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Accounting for the Microbusiness - A Teaching Manual (Peace Corps, 1975, 105 p.)
	The system
		(introduction...)
		The preliminary interview
		Lesson # 1
		Lesson # 2
		Lesson # 3
		Lesson # 4
		Installation of the system
		Follow-up visits
		Month end financial statements
		Analysis

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

The system

MICRON

The MICRON accounting system and teaching method have been founded on points "A" and "B" of the introduction. Whenever possible abstract accounting concepts have been simplified and the teaching method streamlined to be as efficient and dynamic as possible. The effectiveness of point "C" (Instructors that understand and respect this class of owner) is, of course, in the hands of you, the instructor. If you are interested and want to teach these people, you will successfully instruct them. If it is a chore you would rather not do, then no system can motivate your students, and it would be best if you worked in something else.

MICRON is based upon a few changes in accounting principles that from some professionals often elicit the same response, "That is not right! " These professionals are correct if one considers standard accounting rules a gospel rather than a guide. But, if one looks at the larger aims of accounting - the accurate registration and representation of business transactions - there may be more than one way to gain the same result. MICRON is another "way" and whether dr not it meets "standard accounting principles" is besides the point. This system works and it is tailored to meet a specific audience who cannot grasp the complexities of those "standard principles".

The primary simplication in this accounting relates to the definition of debits and credits. Here, all debits are "more" of something of value while all credits are "less" of something of value. This is to eliminate the troublesome redefinition of debit and credit on the liabilities side of the balance sheet. The change is made possible by a special organization of the accounts into two distinct groups with two sets of books. This division is between cash and credit transactions.

The first group of accounts consists of all cash transactions and is organized into what might be called a large checkbook The second group, consisting of credit transactions, is in a book or books designed much like auxiliary accounts payable and accounts receivable books.

The success of MICRON lies in this conceptual and organizational separation of cash and credit transactions. Prototypes to this system attempted to unite the two books into one page and' although it is mechanically possible, the results were not satisfactory It was found that those owners who could not under stand the unified approach could easily use the separated version that distinguishes between cash and credit transactions. Therefore, we urge you not to take a step backwards by using one instead of two books; save yourself the frustration!

The teaching method is one based on both individual and class instruction with a very strong emphasis upon a "trial and error" approach to understanding. The procedure is to teach basic ideas and the fundamentals of bookkeeping in a classroom atmosphere and then immediately emerse the owner into the "practice" by openning the company's books. Follow-up visits check the students progress and serve as sessions to further explain theory or particular book entries. As you will see, those owners who have a genuine desire to learn wild quickly assimilate the material.

It is felt that this quick assimilation is due to two factors. First, the student is not given time to be bored as he immediately sees and experiences theory changed into action. Secondly, after only 5 lessons the student himself becomes the central participant in a very relevant project his own company This immediate transfer of responsibility from teacher to student creates a sink or swim situation where the owner realizes that his success rests totally upon his own abilities. If the instructor makes periodic visits to help and encourage the student, the student realizes that he has no one to blame but himself for failure. Therefore, the ultimate success of this system rests upon the participation and responsibility of the student. We are only trying to "help him help himself".

Our teaching experience has shown that this process can be accomplished in an average of 33 hours instruction time. The following line graph will serve as a guide:

Hours

The Teaching Plan
Objectives

2

Explanation of the Financial Statements

3

Explanation of: Transactions
The System
Cash Book

2

Explanation of the Credit Books and the purchase of the Accounting Books

2

Explanation of Auxiliary Sections and Review

3

Openning of the Books, elaboration of the initial Balance Statement, and entering the first transactions.

8

8 follow-up visits

2

Instructions to elaborate Financial Statements

3

Elaboration of the Financial Statements

2

Seminar on Financial Analysis

2

Review and Analysis of Financial Statements

2

Review transactions during month

2

Elaboration and analysis of Financial Statements

Sessions should never be more than two hours to avoid losing the students attention. If the students cannot grasp a point, divide a lesson into two sessions. Also it is suggested that the classes be held on consecutive days and that the system be immediately installed. This will insure quick movement from the theory to the practice.

Before explaining the lesson plan a few other important points must be mentioned ...

First, it is imperative that each instructor understand the mechanics of this system perfectly before attempting to teach it.

Included in the "Financial Statements" section of this manual are a trial balance, beginning and ending balance sheets, and an income statement for the transactions of "Colombia Industries" during the month of July. During the lesson, if one follows the commercial movements of this company, the evolution of the system from the beginning balance sheet to the elaboration of month end statements will become clear.

Other aids to greater proficiency are provided by the sections entitled "Additional Controls" and "Odd Entries". However' it is assumed that the instructor knows or has had experience in accounting. Many small businesses often conduct transactions that are, to say the least, odd and experience in accounting comes in handy when deciding what to debit and credit. Such rare entries become an intellectual challenge but we have yet to find one that can't be handled In short, be imaginative. MICRON is as effective as its application.

Second, it is preferred that the instructor initially teach two or three companies on a personal non-classroom basis to gain mastery of the system and teaching method The benefits of the "trial and error" method of learning can be of use to teachers as well as students. It should also be suggested that the number of students per teacher be kept to manageable levels At month end statement time 4 or 5 companies are a lot.

Third, the teacher must remember that his audience has a short attention span. Again, we emphasize as many visual and dynamic teaching techniques as possible. Asking spot questions taking examples from the students' industries reviewing important concepts from new points of view, etc. will make a boring session into an exciting one. A good teacher is an actor ... so let yourself get into it!

