BASIC FINANCIAL

SKILLS

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 CONTENTS

EXERC ISE: PR E ASSESSMENT ...................................................................... 3

BASIC FINANC IAL TERMINOLOGY ............................................................. 3

THE MOST IMPORTANT THINGS TO KNOW ABOUT BANKING......................... 5

WHAT IS A BUDGET?............................................................................... 7

EXERCISE: POST ASSESSMENT ...............................................................19

BOOKKEEPING AND FINANCIAL DOC UMENT ..............................................25

C ASH FLOW ANALYSIS .....................................................................35

FUNDRAISING.......................................................................................38

FUNDRAISING EVENT S......................................................................................... 38

PLANNING A FUNDRAISING E VENT ......................................................................... 39

DOING AN IN ITIAL BUD GET FOR AN ORGANIZATION ................................................. 42

WRITING YOUR BUDGET....................................................................................... 42

BIBLIOGRAPHY......................................................................................46

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EXERCISE: PRE ASSESSMENT

This exe rcise is de signed to broadly measure your curre nt le vel of aware ness and knowledge
about the subje ct
Not true for More or Definite ly
Put a tick in the column that most de scribes you me at all less true true for me
for me
1 I can list three example s of formal financial
institutions
2 I can list three example s of informal financial
institutions
3 I can explain what a budge t is
4 I can compile a budget
I can explain the diffe rence be twee n wants and
5
needs
6 I can se t a SMART goal
I know what to do if I spend more than what I
7
earn
8 I can explain what the true cost of debt is

BASIC FINANCIAL TERMINOLOGY

EXERC ISE: Group Discussion

Group exercise

Can you think of any othe r te rm inology that we should discuss?

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In orde r to be able to se t and manage your own budge t as we ll as a budget for a small business,
it is important to unde rstand the world of finance . Le ts have a look at some of the te rm s:

Credit
In te rms of m y bank account, cre dit is m oney that comes into m y account, for example a salary.
It could also be mone y that I borrow from someone or a bank, with the prom ise to repay the
lende r at some date in the future

Debit
In te rms of m y bank account, debit is the money going out of the account. I could for example
im plement a debit orde r whe re I agree with the bank to pay a fixed amount e ve ry month to a
pe rson or institution. The bank will then automatically deduct the mone y e ve ry month and pay it
ove r, for example I could pay m y clothing accounts, wate r and lights e tc via debit orde r

Savings account
Is an a ccount whe re you make deposits e ve ry month and the bank pays you inte rest on the money
in your account. It is normally use d for short te rm savings

Balance sheet
A company or pe rson's financial statement. It reports your asse ts, liabilities, and ne t worth at a
spe cific time

Cheque account
I can open a cheque account with a bank. The bank then issues me with cheque. A cheque
contains an unconditional orde r from the drawe r (the pe rson writing out the che que) that dire cts a
bank to pay a definite sum of mone y to a payee

Beneficiary
A pe rson who bene fits from the te rm s of a trust, pension or provide nt fund, or othe r de fe rred
income plan, or an insurance policy

Cash Flow
Cash ge ne rated by, or used in, ope rations

Consumer Price Index (CPI)

An index showing changes in the cost of living, or inflation, based on the ave rage cost of a
"baske t" of goods and se rvices

Personal loan
Temporary borrowing of a sum of mone y
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Exchange rate
 THE MOST IMPORTA NT THINGS TO KNOW A BOUT BA NKING

EXERCISE : Group Discussion

Group discussion
• What is a stok vel? Is this an effe ctive way of saving mone y? Why?
• Wha t is a loa n sha rk and why a re they so dange rous to make use of?
• What is a burial socie ty? Is it a good or bad thing to be long to a burial socie ty? Please
motivate your answe r
• Wha t is a pyram id scheme a nd expla in the dange rs associa ted with it?

Money in a bank account is safe - A bank is one of the safe st places to stash your cash since
your account is insured against loss by the gove rnment.

