Review Material Lessons 6 10

LESSON 6 - FORECAST THE REVENUES OF THE BUSINESS
Forecasting is calculating or predicting future events that usually comes from the result
of a study and analysis of available pertinent data.
Revenue is the total income produced by a given source, a property expected to yield a
large annual revenue, or the gross income returned by an investment.
LESSON 7 – COSTING
A price is the quantity of payment or compensation given by one party to another in return
for one unit of goods or services.
Fixed Costs – This cost is considered unchanging no matter how much a business
increase or decrease its sales.
Variable Costs – This cost is considered as relative or proportional to the output
produced by the business.
Product Cost – Production or product costs refer to the costs incurred by a business
from manufacturing a product or providing a service.
Product Cost = Fixed Costs + Variable Costs
Unit Cost – This is the product cost relative to the number of units produced.
𝐏𝐫𝐨𝐝𝐮𝐜𝐭 𝐂𝐨𝐬𝐭
Unit Cost = 𝐍𝐨. 𝐨𝐟 𝐏𝐫𝐨𝐝𝐮𝐜𝐭 𝐏𝐫𝐨𝐝𝐮𝐜𝐞𝐝
Markup Price – Is the amount of difference between the selling price and unit cost.
Markup Price = Unit Cost ∗ Desired Rate of Return
Selling Price – This is the amount that the business should sell its product.
Selling Price = Unit Cost + Markup Price
LESSON 8 – REASONS FOR KEEPING BUSINESS RECORDS

Good records will help you do the following:
A business record is a document (hard copy or digital) that records business dealing. A
business record includes meetings, minutes, memoranda, employment contracts, and
accounting source documents.
Good records will help you do the following:
1. Legal and Compliance Requirements
2. Financial Management and Decision Making
3. Taxation and Audit Purposes
4. Business Performance Evaluation
5. Legal Protection and Risk Management
Explanation:
1. Legal and Compliance Requirements - Failure to meet these obligations can result
in penalties, fines, or even legal consequences.
2. Financial Management and Decision Making - By maintaining financial statements,
invoices, receipts, and expense records, businesses can gain insights into their financial
health, cash flow, and profitability.
3. Taxation and Audit Purposes
Maintaining detailed records of income, expenses, deductions, and tax filings enables
businesses to comply with tax laws, substantiate claims, and defend their positions in
case of an audit.
4. Business Performance Evaluation
By analyzing sales data, customer feedback, inventory records, and marketing metrics,
you can identify patterns, strengths, weaknesses, and opportunities.
5. Legal Protection and Risk Management
In case of disputes or disagreements, having proper documentation ensures clarity
regarding rights, obligations, and terms of the agreements.
Importance of Record – keeping
By prioritizing record-keeping, businesses can operate more efficiently, reduce risks, and
position themselves for long-term success. So, remember, keeping good records is not
just a legal requirement, but also a strategic investment in your business's growth and
resilience.
LESSON 9 – FINANCIAL POSITION

Statement of Financial Position, also known as the Balance Sheet, presents the financial
position of an entity at a given date.
It is comprised of three main components:
• Assets are the resources owned and controlled by the firm.
• Liabilities are obligations of the firm arising from past events which are to be settled
in the future.
• Equity or Owner’s Equity are the owner’s claims in the business. It is the residual
interest in the assets of the enterprise after deducting all its liabilities.
Examples of Assets:
Cash, Accounts Receivable, Merchandise Inventory, Supplies, Prepaid Expense,
Property, Plant and Equipment (equipment, furniture, building, land), Copyright, Patent,
Franchise, Goodwill, etc.
Examples of Liabilities:
Accounts Payable, Notes Payable, Utilities Payable, Unearned Income, Loans Payable,
Mortgage Payable.
Examples of Owner’s Equity:
Capital and Drawing
ASSETS
➢ Cash is money on hand, or in banks, and other items considered as medium of
exchange in business transactions.
➢ Accounts Receivable are amounts due from customers arising from credit sales
or credit services.
➢ Notes Receivable are amounts due from clients supported by promissory notes.
➢ Inventories are assets held for resale.
➢ Supplies are items purchased by an enterprise which are unused as of the
reporting date.
➢ Prepaid Expenses are expenses paid in advance. They are assets at the time of
payment and become expenses through the passage of time.
➢ Property, Plant and Equipment are long-lived assets which have been acquired
for use in operations.
LIABILITIES
➢ Accounts Payable are amounts due, or payable to, suppliers for goods purchased
on account or for services received on account.
➢ Notes Payable are amounts due to third parties supported by promissory notes.
➢ Unearned Income is cash collected in advance; the liability is the services to be
performed or goods to be delivered in the future.
➢ Loans Payable refers to the amount of money that a business or individual owes
to a lender or financial institution because of borrowing funds.
➢ Mortgage Payable refers to a long-term debt obligation that an individual or
organization has incurred to finance the purchase of real estate property.
OWNER’S EQUITY
➢ Capital is the value of cash and other assets invested in the business by the owner
of the business.
➢ Drawing is an account debited for assets withdrawn by the owner for personal use
from the business.
LESSON 10 – INCOME STATEMENT
Statement of Comprehensive Income (SCI) – Also known as the income statement contains the
results of the company’s operations for a specific period which is called net income if it is a net
positive result while a net loss if it is a net negative result. This can be prepared for a month, a
quarter, or a year. (Haddock, Price, & Farina, 2012)
Statement of Comprehensive Income (SCI) – Also known as the income statement.

Contains the results of the company’s operations for a specific period which is called net
income if it is a net positive result while a net loss if it is a net negative result. This can be
prepared for a month, a quarter, or a year. (Haddock, Price, & Farina, 2012)

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LESSON 6 - FORECAST THE REVENUES OF THE BUSINESS

LESSON 8 – REASONS FOR KEEPING BUSINESS RECORDS

LESSON 9 – FINANCIAL POSITION

Statement of Comprehensive Income (SCI) – Also known as the income statement.

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