Fourth, the selection of students should be a careful process. Whether the students be business owners, their wives, children or trusted employees, the first consideration must be desire. Only those who want to learn will learn and you will be wasting both your time and theirs if there isn't this important common denominator, For those of you who work with credit related institutions, it might be noted that those students who are awaiting approval of loans often have shown more desire before receiving the money than after. Consequently, we discourage teaching those awaiting loan approval as their motives might be camouflaged.

If during the preliminary interview the person shows desire and has a company that might be judged "ongoing" rather than in a "liquidation" state, the final decision rests upon his intellectual capabilities. Years of education are not necessarily indicative of a person's ability to assimilate new ideas, make rational judgments, and show common sense. This is your value judgment. We urge you not to accept obvious failures for instruction as only ill-will will result.

Given the classroom situation, it is best to group those of equal intellectual capabilities. Also if they can be drawn from the same industrial sector or have similar types of business transactions, the teaching process will be easier.

Finally, if someone other than the owner is to be bookkeeper, it is very important that the owner also attend classes and learn some accounting. Experience has shown that where the owner knows nothing of the accounting, he often ignores it or may even distrust it.

Fifth, it is recommended that a pencil, not a pen be used to make all entries. Students are expected to make errors at first (it is part of the teaching method) and they will probably continue doing so even after the system is mastered ... we are all human. Just because something is written in pen does not make it more correct ... only harder to erase.

Now that you have an overview of MICRON and its teaching method, we have organized approach, lesson, and follow-up outlines that can either serve as a step by step reference to class instruction or as a guide to one-on-one teaching. The basic structure of these outlines will be a listing of the objectives teaching or instructional aids and the recommended procedural approach to each session.

Included in this manual is a detachable "Teaching and Instructural Aids" section that will prove to be quite helpful. It consists of a chronological sequence of questionnaires visual aids, handouts, and examples that are numbered to conform to the session outlines. They will not only help explain the system to you and your students, but should add an important visual dimension to what is generally a very boring subject to teach,

Finally, good lucks You are about to make accounting both relevant and dynamic to an economic sector that desperately needs the help. You should also have a very satisfying experience as those you teach will be most appreciative of your assistance.

The preliminary interview

THE INTRODUCTORY INTERVIEW

OBJECTIVES:

a. To establish a working relationship with the owner.

b. To study his learning potential and knowledge of accounting.

c. To understand every business transaction that the company makes in order efficiently organize the books.

MATERIAL AIDS:

Aid # 1. The Questionnaire.

PROCEDURE:

1.

This should be a loose interview session using the questionnaire as a guide.

2.

It should be conducted in the owner's company so that the teacher can get a first hand idea of the company's operations, review the firm's paperwork and look at any rudimental accounting system that might be in use. In this way the instructor should be able to judge the difficulty or ease that teaching this person may present.

3.

The understanding of all commercial transactions is indispensable. After the interview you should be able to state all the business policies of this company. This will include how postdated checks are issued, received and handled; whether the company incurs expenses or receives income from outside the business; who pays for the transportation of merchandise, etc.

4.

After the interview list all the accounts this company needs to carry and in what manner you ought to organize the books to facilitate entries.

5.

It might be pointed out that the teacher should not attempt to change the company's business practices at this point. He should only figure out how to account for them. During the lesson the concept of the separation of the owners' cash from that of the company will be introduced, Most fundamental business policy changes should be suggested only after the first month's financial statements are compiled. In this manner the instructor can demonstrate with facts how changes may improve the company's condition.

Lesson # 1

OBJECTIVES:

To explain:
a) The reasons for accounting
b) Balance Sheet. Profit and Loss Statement, and the Trial Balance.

MATERIAL AIDS:

Bulletin Board Aids: 2, 3, 4, 5, 6, 7, 8
Handout Aids: 3, 6, 8 9

METHODOLOGY:

The following is a detailed outline presenting the oral lesson:

1.

Aid 2. What is the object of Accounting? Discussion.

1.1 "The object of accounting is to collect the transactions, to organize and register them and to present them in a way that facilitates analysis "

1.2 "The presentation that facilitates analysis takes the form of the Balance Sheet and the Profit and Loss Statements.'

2.

Aid 3. What is the Balance Statement? Discussion

2.1 "The Balance Statement represents the financial condition of a company in $ on a particular day. "

2.2 Explain every account especially cash on hand, inventory, investments, fixed assets, current liabilities and capital. For example: "Investments are funds of the company invested outside the business. "

2.3 Aids 4, 5. Explain: Assets - Liabilities = Capital.
Assets = What the company has
Liabilities = What the company owes,
Capital = What remains after paying deb or your investment in the company.

3.

Aid 6. What is a Profit and Loss Statement? Discussion.

3.1 It is the application of costs to sales during a given period of time to determine profitability.

3.2 Aid 7. Explain each account. Concentrate on Cost of Goods Sold.

4.

Aid 8. What is a Trial Balance?

4.1 "It is an organizational tool comprised of all the company's accounts taken from both the Balance and Income Statements It is proof that all transactions have been properly recorded.

4.2 Do not explain it further as it will only confuse the student.

5.

Aid 9. Hand out the "Initiation Sheet".

5.1 It is the information needed to start an accounting system.

5.2 Assign the "Fixed Assets List and Values" for the next class.

Lesson # 2

OBJECTIVES:

To explain:
a) Transactions
b) Paper Work
c) Overview of System
d) Cash Book
e) The gathering of information for initial balance sheet.

MATERIAL AIDS:

Bulletin Board Aids: 2, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19
Handout Aids: 16, 18, 19.
NOTE: Cover one classroom wall with Aid 17.

METHODOLOGY:

1.