You pay for the convenience of having a bank account - Banks pay lowe r rate s on inte rest-
bearing accounts than broke rages and mutual fund companies that offe r che ck -writing privile ges.
What's more, bank fees can be high - account costs can easily add up unle ss you keep a m inimum
required balance on deposit

Inflation can eat what you earn from a bank - Even at a low rate of inflation, the annual creep
in the cost of goods and se rvices usually outpace s what banks pay in inte rest-bearing accounts

Not all interest rates are created equal - Bank s freque ntly use diffe rent me thods to calculate
inte rest. To compare how m uch mone y you'll earn from various accounts in a year, ask for each
account's "annual pe rcentage yie ld." Banks typically quote both figures, but only APYs are
calcula ted the same way e ve rywhe re

You can get better rates (but there's a hitch) – In gene ral the longe r pe riod you have to save
for example a 6-month de posit account, the highe r the inte re st rates. Howe ve r that usually
means that you can not withdraw the mone y from the a ccount. The call off for these k ind of
investments are normally 32 days, and you pay pe nalties if you withdraw your mone y earlie r

A TM fees can take a significant bite out of your budget - The convenience of using
automated telle r machine s is an increasingly price y one . It is e ven more expensive to withdraw
mone y from the ATM of anothe r bank, so withdraw mone y from your banks ATM as far as possible.
Also you will pay a fee for e ve ry transaction, so plan your spe nding and make sure you draw
enough mone y

Getting the best deal takes work - You won't ge t a great deal on a car if you just walk into a
deale r and plunk your mone y down. Like wise , you won't ge t a great bank ing deal unless you

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comparison-shop and ask about price breaks. For example , a bank m ight offe r free che ck ing if you
are a shareholde r or if you dire ct deposit your pay che ck

Internet Banking – Inte rnet banking facilities is on the increase . Each bank offe rs a unique
inte rnet se rvice . Se curity for inte rne t bank ing is top priority and ce rtain banks need a 3 part log in
sequence to pre vent fraud. Inte rne t bank ing is the cheapest way to do banking.

Using a debit card – Most banks urge their custome rs to use the ir savings, transmission and
e ven cheque bank cards as a debit card. The card is used to pay for goods at most store s. More
and more stores are ex cepting debit (maestro) cards
Use the Internet to shop for bank services - You can use the Inte rnet to compare fees, yields,
and minim um deposit requirements nationwide . To find out what a local bank is offe ring, plug its
name into any Inte rne t search engine

Informal financial institutions

Informal financial institutions include friends, family, ‘stok vel’, loan sharks, burial socie ties,
pyram id schemes

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 WHAT IS A BUDGET?

The re are ve ry fe w individuals who take the time to create a pe rsonal budge t. Some individuals
do not see the ne cessity of doing so; othe r people simply have no de sire to restrict the ir spe nding
habits. W ith this in mind, it should surprise no one that the numbe r of pe rsonal bank ruptcie s has
reached an all time high. Some individuals buy on desire and envy without first thinking of the
conseque nces the reof. In orde r to re ve rse this trend people need to be come more re sponsible
with the ir ways of spending. O ne of the best tools to he lp an individual accomplish this be haviour
is the pe rsonal budge t. This se ction will he lp you to unde rstand the world of mone y in orde r to
manage pe rsonal finances. It will also help you to:

• Plan and manage your own financial we ll-be ing

• De velop an unde rstanding of your own income and expenditure patte rns
• Plan short and long te rm financial commitments and how to budge t for them

A budge t is a plan for saving and spe nding your income . It is a financial plan that se ts limits on the
amount of mone y that will be spe nt on each category of expe nses in a given month. Eve ry month
you ge t a ce rtain amount of mone y and you have to use it to pay ce rtain expenses

EXERCISE: The importance of managing personal finances

Many people have no idea exactly whe re or how the y spe nd a good portion of their mone y. How
many times have you taken mone y from the ATM only to realise a couple of days late r that it is
gone? Many times it is difficult to remembe r how exactly you spent the mone y, and often times
this mone y is wasted on frivolous purchases

Teamwork

• Discuss why it is so important to have a budge t

• Discuss the consequences of a wrong budge t

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Compiling your budget

A lot of people realise the ir need for a budge t, but the y simply have no idea whe re to sta rt. W ith
this in m ind, le ts have a look at the basic STAGEs of creating a pe rsonal budge t

