Summary

This document defines various terms related to business and finance. Key definitions are included for concepts such as revenue, cost, sales, and profitability. The document also describes the implementation process of a business plan, staffing requirements, and business operations.

Full Transcript

DEFINITION OF TERMS Basic requirements to start a business: Securities and Exchange for partnership or Corporation Commission (SEC) Registration Department of Trade and for your business tradename Industry (DTI) Registration Mayor’s Business Permit for getting the license to operate...

DEFINITION OF TERMS Basic requirements to start a business: Securities and Exchange for partnership or Corporation Commission (SEC) Registration Department of Trade and for your business tradename Industry (DTI) Registration 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 for getting TIN, official receipts and invoices, registering your books of Revenue (BIR) Registration accounts, and paying your national Internal revenue taxes SSS, PhilHealth, and Pag- for registering yourself or your company as an employer and for remitting ibig Fund registration your employees’ contribution together with your employer’s share Business Plan Is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. Implementation Process of executing a plan or policy so that a concept becomes reality. Process Assures the business operations impact on productivity and efficiency. Staffing Refers to the number of people needed to do the work planned in the work process. Revenue 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. Sales Used especially when the nature of business is merchandising or retailing. Profit Is the gross income. The amount of gross profit provides information to the entrepreneur about revenue earned from sales. Cost Refers to the purchase price of the product including the total outlay required in producing it. Operating profit margin Is the second level of revenue in the income statement. At this stage, not only is the cost of buying or making the product that has been deducted included but also the operating expenses. Income statement Is the net profit margin and the third level in the revenue. Business is only given consideration like interest expense and income tax. Quick ratio Measures its short-term obligations with its most liquid assets and therefore excludes inventories from its current assets. Service Income Used to record revenues earned by rendering services. Mark up Refers to the amount added to the cost to come up with the selling price. Mark Up Price = (Cost x Desired Mark Up Percentage) Selling Price Selling Price = Cost + Mark Up 1 Projected Monthly Projected Daily Revenue x 30 days Revenue Projected Yearly Revenue Projected Daily Revenue x 365 days Cost of Goods Sold / Cost Refers to the amount of merchandise or goods sold by the business for a of Sales given period. Merchandise Inventory, Refers to goods and merchandise at the beginning of operation of beginning business or accounting period. Purchases Refers to the merchandise or goods purchased. Example: Cost to buy each pair of Jeans or t-shirt from a supplier. Merchandise Inventory, Refers to goods and merchandise left at the end of operation or end accounting period. Freight-in Refers to amount paid to transport goods or merchandise purchased from the supplier to the buyer. In this case, it is the buyer who shoulders this cost. Profitability ratios Group of financial statements that primarily determine the profitability of the business operation. Bookkeeping The process of recording business transactions in a systematic and chronological manner. It is systematic because it follows procedures and principles. Bookkeeper The person who is in-charge to record, maintain and update business records from all sorts of financial transactions using account title. Book of Accounts The book of accounts is composed of the Journal and Ledger, to record the business transactions. Journal Referred to as the book of original entry. Ledger Referred to as the book of final entry. 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. General Ledger Is a group of all accounts that can be found in the chart of accounts. These accounts will be reflected in the trial balance as a summary of all financial activities that have taken place as recorded in the general journal and subsidiary ledgers. Subsidiary 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. Account Receivable The accounts receivable ledger is a subsidiary ledger which records all Ledger credit sales made by a business. Account Payable Ledger An accounts payable ledger contains the detail for all invoices received from suppliers. This ledger is used as a subsidiary ledger, from which summary-level information is periodically posted to the general ledger. Debit The left-hand side entry also known in accounting as “Value Received.” Credit The right-hand side entry also known in accounting as “Value Parted With.” 2

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