Aid 2. The object of accounting is to collect transactions, to organize and register them and to present them in a way that facilitates analysis.

2.

What is a transaction? Discussion.

2.1 "An interchange of two things of value".

2.2 Aid 10. In every transaction there is more of one thing and less of another.

2.3 The more is called Debit.
The less is called Credit.

2.4 Aid 11. The evolution of Debit and Credit.

2. 41 If I give you two oranges, I have two less (make entry).
If you give me two apples, I have two more (entry).

2.42 If I give you three oranges, I have three less or a "credit".
If you give me three apples, I have three more or a "debit".

2.43 If I buy $100 of raw materials, I enter $100 as a "credit" to cash and $100 as a "debit" to raw materials.

2.44 If I sell $500 in merchandise, I enter $500 as a "debit" to cash and $500 as a "credit" to raw materials.

2.5 Aid 12. How many types of transactions are there? Discussion.

2.51 Cash ... where the interchange of two things of value takes place on the same day. Examples.

2.52 Credit... where the interchange takes place on two different days. Examples.

3.

Why Paper Work? Discussion

3.l Evidence to prevent errors, omissions, and tricks;

3.2 A record for accounting.

3.3 Demonstrate a cash voucher (Aid 13), a sales voucher (Aid 14), and a receipt (Aid 15).

4.

Aid 16. Diagram of the System. Explain first two steps.

Cash transactions are entered in the Cash Book.

Credit transactions are entered in the Credit Book.

5.

Aid 17. The Cash Book. this model should be on the wall.

5.1 Explain the book's three sections: Information, Money, Accounts,

5.2 Explain each one of the accounts.

5.3 Aid 18. Handout the "Guide to Account Entries " and use it to explain entries

5.4 Aid 19 Present this list of transactions one by one saying.
"Is this a cash or credit transaction?" Cash.
Where do we enter cash transactions?" Cash Book.
"How?''

5.5 Explain how to "square" the Cash Book page.

5.51 The total of all debits must equal all the credits

5.52 Add all columns vertically, then add all debit balances and all credit balances.

5.53 If not equal,
a) check all entries for debits and credits;
b) check addition

5.6 Pass squared account balances on to the next page.

6.

Review list of fixed assets and their values.

7.

Referring to the "Initiation Sheet" request list of all suppliers, clients and creditors with account balances for the next session.

8.

Advise students that they will buy their books at the next session and announce their price.

Lesson # 3

OBJECTIVES:

To explain Credit Books
To sell and distribute account books,

MATERIAL AIDS:

Bulletin Board Aids: 16, 20, 21, 22, 23, 24,

METHODOLOGY:

Distribute work sheets for the Credit Books,

1.

Aid 16. Review the Diagram of the System.

2.

The Credit Books are divided into two groups:
Credit Sales and Payments are entered in the Credit Sales Book.
Credit Purchases and Payments are entered in the Credit Purchases Book.

2.1 Both the Organization and Entries are the same in each book.

2.11 The Books are divided into Amount, Individual Account' and Summary sections. Explain using Aids 20, 21.

2.12 Credit Transactions are recorded in all these sections.

2.2 Handout six worksheets to each student, refer them to the "Guide to Account Entries" and (Aid 22) present the list of examples one by one asking
"Is this a cash or credit sale?" Credit.
"Where do we enter credit sales?" Credit Sales Book
"How?" Pick a student.

2.3 Aid 23. Repeat the procedure of 2.2 for Credit Purchases examples.

2.4 Emphasize importance of credit balances asking, "How much does client "x" owe us?" "All clients? "; etc.

3.

Credit Payments - review difference between credit and cash payments.

3.1 If sale occurs at delivery, advances before and payments after delivery are credit payments.

3.2 Refer to the "Guide to Accounting Entries", read the examples (Aid 24) one by one and have the students make the entries in their handouts as you do on the bulletin board asking,
"Is this a cash or credit transaction?"
Cash because we receive money.
"Where do we enter cash transactions?"
Cash Book.
"Does this cash transaction affect a credit account also?" Yes.
"Will this transaction affect the summary?" Yes.

3.3 Advances on contracts teach this part of the "Guide to Accounting Entries" only to those who receive advances. Make up examples.

4.

Distribute ant sell accounting books: to prevent mistakes, gain a discount, and secure a supply of materials.

4.1 The books are:

4.11 The Cask Book: Soft cover accounting notebook with between 12 and 16 "T" accounts.

4.12 The Credit Books: Adjustable, 2 screw binding, hardcover accounting books with three columns. An alphabetical index (for individual accounts) and 100 pages are needed in each.

4.13 The Account Book: 40 pages softcover accounting notebook with three columns.

4.14 Folders: 8 simple cardboard folders to file:

Banks
Clients
Suppliers
Creditors

Others
Correspondence
Financial Statements
Taxes

5.

Review the fiat of Clients, suppliers and creditors and their account balances.

Lesson # 4

OBJECTIVES:

a) To explain the auxiliary sections.
b) To review bookkeeping proceedures in sub-groups.
c) To organize their books.

MATERIAL AIDS:

Aids 25, 26, 27, 28

METHODOLOGY:

1.

"Should we control other accounts like accounts receivables and accounts payables". Discussion

1.1 Loans to Employees... Have students suggest organization,

1.11 Aid 25. Individual Account and Summary Sections

1.12 Aid 26 Read list and make entries in worksheets.

1.2 Creditors... Have students suggest organization.

1.21 Individual Account and Summary Sections

1.22 These may be divided into short and long term individual account and summary sections.

2.

Review "Guide to Account Entries" and "Diagram of System".