Group exercise

Discuss why individuals with spe cific goals are more successful than people without spe cific goals

Individual exercise
Se t yourse lf short, medium and long te rm goals
• Short te rm goals
• Me dium te rm goals
• Long te rm goals

Individual exercise
Go back to your goal that you have se t and che ck if it is SMART. If not, change it to be SMART

The se cre t lies in knowing whe re you a re now, whe re you want to go in the future and figuring out
how you are going to ge t the re. It is like charting your route to a ne w and unfamiliar place . You
just have to find out which roads to take in orde r to reach your final destination. Distinguish
be twee n Short, Medium and Long te rm goals.

Short term goals – For a couple of days, a week or a month

Medium term goals – For a couple of months
Long term goals – For a year and more

In this case , your financial destination – your future goals

SMA RT Goals
An easy way to e nsure that we set achie vable goals, is to make use of the SMART goal setting
acronym

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Specific – does the goal mention spe cifics, for example I have just started with a part time job
and it is possible to save some mone y? A spe cific goal is that I want to save R1000 ove r the nex t
5 months as a de posit on a car
Measurable – can I measure the goal that I have se t? If I just say I want to save, how do I
measure it? It is much more effe ctive to state a measurable goal, for example I want to save
R200 a month
A chievable – is it possible to a chie ve the goal in the time pe riod that I have se t? If you have
already committed your salary to othe r things, your goal is not achie vable
Realistic – is this a realistic goal? For example , if I do not have any saved mone y and I do not
have a part time job, it is not realistic to say that I can buy it by the end of the year
Trackable or timeline – can I track m y goal? For example can I see tha t a t the e nd of month one
that I have R200, by the end of month two I will have R400 and so forth
As long as we measure any goal that we se t against the SMART model, and we stick to it, we will
reach it

Stage 2: Make a list of your monthly income

C reate a list of your monthly income . This figure will se t the cap on your total budge t. What
makes up your income in a month?

Do you do any ex tra work whe re you are re ce iving mone y?

Maybe your parents are providing some mone y?

You m ight be re ceiving mone y from some sort of grant

Starting a small home base d business

Inve stment profits – whe re you are ge tting inte rest on an investment

Divide nds from stock – stocks that pay out a bonus from time to time

Add it up and write down the total – THAT IS HOW MUC H MO NEY YOU HAVE TO SPEND IN A
MO NTH!

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Stage 3: C reate a list of your monthly expenses

EXERCISE: Individual Exercise

Individual exercise

List some of your needs

List some of your wants

C reate a list of your monthly expenses. Do you know whe re your mone y goes? You m ight say
re nt, loan repayments, food or mone y that you spend on re laxing, for example going to the
movie s. But afte r that, things begin to get a bit fuzzy about whe re the rest of it goes
Afte r you have se t your goals, the nex t stop is to learn whe re your mone y is be ing spent before
you can make a realistic financial plan. This might be a hard job for some people ; othe rs will find
it to be ve ry re warding. No matte r how you feel, it must be done before you can start to de ve lop
your winning plan. Inve st the time now for a be tte r payoff late r
Ofte n your expe nses could be divided into needs and wants.

The re is a diffe re nce be tween what we nee d and what we want. We often have to save on what
we want for example a ne w CD, in orde r to pay for what we need for example food and clothing
Needs are basic things that are require d for your safe ty and health, for example food
to keep you alive , clothing to keep you warm and she lte r to prote ct you
Wants on the othe r hand, are items you desire but are not critical to life . Theses may
include ice cream, designe r jeans or a car

So is a good idea to track your ex penses for a month to see whe re your mone y is going to, but for
now, le ts just see what makes up your expenses in a month:
Rent
Food
C lothes
Transportation
Utilities (Wate r and Ele ctricity)
Ente rtainment
Ex tra – anything e lse you are spending your mone y on

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Stage 4: Develop a savings plan

Now that you know how much mone y you earn (income ) and how much mone y you spend
(ex penses), you can see how m uch money (if any) remains for additional savings. Make a habit to
save some thing, no matte r how small, form e ve ry bit of money that you re ce ive

Stage 5: Using the plan

For a budge t to be effe ctive, it must be used each day. This is the most important STAGE and will
probably need the most te nacity!

