Accounting Basics
- 1. Accounting Basics November 17, 2006 Denver Metro Chamber of Commerce
- 2. Why Are You Here? To Get a Basic Understanding of Accounting To Get an In-Depth Understanding of Accounting as Practiced by the Chamber
- 3. How Does She Know This Stuff? BS Finance 8 Years Chamber Controller 15 Years Controller for Membership Organizations 18 Years Accountant for Not for Profits 200 Years Accounting Experience
- 4. What Are We Going to Cover? Accounting – Basic Rules and Concepts How Those Rules and Concepts Apply to the Chamber How YOU Ensure Good Financial Reporting
- 5. Why Accounting? It’s the Language of Business It’s How Activities are Measured It’s How Results are Communicated
- 6. Accounting – Basic Rules and Concepts I GAAP Generally Accepted Accounting Principles Entities Proprietorship, Partnership, Corporation Tax Status Cash v. Accrual Accounting
- 7. Accounting – Basic Rules and Concepts II Objectivity Conservatism Consistency These are the CARDINAL RULES of Accounting.
- 8. Accounting – Basic Rules and Concepts II Objectivity “there must be reasonable and verifiable evidence to support any transaction” Conservatism “when in doubt, be conservative” Consistency “in order to know where we are, we have to know where we were before”
- 9. Accounting – Basic Rules and Concepts III Financial Statements Balance Sheet Income Statement
- 10. Accounting – Basic Rules and Concepts III Assets (what you own) - Liabilities (what you owe) = Equity (what you’re worth) Financial Statements - Balance Sheet Historical, Long Term Document These always have to balance - double entry bookkeeping
- 11. Denver Metro Chamber Of Commerce and Metro Denver EDC Balance Sheet August 31, 2006 Audited 831/2006 8/31/05 EDC DMCC TOTAL TOTAL ASSETS Current Assets Cash and Short Term Savings 3,038,117 1,820,627 4,858,744 2,957,578 Long Term Investments 0 1,006,681 1,006,681 699,205 Building Reserve 0 254,146 254,146 253,792 Total Cash and Investments 3,038,117 3,081,454 6,119,571 3,910,575 Receivables Membership Dues (net of Allowance) 0 159,923 159,923 386,882 Related Entities 0 16,179 16,179 (200,490) Other 0 33,576 33,576 16,974 Total Receivables 0 209,678 209,678 203,366 Other Assets Notes Receivable 0 7,000 7,000 64,336 Prepaid Expenses 0 417,895 417,895 145,200 Total Other Assets 0 424,895 424,895 209,536 Property & Equipment less Acc. Depr. 54,642 2,687,290 2,741,932 2,692,561 TOTAL ASSETS 3,092,759 6,403,317 9,496,077 7,016,038 LIABILITIES AND NET ASSETS Current Liabilities Accounts Payable 0 125,648 125,648 173,086 Payroll Liabilities 0 627,545 627,545 520,216 Advances/Other 0 0 0 10,562 Total Current Liabilities 0 753,193 753,193 703,864 Other Current Liabilities Deferred Dues less Deferred Commissions 0 1,058,320 1,058,320 1,488,096 Other Deferred Income 1,700,000 231,843 1,931,843 109,745 DMCC/EDC Intercompany 0 0 Total Other Current Liabilities 1,700,000 1,290,163 2,990,163 1,597,841 Total Liabilities 1,700,000 2,043,355 3,743,355 2,301,705 Net Assets Fund Equity - Prior Years 567,501 4,145,632 4,713,132 3,950,691 Net Profit / (Loss) 412,373 627,216 1,039,589 763,642 Total Net Assets 979,874 4,772,848 5,752,721 4,714,333 TOTAL LIABILITIES & NET ASSETS 2,679,874 6,816,203 9,496,076 7,016,038
- 12. Accounting – Basic Rules and Concepts III Revenue or Income ($ IN) - Expenses ($ OUT) = Net Income (the Bottom Line) Financial Statements - Income Statement Dynamic, Short Term Document Links with the Balance Sheet - Net Income is Equity
- 13. Denver Metro Chamber Of Commerce Income Statement - Executive Summary For the Twelve Months Ending August 31, 2006 Curr. Period Curr. Period YTD YTD (Over)/Under (Over)/Under Annual Actual Budget Actual Budget Year to Date % Budget REVENUE Membership Dues 368,198.38 311,536.00 4,060,709.35 3,744,000.00 (316,709.35) -8% 3,744,000.00 Administrative Income 284,644.31 255,950.00 380,283.43 322,110.00 (58,173.43) -18% 322,110.00 Member Services Income 470.00 0.00 66,220.00 62,345.00 (3,875.00) -6% 62,345.00 Corporate Communications 13,066.66 200.00 27,276.66 18,500.00 (8,776.66) -47% 18,500.00 Events Income 20,752.06 31,000.00 459,381.62 402,825.00 (56,556.62) -14% 402,825.00 Metro Denver EDC Income 0.00 320,600.00 242,825.21 525,600.00 282,774.79 54% 525,600.00 Marketing Sales & Service 37,855.66 8,620.00 237,364.47 189,650.00 (47,714.47) -25% 189,650.00 Business Resource Ctr Income 27,280.42 3,000.00 67,284.43 38,000.00 (29,284.43) -77% 38,000.00 Public Affairs Income 129,710.00 46,150.00 300,592.97 416,825.00 116,232.03 28% 416,825.00 TOTAL REVENUE 881,977.49 977,056.00 5,841,938.14 5,719,855.00 (122,083.14) -2% 5,719,855.00 EXPENSE Payroll Expense 683,911.27 249,822.00 3,213,106.00 2,938,300.00 (274,806.00) -9% 2,938,300.00 Administrative Expense 152,085.37 125,599.99 838,049.31 804,465.00 (33,584.31) -4% 804,465.00 Member Services Expense 2,089.27 775.00 23,383.77 23,500.00 116.23 0% 23,500.00 Corporate Communications 5,552.30 2,500.00 75,381.45 81,152.07 5,770.62 7% 81,152.07 Events Expense 16,602.36 2,700.00 181,581.49 159,600.00 (21,981.49) -14% 