2.1 Stress control accounts: banks, cash on hand! accounts receivable, accounts payable; creditors, loans to employees.

2.2 Discuss value of Control Accounts.

2.3 Divide class into subgroups, pass out receipts and vouchers of fictitious transactions ; have them make entries,

2.31 Have at least as many entries as students.

2.32 Have a representative from each group make entries on bulletin board - every student must make one entry.

2.33 Add up debits and credits to check work.

3.

Organization of the Books.... help students.

3.1 Place Account titles in Cash and Credit Books according to company, Auxiliary Sections are in Credit Books.

3.2 List fixed assets on the last pages of a Credit Book.

3.3 Aid 27. Place account headings (all possible to account for future growth) in Account Book.

3.4 Aid 28. Explain how to take an inventory of merchandise. Using last page of Cash Book, list raw materials, products in process and finished goods.

4.

Set the date of system initiation with each student.... they must have all information required by the "Initiation Sheet" at that date.

Installation of the system

OBJECTIVES:

a) Open the Books
b) Make the first day's entries

MATERIAL AIDS:

Aid 9

PROCEDURE:

The first section is for teachers who are instructing students individually The second section resumes the group approach.

1.

The one-on-one approach (Aid 9)

1.1 Give student "Initiation Sheet"'

1.11 All balances must be from the night before initiation.

1.12 Inventory is only the value of raw materials. Neither sales price nor invested labor is important.

1.13 Do not start system without 95% of information Bank balances, Inventory and Cash on Hand are imperative.

1.2 Teacher buys and organizes books.

1.21 Organization based on original interview and new information.

1.22 Place account headings in all books.

2.

The Day of Initiation - in the company

2.1 Fill out Account Book with balances from the Initiation Sheet.

2.2 Pass balances to a Balance Statement and compute Beginning Capital

2.21 Pass Beginning Capital balance back to Account Book.

2.22 If the owner forgets something, the affected account must be changed and the Beginning Capital readjusted.

2.3 Open the Cash Book.

2.31 Enter Cash or hand and Bank Account Balances.

2.32 Check last page inventory section. If not complete, require completion by the next visit.

2.4 Open the Credit Books

2.41 Place names and account balances in the respective "individual account" sections of Accounts Receivable, Accounts Payable, Loans to Employees and Creditors.

2.42 Add up individual account balances and enter the sum in the respective "summary'' section. These balances must coincide with those in the Account Books.

2.43 Check fiat of Fixed Assets. If not complete, require completion by the next visit.

2.5 Place all papers and documents in their respective folders.

3.

Make first day's entries. Entries are to be made daily.

3.1 Help owner if needed. Explain questions.

3.2 Have owner list doubts or omissions for the next visit.

3.3 Congratulate owner and get a well deserved beer or two!

Follow-up visits

OBJECTIVES:

a) Check Entries
b) Explain theoretical or practical misunderstandings
c) Check paper flow
d) Balance first Cash Book page

PROCEDURE:

Visit the company as needed. Every other day at first.

1.

Check entries... at first read every one

1.1 If error is found,
a. Ask why entry was made as it was.
b. Repeat theoretical argument behind the omission
c. Have him correct error and explain what he has done and why.

1.2 Common errors include ...
a. Entering payments from clients in the sales column,
b. Entering payments to suppliers in the raw materials column.
c. Addition and substraction in balances and summaries
d. Entering transportation, discount or commission expenses among "general expenses".
e. Forgetting to make all three entries on a credit transaction
f. Not entering a sale at time of delivery,
g. Entering either sales or purchases in the payments columns of the credit books.
NOTE In the Credit Books the second column is always for payments.

2.

Check Paper Flow

3.

Help Balance the first Cash Bock page ... he should do the rest.

Month end financial statements

OBJECTIVES:

a) To close the books
b) Elaborate Financial Statements

MATERIAL AIDS:

Handout Aid 29.

PROCEDURE:

The following is not a lesson plan but a detailed explanation of statement elaboration. Two or three days before month end give a short class on this subject.
Often students will do better if given a step by step approach: squaring the month, completing the Account Book and, then, elaboration of the Statement.
The best students will loam in two months; the rest in 4. If they have not learned by this point, have them drop the Cash Book and only carry the Credit Books for control.

1.

Closing the Books

1.1 Take a month end inventory using the inventory section of the Cash Book. Pass balances to the Account Book.

1.2 Square Cash Book on the last day of month.
a) This effectively squares the month.
b) Leave a margin of knee between months for correctionsand omissions.
c) Start next month with Bank and Cash on Hand balances.

2.

Account Book

2.1 Pass all balances from the Cash Book to the appropriate account.

2.2 Pass the "Amounts" of Credit Sale a and Purchases when indicated.
a) These amount sections are cleared at month's end.
b) Do not merely pass control section balances!

2.3 Figure account balances:
Past Month's Balance
+ Debit Entries
- Credit Entries
This Month's Balance
a) If balances on control accounts to not match those in the Account Book, compare all entries and check all mathematics until the discrepancy is found.
b) Group all variable expenses in "Cost of Sales"
c) Group all fixed expenses in "Other Expenses"
d) Figure accumulated balances for year end purposes.

3.

Trial Balance

3.1 Pass all account balances by filling in the blanks.

3.2 Use last month's inventory figure.

3.3 The sum of Column I must equal Column II

3.4 If the Trial Balance does not square. . .
a) Were all numbers correctly passed?
b) Are the mathematical operations in the Account Book correct?
c) Were the balances from the squared Cash Book and the Amounts of Credit Sales and Purchases correctly passed?
d) Are control account balances and the Account Book squared?