Stage 6: Add other categories

EXERCISE: Individual Exercise

Individual exercise

Why it is so important to save mone y?

List diffe rent ways to save mone y

Add categories if necessary. Three areas that are often ove rlooked are:

Debt reduction

Re tirement savings

Eme rgency savings

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EXERCISE: Set your own budget

Choose a voluntee r in your team , someone tha t eithe r has a job a nd earns a salary
or ge ts pocke t mone y, and se t a pe rsonal budge t for that pe rson

Use the following format

GOA L

Month:

INCOME EXPENSES

Salary Trave l

Se lling pape r ove r weekend Food

C lothes

TOTA L INCOME TOTA L EXPENSES

Group exercise

What can you do if your expe nditure is more than your income?

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PREPARING A PERSONAL BUDGET

EXERC ISE – PR EPAR ING A BUDGET

Purpose : To practise pre paring a simple budge t

Time: 20 m inutes individually, 10 m inutes feedback in plenary

Task :

Use the information provide d be low to prepare a budge t for yourse lf for one month,
assuming that you have R 3000 disposable income for the month. Calculate the total
amount, making sure that you do not ex ceed it.

Prices for some items have been provided as a guide.

1 litre m ilk : R 5.50 Vege tables/Fruit: R 24.99 Soap: R 5.25

Phone card: R 30.00 C D: R 130.00 1 kg Meat R 29.99

Toothpaste: R 6.45 Bread: R 5.80 Jam: R 7.75

Budget for the month of March 2007 for: ____________________________________

Income:

_______________________________________________________________

Item Cost per item No. required Calculations Total

Rent

Food

Lights and
Wate r

Transport

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Toile tries

Ente rtainment

O the r (e .g.
studie s)

Savings

TOTA L

Learning points

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 EXERC ISE: EAR NING EXTR A INCOME

Individual Ide ntify diffe rent ways to increase your pe rsonal income.
exercise

Compile a
budget for a
small business

???? Consultants

Month:

INCOME EXPENSES

Consultation fees Rent

Se lling of se rvice s Phone acc

Stationary

TOTA L INCOME TOTA L EXPENSES

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THE COST OF DEBT

EXERCISE: Group Discussion

Group exercise

Yo u wa nt to buy a ne w C D pla ye r. Afte r look ing around yo u de cide to buy it on hire -

purcha se. T he pla ye r costs R599. Yo u need a R50 deposit tha t you pay immedia te ly
– from your savings. The credit ra te is 25%. Calculate ho w much you will really pa y
fo r the CD pla ye r o ve r a o ne yea r period
Group Discussion
How do you build up a credit history?
How do you build up a positive credit history?
What are the consequences if you have a bad credit rating?

The cost of credit depends on various factors, for example:

Who yo u borro w from. It is much cheape r to bo rro w from a pla ce whe re you pa y
no inte rest, fo r example your parents. The second cho ice is a ba nk and the y will
cha rge you inte rest, if you can ge t a loan a t a ll. Ne ver use a loa n sha rk
Yo ur credit histo ry – the be tte r your histo ry, the easier it is to bo rrow mo ney
aga in. It is ve ry difficult to bo rrow mone y without a credit histo ry. A lo t o f peo ple
sta rt off with help with the ir pa rents o r a gua rdian that signs sure ty
Ho w much yo u borro w
Ho w long you take to repay it. The longe r yo u take to repa y the debt, the mo re
you will pa y. The cost will va ry with how long you take to pay C re dit costs will
va ry from lende r to lender so befo re you bo rrow, compa re the costs at se vera l
pla ces

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 EXERCISE: KEY LEARNING
Checklist

The follo wing ma jor lea rning a reas we re addressed during this
se ction

I need more help

Fill in the che ck list be lo w:

understa nd

understa nd
I do not
I fully
1 I unde rstand most commonly use d financia l terms

2 I kno w wha t a budge t is and how to compile one

3 I kno w why budge ting is impo rtant

4 I kno w wha t va rious sources of income a re

5 I kno w wha t to do if my expenditure o n m y budge t is

more than my income

6 I kno w how to set a SMART goal

7 I kno w how to make ex tra money

EXERCISE 12: Self-evaluation

What makes up the basic elements of an income in your budget?

