balance				180
7	2	A. Lofaso	76	30		210
7	2	C. Chandler		30		240
7	3	A. Lofaso	77		50	190
7	3	C. Chandler			80	110

Loans to employees list

July 2	Loaned $60 - Cash Voucher # 76 $30 to Chip Chandler $30 to Antonio Lofaso
July 3	Labor Costa of $750 - Discounting Voucher # 77 for $130. $80 from Chip Chandler $50 from Antonio Lofaso

Book of accounts: Title of account pages

CASH ON HAND

Date			Deposits	Withdrawals	Balance
6	30	Initial Balance			250
7	31	Squared	1, 900	1, 860	290

BANKS

Date			Deposits	Withdrawals	Balance
6	30	Initial Balance			2, 500
7	31	Squared	17, 800	19,467	833

LOANS TO EMPLOYEES

Date			Loans	Discounts	Balance
6	30	Initial Balance			180
7	31	Squared	60	130	110

ACCOUNTS RECEIVABLE

Date			Credit Sales	Payments	Balance
6	30	Initial Balance			5, 600
7	31	Squared	26, 000	12, 000	19,600

INVENTORY

Date			Raw Material	In Process	Finished Goods	Total
6	30		2,000	3, 500	4, 500	10, 000
7	31		1,500	3, 000	1, 500	6, 000

INVESTMENTS

Date			Investments	Liquidations	Balance
6	30	Initial Balance			- 0-
7	31	Squared	- 0 -	- 0 -	- 0-

AID # 27.1

FIXED ASSETS

Date			Purchases	Sales	Balance
6	30	Initial Balance			30,000
7	31	Squared	- 0 -	- 0 -	30,000

DEPRECIATION (Each Year)

Date			Year	Accumulated
6	30	Initial Balance		- 0 -

ACCOUNTS PAYABLE

Date			Credit Purchases	Payments	Balance
6	30	Initial Balance			5,400
7	31	Squared	13, 500	3, 117	15, 783

CURRENT OBLIGATIONS

Date			Loans	Liquidations	Balance
6	30	Initial Balance			12,000
7	31	Squared	- 0 -	- 0 -	12,000

ACCUMULATED SOCIAL BENEFITS (6 months)

Date			Increases	Liquidations	Balance
6	30	Initial Balance			3,100
7	31	Squared	- 0 -	- 0 -	3,100

BANK OBLIGATIONS

Date			Loans	Liquidations	Balance
6	30	Initial Balance			- 0 -
7	31	Squared	- 0 -	- 0 -	- 0-

FINANCE OBLIGATIONS

Date			Loans	Liquidations	Balance
6	30	Initial Balance			20,000
7	31	Squared	- 0 -	1, 000	19, 000

OTHER OBLIGATIONS

Date			Loans	Liquidations	Balance
6	30	Initial Balance			- 0 -
7	31	Squared	- 0 -	- 0 -	- 0 -

BEGINNING CAPITAL (at initiation of system)

Date			Balance
6	30	Permanent Balance	8,030

PROFITS/LOSS Previous Years

Date			Year	Accumulated
6	30		- 0 -	- 0 -

PROFITS/LOSS - This Year

Date			Profit	Loss	Balance
7	31	- Lose ( from P & L Statement)	- 0 -	1,080	(1,080)

SALES

Date			Cash	Credit	Total	Accumulated
7	31		4,000	26,000	30,000	30,000

COST OF SALES

Date			Commissions	Discounts	Total	Accumulated
7	31				- 0 -	- 0 -

PURCHASES OF RAW MATERIALS

Date		Cash	Credit	Total	Accumulated
7	31	2,500	13,500	16,000	16,000

LABOR

Date			Month	Accumulated
7	31		3,800	3,800

SOCIAL BENEFITS

Date			Cost of Benefits	Payments from workers	Balance	Accumulated
7	31		467	20	447	447

SALARY AND PERSONAL EXPENDITURES

Date			Month	Accumulated
7	31		4,700	4,700

OTHER EXPENSES

Date			General Costs	Transport	Total	Accumulated
7	31		1,800	-0-	1,800	1,800

INTEREST PAYMENTS

Date			Month	Accumulated
7	31		333	333

OTHER INCOME OR EXPENSES ( OUTSIDE)

Date			Income	Expense	Balance	Accumulated
7	31		- 0 -	- 0 -	- 0 -	- 0 -

COSTS OF GOODS SOLD

Date			Month	Accumulated
7	31	From P & L Statement	20, 000	20, 000

Monthly inventory listing

				July 31			August 31			September 30			October 31			November 31			December 31
		Description		Units	Unit value	Total	Units	Unit value	Total	Units	Unit value	Total	Units	Unit value	Total	Units	Unit value	Total	Units	Unit value	Total
1		Raw Material
2		A - Dozens		2	10	$ 20	0	10	$ - 0 -
3		B		4	5	30	3	5	10
4		C		10	1	10	20	1	20
5		D		1	15	15	4	20	80
6		E - Grams		200	5	1000	100	5	500
7		F - Pounos		5	20	100	10	18	180
8		G		15	3	45	5	3	15
9		H - Kilos		9	8	72	9	8	72
10		I - Gallons		6	10	60	10	10	100
11			Subtotal			1342
12		L					30	5	150
13		M					60	3	130
14		N					100	10	1000
15			Subtotal						3347
16
17
18
19
20		Products in process
21		1		20	40	800	10	15	150
22		2		10	30	200	0	30	- 0 -
23		3		80	40	1300	41	10	400
24			Subtotal			2200			550
25
26
27
28
29
30
31
32		Finished products
33		1a		10	60	600	5	50	350
34		2b		15	40	600	5	30	150
35		3c		70	30	1600	0	0
36			Subtotal			2300			400
37
38
39			Total			6342			3197
40
41
42
43