4.

Financial Statement

4.1 The Profit and Loss Statement
a) Pass the appropriate accounts.
b) Pass amount of profit or lose to the Account Book ant the Balance Statement.

4.2 The Balance Statement
a) Pass appropriate accounts - this month's inventory and profits also.
b) Check accuracy by comparing sum of Capital accounts to Assets minus Liabilities.

Analysis

OBJECTIVES:

How to
a) apply and interpret financial statements
b) use other parts of the system for analysts
c) use the system as a base for budget and cost analysis

MATERIAL AIDS:

Aids 30, 31, 32

PROCEDURE:

A month or two after the students have completed sets of financial statements, give them a class on the use and application of these statements and the rest of the system.

1.

The Profit and Loss Statement - organized to facilitate marginal utility analysis.

1.1 Demonstrate the effect of variable costs upon sales revenues.
a) Show how "costs of sales" and "cost of goods sold" affect marginal utility
b) Labor costs generally, may be treated as a fixed cost. Only treat it as a variable coat when it truly (in accordance with the accounting data, not intuition) shows a marked monthly variance reflected in production changes. To match labor and inventory costs is extremely complicated and we suggest the fixed coat method, Any variance is averaged out over time.

1.2 Demonstrate how marginal utility must cover fixed costs to have profits
a) The salary of the owner (or owners) is included among the fixed costs for psychological reasons.
- We never want him to see profits unless they are over what he personally takes out of the business.
- This way he will treat his personal expenses as a cost and perhaps thinks twice before spending money he knows 0a company needs.
- To convince him he should budget his expenses in a fixer weekly salary and live within it.
b) If sales taxes are paid and do not really have a relationship to sales, they should be treated as a fixed coat.

2.

The Balance Sheet

2.1 Examine the relation between Assets, Liabilities, and Capital and the effect of profit or losses.

2.2 Explain current assets, current liabilities, and the concept of Working Capital.
a) Working Capital is included in our Balance Sheet.
b) Show how the purchase of machinery, payment of long term debt, and monthly losses affect Working Capital. Aids 30, 31.
c) Explain difference between liquidity and Working Capital.

3.

Other Analytical Aspects of the System.

3.1 Control of Inventories and Receivables "If the company has Working Capital but no cash on hand, it has probably invested too much in inventories, has a large amount receivables with a slow rotation, or both".
a) Explain inventory control and suggest simple ways to construct systems (Aid 32).
b) Demontrate how to speed-up receivables rotation.
- the Individual Account Section can serve as a Kardex if payment dates are included in the entries.

3.2 The Book of Accounts
a) The analysis of all monthly accounts and costs shows seasonality as well as changes in costs.
b) Facilitates historical analysis.

4.

The Focus of Class Instruction

4.1 The owner should evaluate his own company as if he were planning to purchase it.

4.2 Pointing out weak points and strong points the owner should present his analysis to the group for discussion.

4.3 Create a fictiticus company if you the instructor, see that the owners would prefer not to discuss their companies' problems in front of others.

5.

Other Farms of Analysis

5.1 Cash Flow Systems . . all the information is provided

5.2 Budgetary Control ... based upon historical cat. and cash flow projections

5.3 Variable Cost Analysis of Products,
a) Isolate monthly Fixed Costs
b) Assign monthly variable costs of raw materials and sales costs to each product and compare them to sales figures ... this comparison will show the break-even point for each product.
c) The percentage of total sales per product' the sales coat percentage per product and the cost of goods sold percentage per product are all one needs to establish an elementary break-even point and cost analysis Remember that this does not take into account a very important variable.. the time of production! One must take the appropriate time measurements.

Hours	The Teaching Plan Objectives
2	Explanation of the Financial Statements
3	Explanation of: Transactions The System Cash Book
2	Explanation of the Credit Books and the purchase of the Accounting Books
2	Explanation of Auxiliary Sections and Review
3	Openning of the Books, elaboration of the initial Balance Statement, and entering the first transactions.
8	8 follow-up visits
2	Instructions to elaborate Financial Statements
3	Elaboration of the Financial Statements
2	Seminar on Financial Analysis
2	Review and Analysis of Financial Statements
2	Review transactions during month
2	Elaboration and analysis of Financial Statements

OBJECTIVES:	a. To establish a working relationship with the owner.
	b. To study his learning potential and knowledge of accounting.
	c. To understand every business transaction that the company makes in order efficiently organize the books.
MATERIAL AIDS:	Aid # 1. The Questionnaire.
PROCEDURE:
1.	This should be a loose interview session using the questionnaire as a guide.
2.	It should be conducted in the owner's company so that the teacher can get a first hand idea of the company's operations, review the firm's paperwork and look at any rudimental accounting system that might be in use. In this way the instructor should be able to judge the difficulty or ease that teaching this person may present.
3.	The understanding of all commercial transactions is indispensable. After the interview you should be able to state all the business policies of this company. This will include how postdated checks are issued, received and handled; whether the company incurs expenses or receives income from outside the business; who pays for the transportation of merchandise, etc.
4.	After the interview list all the accounts this company needs to carry and in what manner you ought to organize the books to facilitate entries.
5.	It might be pointed out that the teacher should not attempt to change the company's business practices at this point. He should only figure out how to account for them. During the lesson the concept of the separation of the owners' cash from that of the company will be introduced, Most fundamental business policy changes should be suggested only after the first month's financial statements are compiled. In this manner the instructor can demonstrate with facts how changes may improve the company's condition.