What makes up the elements of expenditure in your budget?

Discuss the difference between wants and needs and provide 3 examples of
each from your own life

What does the acronym SMA RT stand for?

Mention 3 reasons why it is important to manage your money

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EXERCISE: WORDS USED IN THIS SESSION THAT MAY BE NEW TO ME

Frivolous P la yful, light hea rte d

Set the cap The maximum you can use

Surety Se curity, indemnity, gua ra ntee

Reciprocity Mutua l, jo int, sha re d, give and take , complimenta ry

Fraudulent Fake, fa lsified

Tenacity Firmness, pe rsistence

Payee The pe rson tha t the money is paid to

Deficit Shortfa ll o r a rrea rs

EXERCISE: GROWTH ACTION PLAN

Re vie w the work tha t you have co vered during this session and the n comple te the
gro wth a ction pla n belo w:

What did I do well?

Where did I struggle?

How can I improve? By when?

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 EXERCISE: POST ASSESSMENT
ALL OUTCOMES

This EXERCISE is designed to broadly measure your current le ve l

of

a ware ness and knowledge about the subje ct

No t true Mo re o r Definite ly
fo r me a t less true true fo r
Put a tick in the co lumn tha t most
a ll fo r me me
describes you

1 I can list three example s o f fo rma l financia l

institutions

2 I can list three example s o f informa l

financia l institutions

3 I can explain what a budge t is

4 I can compile a budget

I can explain the diffe rence be twee n wa nts

5
and nee ds

6 I can se t a SMART goa l

I kno w wha t to do if I spend more than

7
wha t I earn

8 I can explain what the true cost of debt is

EXERCISE: EXERCISES TO C OMPLETE AT HOME OR IN THE WORKPLAC E

EXERCISE / Assignment cover

Lea rne r Name (please

print):

Lea rne r Number:

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Signed by Lea rne r:

Da te Comple ted:

Assignment Name and

Numbe r:

Signed by Coach /
Me nto r:

Da te:

Signed by Fa cilita to r:

Da te:

Lea rne r Comments:

Coa ch / Mentor / Fa cilita to r Comments:

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Yo ur fa cilita to r will divide yo u into teams. Ea ch team must do the follo wing:
Ea ch individual in the team must co nta ct a no the r bank. Te ll them you a re do ing
resea rch on fina ncial institutions fo r the purposes o f a tra ining programme. Find
out wha t a ll the requirements a re to o pen up a cheque a ccount. Note the
requirements a nd the costs.

Also che ck if you can ge t an o ve rdra ft facility on the a ccount. Note the
requirements a nd the costs fo r an o ve rdra ft.

List a t least 10 financia l terms tha t the bank use

The team regroups a nd lists all the requirements of the va rious institutions. Use
the given ma trix to pro vide feedba ck . hen, as a team a nswe r the questions tha t
follow.

Yo u will use this wo rk to pro vide feedback to the class

Financial terms

Formal financial institutions

Fo rma l financial institutio ns include Ba nks, micro financial institutio ns and building
so cie ties

Describe in general what a bank, micro financial institution and a building

society is and give an example of each

What are the advantages of dealing with formal financial institutions?

And the disadvantages?

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Financial terms

Formal financial institutions

Fo rma l financial institutio ns include Ba nks, micro financial institutio ns and building
so cie ties

Describe in general what a bank, micro financial institution and a building

society is and give an example of each.

What are the advantages of dealing with formal financial institutions?

And the disadvantages?

List ten important things that every person should know about banking

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Basic Financial Skills: Set Your Own Budget – Homework

Dra w up a pe rsona l budge t for yo ur house ho ld fo r a t least 3 months. If possible, do

this on the compute r. If you do no t ha ve access, use the fo rmat on the nex t page.
The n identify:

• Possible wa ys you can ea rn mone y or mo re mo ney

• Possible wa ys you can sa ve mone y

Prese nt this to yo ur facilita tor a nd discuss. File a copy of this in yo ur portfo lio of
evidence

Facilitator

Please pro vide the Learne r with feedba ck as to the fo llo wing:

Did the Learne r use a spreadshee t to produce the budge t? If so, did he/she use
the

so ftwa re effe ctive ly?