159,600.00 Metro Denver EDC Support 82,442.91 264,600.00 644,465.83 942,154.43 297,688.60 32% 942,154.43 Marketing Sales & Service 74,051.00 61,500.00 189,226.07 183,100.00 (6,126.07) -3% 183,100.00 Business Resource Ctr Expense 21,000.66 1,600.00 29,105.71 20,000.00 (9,105.71) -46% 20,000.00 Public Affairs Expense 56,054.74 98,125.00 272,787.28 513,301.48 240,514.20 47% 513,301.48 TOTAL EXPENSE 1,093,789.88 807,221.99 5,467,086.91 5,665,572.98 198,486.07 4% 5,665,572.98 NET INCOME FROM OPERATIONS (211,812.39) 169,834.01 374,851.23 54,282.02 (320,569.21) -591% 54,282.02 1445 Market Street Dividend 150,000.00 150,000.00 252,364.49 150,000.00 (102,364.49) -68% 150,000.00 NET INCOME (LOSS) (61,812.39) 319,834.01 627,215.72 204,282.02 (422,933.70) -207% 204,282.02
- 14. How Those Rules and Concepts Apply to the Chamber GAAP Annual Audit Cash v. Accrual Accounting Match Income with Expense Match Income with Period
- 15. How Those Rules and Concepts Apply to the Chamber Entities Proprietorship, Partnership, Corporation Tax Status THE CHAMBER, THE FOUNDATION AND 1445 MARKET STREETS ARE NOT-FOR-PROFIT CORPORATIONS
- 16. Tax Status • Federal Income Tax 501 (c) 6 – DMCC 501 (c) 3 – DMCF 501 (c) 2 – 1445 • State and Local Sales Tax Only 501 (c) 3 is exempt • Property Taxes
- 17. How Those Rules and Concepts Apply to the Chamber THE CHAMBER IS A MEMBERSHIP ORGANIZATION. As a Membership Organization, we have a Fiduciary Responsibility to our Members. fiduciary - “a person to whom property is entrusted for the benefit of others” responsibility – “answerability or accountability”
- 18. How Those Rules and Concepts Apply to the Chamber Objectivity There must be documentation for everything we do The documentation has to be accurate Conservatism Accounting people will not make assumptions on your behalf Accounting people abhor, detest and despise emergencies
- 19. How YOU Make Accounting Happen INCOME (REVENUE) Create an invoice in database When it’s paid, accounting records the income (Income Statement) Income might be deferred (Balance Sheet) EXPENSE Order something (supplies, catering, pencils) Write up a PO When the bill is ready to be paid,accounting records the expense (Income Statement)
- 20. How Accounting Rules Make Your Life Miserable Purchase Orders There must be documentation for everything we do The documentation has to be accurate Objectivity
- 21. How Accounting Rules Make Your Life Miserable Purchase Orders Accounting people will not make assumptions on your behalf Accounting people abhor, detest and despise emergencies Conservatism
- 22. How Accounting Rules Make Your Life Miserable Cash Receipts All Cash Receipts and Credit Card payments must have a Account Number written on them Objectivity
- 23. Account Numbers!! The list is called the Chart of Accounts There are three sections 1. Department 2. Account 3. Extension
- 24. More about Account Numbers! Departments 1. 000 through 900 2. You can only code stuff to your own department 3. To get detailed reports, we ask for specific departments Accounts 1. The most important one! 2. 4xxx = Revenue 3. 5xxx-9xxx = Expense 4. Get this wrong and we kick it back to you!
- 25. Two Additional Very Important Concepts TIMELINESS The “pay up bum” issue
- 26. Two Additional Very Important Concepts ACCURACY The Corporate Concepts mistake
- 27. How YOU Ensure Good Financial Reporting Bottom-Up Approach Budgeting Departments create their own budget Departments are accountable based on those budgets Purchase Orders Departments write up their own POs Financial Reports are based on those POs
- 28. One More Thing… Only Joe Blake, Robert Blankenship, or Tom Clark can sign contracts for the Chamber Authority is delegated this way: Members > Board > Executive
- 29. What Are Accountants Like? We like Order and Organization We enjoy Processes We like Schedules We don’t like Surprises We can’t really be Creative
- 30. How to Make Accounting Happy Fill out those POs completely and accurately Objectivity, Conservatism Use the correct account numbers Accuracy Turn in your POs and cash receipts promptly Timeliness
- 31. How to Make Accounting Happy Use the forms on the Infomall Ask us if you aren’t sure When you ASSUME, you make an ASS out of U and ME Maintain the records you need to stay on top of your budget Accounting information is Historical information
- 32. What Accounting Will Do For YOU Pay your vendors on time Jump in if you have problems with vendors or members Get you timely and accurate information Encourage to be creative in everything except our stuff Celebrate your successes!
- 33. Bottom-Up Approach – It’s Up to You The Chamber, EDC, Foundation and Market Street staff are an exceptionally talented group of people. We are proud to be working with you. Please understand that the accounting department has constraints you may not see. Your cooperation is vital to the “accountability” of the organization. Thank you so much for your concern, efforts and consideration.
- 34. Questions All Questions are Good Questions! Comments and Rebuttals are also Welcome (kind of)