OBJECTIVES:	To explain: a) The reasons for accounting b) Balance Sheet. Profit and Loss Statement, and the Trial Balance.
MATERIAL AIDS:	Bulletin Board Aids: 2, 3, 4, 5, 6, 7, 8 Handout Aids: 3, 6, 8 9
METHODOLOGY:	The following is a detailed outline presenting the oral lesson:
1.	Aid 2. What is the object of Accounting? Discussion.
	1.1 "The object of accounting is to collect the transactions, to organize and register them and to present them in a way that facilitates analysis "
	1.2 "The presentation that facilitates analysis takes the form of the Balance Sheet and the Profit and Loss Statements.'
2.	Aid 3. What is the Balance Statement? Discussion
	2.1 "The Balance Statement represents the financial condition of a company in $ on a particular day. "
	2.2 Explain every account especially cash on hand, inventory, investments, fixed assets, current liabilities and capital. For example: "Investments are funds of the company invested outside the business. "
	2.3 Aids 4, 5. Explain: Assets - Liabilities = Capital. Assets = What the company has Liabilities = What the company owes, Capital = What remains after paying deb or your investment in the company.
3.	Aid 6. What is a Profit and Loss Statement? Discussion.
	3.1 It is the application of costs to sales during a given period of time to determine profitability.
	3.2 Aid 7. Explain each account. Concentrate on Cost of Goods Sold.
4.	Aid 8. What is a Trial Balance?
	4.1 "It is an organizational tool comprised of all the company's accounts taken from both the Balance and Income Statements It is proof that all transactions have been properly recorded.
	4.2 Do not explain it further as it will only confuse the student.
5.	Aid 9. Hand out the "Initiation Sheet".
	5.1 It is the information needed to start an accounting system.
	5.2 Assign the "Fixed Assets List and Values" for the next class.

OBJECTIVES:	To explain: a) Transactions b) Paper Work c) Overview of System d) Cash Book e) The gathering of information for initial balance sheet.
MATERIAL AIDS:	Bulletin Board Aids: 2, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 Handout Aids: 16, 18, 19. NOTE: Cover one classroom wall with Aid 17.
METHODOLOGY:
1.	Aid 2. The object of accounting is to collect transactions, to organize and register them and to present them in a way that facilitates analysis.
2.	What is a transaction? Discussion.
	2.1 "An interchange of two things of value".
	2.2 Aid 10. In every transaction there is more of one thing and less of another.
	2.3 The more is called Debit. The less is called Credit.
	2.4 Aid 11. The evolution of Debit and Credit.
	2. 41 If I give you two oranges, I have two less (make entry). If you give me two apples, I have two more (entry).
	2.42 If I give you three oranges, I have three less or a "credit". If you give me three apples, I have three more or a "debit".
	2.43 If I buy $100 of raw materials, I enter $100 as a "credit" to cash and $100 as a "debit" to raw materials.
	2.44 If I sell $500 in merchandise, I enter $500 as a "debit" to cash and $500 as a "credit" to raw materials.
	2.5 Aid 12. How many types of transactions are there? Discussion.
	2.51 Cash ... where the interchange of two things of value takes place on the same day. Examples.
	2.52 Credit... where the interchange takes place on two different days. Examples.
3.	Why Paper Work? Discussion
	3.l Evidence to prevent errors, omissions, and tricks;
	3.2 A record for accounting.
	3.3 Demonstrate a cash voucher (Aid 13), a sales voucher (Aid 14), and a receipt (Aid 15).
4.	Aid 16. Diagram of the System. Explain first two steps.
	Cash transactions are entered in the Cash Book.
	Credit transactions are entered in the Credit Book.
5.	Aid 17. The Cash Book. this model should be on the wall.
	5.1 Explain the book's three sections: Information, Money, Accounts,
	5.2 Explain each one of the accounts.
	5.3 Aid 18. Handout the "Guide to Account Entries " and use it to explain entries
	5.4 Aid 19 Present this list of transactions one by one saying. "Is this a cash or credit transaction?" Cash. Where do we enter cash transactions?" Cash Book. "How?''
	5.5 Explain how to "square" the Cash Book page.
	5.51 The total of all debits must equal all the credits
	5.52 Add all columns vertically, then add all debit balances and all credit balances.
	5.53 If not equal, a) check all entries for debits and credits; b) check addition
	5.6 Pass squared account balances on to the next page.
6.	Review list of fixed assets and their values.
7.	Referring to the "Initiation Sheet" request list of all suppliers, clients and creditors with account balances for the next session.
8.	Advise students that they will buy their books at the next session and announce their price.