When you discuss the budge t with the Lea rne r, does he/she sho w an
understa nding of

basic budgeting principles?

• Expenditure sho uld no t exceed revenue

• P lanning for unfo reseeable expenses

• P lanning for regular expenses, such a s re nt, transpo rt, food etc

• Allo wa nce fo r se rvice fees and inte rest

Has the Learne r a llo we d fo r any kind o f fo rma l sa ving o r wo rking to wa rds a
financia l goa l (thereby indica ting responsibility a nd fo rwa rd pla nning…?)

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 Look fo r evide nce o f the Lea rne r ha ving applied his/her mind, as oppose d to just
filling in

some numbe rs

GOA L

Mo nth:

INCOME EXPENSES

Sa la ry T rave l

Se lling pa pe r ove r weekend Food

C lothes

TOTA L INCOME TOTA L EXPENSES

List various methods to Make money

List various methods to Save Money

Discuss plans to adjust income and/or expenses to keep budget on track

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 BOOKKEEPING AND
FINANCIAL DOCUMENT

Why Learn Bookkeeping?

Why would you want to learn bo okkeeping a nd keep up to da te financia l re co rds

anywa y? Ca n't you hire a n a ccountant to come a fte r the end o f the year and get yo ur
che ck book a nd shoe box a nd do your taxes? Sure you can! And yes you will ha ve
adequately fulfilled your taxpa ye r obliga tions. But in o rde r to run a business a nd
kno w wha t, whe re, and when to take co rre ctive a ctions re quires business
info rmatio n. How do you ge t and whe re do you find this info rmation? You do n't if you
do n't keep a ccura te a nd current re co rds about your business financia l a ctivities
(bookkeeping).

Lea rning de finitio ns a nd te rmino logy is a bout a s much fun as watching grass gro ws,
but it is ne cessa ry to the unde rstanding o f bookkeeping. All I can sa y is ho ld your
no se, take your medicine , a nd swa llow. After completing the lesso n, if yo u need to ,
take two aspirin and go to bed.

What is bookkeeping?

Bookkeeping is the pro cess of re co rding and classifying business financia l

tra nsa ctions (activities). In simple language -mainta ining the re co rds of the financia l
activities o f a busine ss o r a n individua l. Bookkeeping's obje ctive is simply to re co rd
and summa rize fina ncial transa ctions into a usable form that pro vides financia l
info rmatio n about a business o r a n individual.

Acco untants norma lly plan and se t up the a ccounting and bookkeeping system fo r a
business and turn o ver the da y to da y re cord keeping to the o wne r o r one o f his/he r
emplo yees. In this age of computers, m ore and mo re of the da ily bookkeeping is

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be ing do ne using bookkeeping softwa re and compute rs although some busine sses
still maintain manual re co rds.

Whe ther you are using the compute r so ft wa re or you do it manua lly, you should
kno w and understa nd the fo llo wing: Bookkeeping Records and Documents
General Ledger-A book containing the a cco unts fo r all of a business's asse ts,
lia bilities, equity, re venue , and expense a ccounts.

Chart Of A ccounts-A co ded listing of a ll the a ccounts in the gene ral ledge r.

Journals-A pre liminary re cord where business transa ctions a re first e nte red into the
acco unting system. The journa l is commonly refe rre d to a s the book o f origina l
entry.

Specialized Journals-Jo urna ls used to initia lly re co rd spe cia l types of transactio ns
such as sales, cash disbursements, and cash re ce ipts in their o wn journal.

Invoice-a business do cument sho wing the names and addresses o f the buyer a nd
the se ller; the da te and te rms o f the sa le ; the description, quantity, unit price , a nd
to ta l price of goods purchased or sold and the method of delive ry.
Se lling business re fe rs to this do cument as a Sa les Invo ice .
Buying business refe rs to this do cument as a Supplie r Invoice .

Receiving Report-A do cument origina ted by the buying busine ss listing the
quantities and co ndition o f the goo ds a nd/or se rvices re ceive d from a supplie r.