OBJECTIVES:	To explain Credit Books To sell and distribute account books,
MATERIAL AIDS:	Bulletin Board Aids: 16, 20, 21, 22, 23, 24,
METHODOLOGY:	Distribute work sheets for the Credit Books,
1.	Aid 16. Review the Diagram of the System.
2.	The Credit Books are divided into two groups: Credit Sales and Payments are entered in the Credit Sales Book. Credit Purchases and Payments are entered in the Credit Purchases Book.
	2.1 Both the Organization and Entries are the same in each book.
	2.11 The Books are divided into Amount, Individual Account' and Summary sections. Explain using Aids 20, 21.
	2.12 Credit Transactions are recorded in all these sections.
	2.2 Handout six worksheets to each student, refer them to the "Guide to Account Entries" and (Aid 22) present the list of examples one by one asking "Is this a cash or credit sale?" Credit. "Where do we enter credit sales?" Credit Sales Book "How?" Pick a student.
	2.3 Aid 23. Repeat the procedure of 2.2 for Credit Purchases examples.
	2.4 Emphasize importance of credit balances asking, "How much does client "x" owe us?" "All clients? "; etc.
3.	Credit Payments - review difference between credit and cash payments.
	3.1 If sale occurs at delivery, advances before and payments after delivery are credit payments.
	3.2 Refer to the "Guide to Accounting Entries", read the examples (Aid 24) one by one and have the students make the entries in their handouts as you do on the bulletin board asking, "Is this a cash or credit transaction?" Cash because we receive money. "Where do we enter cash transactions?" Cash Book. "Does this cash transaction affect a credit account also?" Yes. "Will this transaction affect the summary?" Yes.
	3.3 Advances on contracts teach this part of the "Guide to Accounting Entries" only to those who receive advances. Make up examples.
4.	Distribute ant sell accounting books: to prevent mistakes, gain a discount, and secure a supply of materials.
	4.1 The books are:
	4.11 The Cask Book: Soft cover accounting notebook with between 12 and 16 "T" accounts.
	4.12 The Credit Books: Adjustable, 2 screw binding, hardcover accounting books with three columns. An alphabetical index (for individual accounts) and 100 pages are needed in each.
	4.13 The Account Book: 40 pages softcover accounting notebook with three columns.
	4.14 Folders: 8 simple cardboard folders to file:
	Banks Clients Suppliers Creditors	Others Correspondence Financial Statements Taxes
5.	Review the fiat of Clients, suppliers and creditors and their account balances.

OBJECTIVES:	a) To explain the auxiliary sections. b) To review bookkeeping proceedures in sub-groups. c) To organize their books.
MATERIAL AIDS:	Aids 25, 26, 27, 28
METHODOLOGY:
1.	"Should we control other accounts like accounts receivables and accounts payables". Discussion
	1.1 Loans to Employees... Have students suggest organization,
	1.11 Aid 25. Individual Account and Summary Sections
	1.12 Aid 26 Read list and make entries in worksheets.
	1.2 Creditors... Have students suggest organization.
	1.21 Individual Account and Summary Sections
	1.22 These may be divided into short and long term individual account and summary sections.
2.	Review "Guide to Account Entries" and "Diagram of System".
	2.1 Stress control accounts: banks, cash on hand! accounts receivable, accounts payable; creditors, loans to employees.
	2.2 Discuss value of Control Accounts.
	2.3 Divide class into subgroups, pass out receipts and vouchers of fictitious transactions ; have them make entries,
	2.31 Have at least as many entries as students.
	2.32 Have a representative from each group make entries on bulletin board - every student must make one entry.
	2.33 Add up debits and credits to check work.
3.	Organization of the Books.... help students.
	3.1 Place Account titles in Cash and Credit Books according to company, Auxiliary Sections are in Credit Books.
	3.2 List fixed assets on the last pages of a Credit Book.
	3.3 Aid 27. Place account headings (all possible to account for future growth) in Account Book.
	3.4 Aid 28. Explain how to take an inventory of merchandise. Using last page of Cash Book, list raw materials, products in process and finished goods.
4.	Set the date of system initiation with each student.... they must have all information required by the "Initiation Sheet" at that date.

OBJECTIVES:	a) Open the Books b) Make the first day's entries
MATERIAL AIDS:	Aid 9
PROCEDURE:	The first section is for teachers who are instructing students individually The second section resumes the group approach.
1.	The one-on-one approach (Aid 9)
	1.1 Give student "Initiation Sheet"'
	1.11 All balances must be from the night before initiation.
	1.12 Inventory is only the value of raw materials. Neither sales price nor invested labor is important.
	1.13 Do not start system without 95% of information Bank balances, Inventory and Cash on Hand are imperative.
	1.2 Teacher buys and organizes books.
	1.21 Organization based on original interview and new information.
	1.22 Place account headings in all books.
2.	The Day of Initiation - in the company
	2.1 Fill out Account Book with balances from the Initiation Sheet.
	2.2 Pass balances to a Balance Statement and compute Beginning Capital
	2.21 Pass Beginning Capital balance back to Account Book.
	2.22 If the owner forgets something, the affected account must be changed and the Beginning Capital readjusted.
	2.3 Open the Cash Book.
	2.31 Enter Cash or hand and Bank Account Balances.
	2.32 Check last page inventory section. If not complete, require completion by the next visit.
	2.4 Open the Credit Books
	2.41 Place names and account balances in the respective "individual account" sections of Accounts Receivable, Accounts Payable, Loans to Employees and Creditors.
	2.42 Add up individual account balances and enter the sum in the respective "summary'' section. These balances must coincide with those in the Account Books.
	2.43 Check fiat of Fixed Assets. If not complete, require completion by the next visit.
	2.5 Place all papers and documents in their respective folders.
3.	Make first day's entries. Entries are to be made daily.
	3.1 Help owner if needed. Explain questions.
	3.2 Have owner list doubts or omissions for the next visit.
	3.3 Congratulate owner and get a well deserved beer or two!

OBJECTIVES:	a) Check Entries b) Explain theoretical or practical misunderstandings c) Check paper flow d) Balance first Cash Book page
PROCEDURE:	Visit the company as needed. Every other day at first.
1.	Check entries... at first read every one
	1.1 If error is found, a. Ask why entry was made as it was. b. Repeat theoretical argument behind the omission c. Have him correct error and explain what he has done and why.
	1.2 Common errors include ... a. Entering payments from clients in the sales column, b. Entering payments to suppliers in the raw materials column. c. Addition and substraction in balances and summaries d. Entering transportation, discount or commission expenses among "general expenses". e. Forgetting to make all three entries on a credit transaction f. Not entering a sale at time of delivery, g. Entering either sales or purchases in the payments columns of the credit books. NOTE In the Credit Books the second column is always for payments.
2.	Check Paper Flow
3.	Help Balance the first Cash Bock page ... he should do the rest.

OBJECTIVES:	a) To close the books b) Elaborate Financial Statements
MATERIAL AIDS:	Handout Aid 29.
PROCEDURE:	The following is not a lesson plan but a detailed explanation of statement elaboration. Two or three days before month end give a short class on this subject. Often students will do better if given a step by step approach: squaring the month, completing the Account Book and, then, elaboration of the Statement. The best students will loam in two months; the rest in 4. If they have not learned by this point, have them drop the Cash Book and only carry the Credit Books for control.
1.	Closing the Books
	1.1 Take a month end inventory using the inventory section of the Cash Book. Pass balances to the Account Book.
	1.2 Square Cash Book on the last day of month. a) This effectively squares the month. b) Leave a margin of knee between months for correctionsand omissions. c) Start next month with Bank and Cash on Hand balances.
2.	Account Book
	2.1 Pass all balances from the Cash Book to the appropriate account.
	2.2 Pass the "Amounts" of Credit Sale a and Purchases when indicated. a) These amount sections are cleared at month's end. b) Do not merely pass control section balances!
	2.3 Figure account balances: Past Month's Balance + Debit Entries - Credit Entries This Month's Balance a) If balances on control accounts to not match those in the Account Book, compare all entries and check all mathematics until the discrepancy is found. b) Group all variable expenses in "Cost of Sales" c) Group all fixed expenses in "Other Expenses" d) Figure accumulated balances for year end purposes.
3.	Trial Balance
	3.1 Pass all account balances by filling in the blanks.
	3.2 Use last month's inventory figure.
	3.3 The sum of Column I must equal Column II
	3.4 If the Trial Balance does not square. . . a) Were all numbers correctly passed? b) Are the mathematical operations in the Account Book correct? c) Were the balances from the squared Cash Book and the Amounts of Credit Sales and Purchases correctly passed? d) Are control account balances and the Account Book squared?
4.	Financial Statement
	4.1 The Profit and Loss Statement a) Pass the appropriate accounts. b) Pass amount of profit or lose to the Account Book ant the Balance Statement.
	4.2 The Balance Statement a) Pass appropriate accounts - this month's inventory and profits also. b) Check accuracy by comparing sum of Capital accounts to Assets minus Liabilities.

OBJECTIVES:	How to a) apply and interpret financial statements b) use other parts of the system for analysts c) use the system as a base for budget and cost analysis
MATERIAL AIDS:	Aids 30, 31, 32
PROCEDURE:	A month or two after the students have completed sets of financial statements, give them a class on the use and application of these statements and the rest of the system.
1.	The Profit and Loss Statement - organized to facilitate marginal utility analysis.
	1.1 Demonstrate the effect of variable costs upon sales revenues. a) Show how "costs of sales" and "cost of goods sold" affect marginal utility b) Labor costs generally, may be treated as a fixed cost. Only treat it as a variable coat when it truly (in accordance with the accounting data, not intuition) shows a marked monthly variance reflected in production changes. To match labor and inventory costs is extremely complicated and we suggest the fixed coat method, Any variance is averaged out over time.
	1.2 Demonstrate how marginal utility must cover fixed costs to have profits a) The salary of the owner (or owners) is included among the fixed costs for psychological reasons. - We never want him to see profits unless they are over what he personally takes out of the business. - This way he will treat his personal expenses as a cost and perhaps thinks twice before spending money he knows 0a company needs. - To convince him he should budget his expenses in a fixer weekly salary and live within it. b) If sales taxes are paid and do not really have a relationship to sales, they should be treated as a fixed coat.
2.	The Balance Sheet
	2.1 Examine the relation between Assets, Liabilities, and Capital and the effect of profit or losses.
	2.2 Explain current assets, current liabilities, and the concept of Working Capital. a) Working Capital is included in our Balance Sheet. b) Show how the purchase of machinery, payment of long term debt, and monthly losses affect Working Capital. Aids 30, 31. c) Explain difference between liquidity and Working Capital.
3.	Other Analytical Aspects of the System.
	3.1 Control of Inventories and Receivables "If the company has Working Capital but no cash on hand, it has probably invested too much in inventories, has a large amount receivables with a slow rotation, or both". a) Explain inventory control and suggest simple ways to construct systems (Aid 32). b) Demontrate how to speed-up receivables rotation. - the Individual Account Section can serve as a Kardex if payment dates are included in the entries.
	3.2 The Book of Accounts a) The analysis of all monthly accounts and costs shows seasonality as well as changes in costs. b) Facilitates historical analysis.
4.	The Focus of Class Instruction
	4.1 The owner should evaluate his own company as if he were planning to purchase it.
	4.2 Pointing out weak points and strong points the owner should present his analysis to the group for discussion.
	4.3 Create a fictiticus company if you the instructor, see that the owners would prefer not to discuss their companies' problems in front of others.
5.	Other Farms of Analysis
	5.1 Cash Flow Systems . . all the information is provided
	5.2 Budgetary Control ... based upon historical cat. and cash flow projections
	5.3 Variable Cost Analysis of Products, a) Isolate monthly Fixed Costs b) Assign monthly variable costs of raw materials and sales costs to each product and compare them to sales figures ... this comparison will show the break-even point for each product. c) The percentage of total sales per product' the sales coat percentage per product and the cost of goods sold percentage per product are all one needs to establish an elementary break-even point and cost analysis Remember that this does not take into account a very important variable.. the time of production! One must take the appropriate time measurements.