Sales Order-A do cumente d o riginated by the selle r listing the goods and/o r se rvices
orde red by a customer and othe r info rma tion such as prices and de live ry da tes.

Purchase Order-A document o rigina ted by the purchaser (buyer) requesting the
supplie r to ship goods o r pe rfo rm services.

Check/cheque Book-Fo rmal re co rd of all che cks written, deposits, ba nk cha rges,
and m isce lla neous charges and credits.

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Check/cheque-A written o rde r directing a bank to pa y cash from the acco unt of the
write r (dra we r) o f the che ck.

Bank Reconciliation-T he pro cess of bringing the che ckbook and bank sta tement
ba lances into agreement.

Bank Statement-A copy o f the bank 's re co rd o f the business's a cco unt sho wing the
ba lance of the a ccount a t the beginning of the month, the deposits a nd withdra wa ls
(mo stly che cks) made during the month, se rvice cha rges, a nd the balances a t the
end o f the month.

Financial Statements-Accounting repo rts prepa red pe rio dically to info rm the
owne r, creditors, and othe r inte reste d pa rties as to the financia l condition a nd
ope rating results of the business. The three basic financial sta tements are:

Balance Sheet-T he financia l sta tement which sho ws the amount and na ture o f
business asse ts, liabilities, and o wner's equity (capita l) as o f a spe cific po int in time.
It is a lso kno wn a s a Sta tement of Financia l Positio n or a Statement o f Financia l
Condition.
Income Statement-The financial sta tement tha t summarizes re venues a nd
expenses fo r a spe cific pe riod o f time, usua lly a mo nth or a year. This sta tement is
also ca lled a P rofit and Loss Sta tement o r an Ope rating Sta tement.

Capital Statement-The financial repo rt tha t summa rizes a ll the changes in owne r's
equity (ca pita l) tha t occurred during a spe cific pe riod.

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BOOKKEEPING TERMINOLOGY

The de finitions and term ino logy to be presented are by no means all the te rm ino logy
tha t is used in the field o f bookkeeping, but a re some of the ma jo r terms tha t you
might encounter.

First, let's sta rt with the Major terms tha t a re used to o rganize our financial
info rmatio n.

Assets
Fo rma l Definition: The pro pertie s used in the opera tio n or investment a ctivities o f a
business. Info rma l Definition: All the good stuff a business has (anything with
va lue). Additional Explana tion: T he goo d stuff include s tangible a nd inta ngible stuff.
Tangible stuff you can physica l see and touch such as ve hicles, equipment a nd
buildings. Intangible stuff is like piece s o f pape r (sale s invo ices) represe nting loa ns
to your custome rs whe re they promise to pa y you la te r fo r your se rvices o r product.
Examples of asse ts tha t many individuals ha ve are ca rs, ho uses, boats, furniture ,
TV's, a nd appliances. Some example s o f business type a sse ts a re cash, a cco unts
re ce ivable , note s re ceivable , inve ntory, land, a nd equipment.

Liabilities
Fo rma l Definition: C laims by creditors to the property (a sse ts) of a busine ss until
the y a re paid.

Info rmal Definition: O the r’s claims to the busine ss's good stuff. Amounts the
business o wes to o thers.

Additiona l Explana tion: Usually one of a business's biggest liabilitie s (hope fully the y
are no t past due) is to supplie rs whe re a business has bo ught goo ds and services
and charge d them. This is simila r to us go ing o ut and buying a TV and cha rging it on
our credit ca rd. Our credit card bill is a liability. Ano the r good pe rsona l example is a
home mo rtgage . Ve ry fe w peo ple a ctua lly own their o wn home. The bank has a claim
aga inst the home which is calle d a mo rtga ge. T his mo rtgage is ano the r example of a
pe rsonal liability. Some examples of business liabilities are a ccounts pa ya ble , no tes
pa yable, a nd mo rtgages pa yable.

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Owner's Equity also called O wner's Capital
Comment: Both te rms ma y be used inte rcha ngeably.

Fo rma l Definition: The o wner's rights to the pro pe rty (asse ts) of the busine ss; a lso
ca lled proprie torship and ne t wo rth.

Info rmal De finitio n: Wha t the business o we s the o wne r. The good stuff left fo r the
owne r assum ing all liabilities (amounts o wed) ha ve been pa id.

Additiona l Ex pla na tio n: O wner’s Equity (Capita l) represents the o wne r's cla im to the
goo d stuff (asse ts). Most peo ple a re fam ilia r with the term equity beca use it is so
often use d with lende rs wanting to loan individua ls mone y based on the ir home
equity. Home equity can be tho ught of as the amount o f mone y a n o wne r wo uld
re ce ive if he/she so ld the ir house and pa id off a ny mo rtgage (loan) on the prope rty.

Revenue also called Income

Fo rma l Definition: T he gross increase in o wne r's equity (capita l) resulting from the
ope rations a nd o the r activities o f the business.

Info rmal De finition: Amounts a business earns by se lling se rvice s and products.
Amounts bille d to custome rs fo r se rvices a nd/o r products.

Additiona l Explana tion: Individua ls can best re la te by thinking o f re venue as their

ea rnings/wages the y re ce ive from the ir job. Most business re venue results from
se lling their products and/o r se rvices.

Expense also called Cost

Fo rma l Definition: De crea se in o wner's equity (capita l) resulting from the co st o f
goo ds, fixed asse ts, and se rvices and supplies consumed in the ope ra tions o f a
business.

Info rmal De finition: The costs of do ing business. The stuff we use d and had to pa y
fo r o r cha rge to run our business.

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Additiona l Explana tion: Some examples of pe rso nal expense s that most individuals
are familia r with a re utilities, phone , clo thing, foo d, gaso line , a nd repa irs. Some
examples o f business expenses a re office supplies, sala ries & wages, adve rtising,
building re ntal, a nd utilities.

Owner's Investments
Fo rma l Definition: Increase in o wne r's equity (capita l) resulting from additiona l
investments of cash and/o r othe r prope rty made by the owne r.

Info rmal definition: Additional amo unts, e ithe r cash o r o the r prope rty tha t the o wne r
puts in his busine ss.

Additiona l Explana tion: Although these amounts can be kept up with as a separa te
item, the y a re usua lly re co rded directly in the O wne r's Capita l Account. In o ther
wo rds, immedia te ly put into Ma Equity's purse.

Owner's Drawing
Fo rma l Definition: De crea se in o wner's equity (capita l) resulting from withdra wa ls
made by the owne r.

Info rmal definition: Amounts the o wne r withdra ws from his busine ss fo r living and
pe rsonal expe nses.

Additiona l Explana tio n: T he owne r of a so le pro prie to rship does no t normally re ce ive
a "fo rma l" pa y che ck from the business, but just like most of the rest of us needs
mone y to pa y fo r his house , ca r, utilities, and groce rie s. An o wne r's dra w is use d in
orde r for the owne r to re ce ive mone y o r othe r "goo die s" from his business to take
ca re o f his pe rsona l bills.

Transaction-Any e vent o r condition that must be reco rded in the books o f a

business be ca use of its effect on the financia l condition of the business, such as
buying and selling. A business dea l or agreement.

Single Entry-T ype of "info rmal" a ccounting/bookkeeping system whe re a use r of this
system makes only one entry to e nte r a business financia l transa ctio n. It genera lly

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includes a da ily summa ry of cash rece ipts and a monthly re co rd of re ce ipts and
disbursements (wo rkshee ts).

Double Entry-T ype o f accounting/bookkeeping system tha t requires e ve ry

tra nsa ction to be re co rded in at least two pla ces (a ccounts) using a debit and a
cre dit. Eve ry tra nsa ction is re co rded in a "fo rmal" journal as a debit e ntry in one
acco unt, and as a credit e ntry in a no the r account. Pe riodica lly, usua lly monthly, the
summarized balances from the journa ls a re posted (transfe rred) to a forma l business
re co rd called the genera l le dge r.

Cash Method (Basis) of A ccounting-method of acco unting that re cognizes

re venues (ea rnings) in the pe riod the cash is receive d and expe nses in the pe riod
whe n the cash payments a re made.

Debit-
An e ntry in the financia l bo oks of a firm tha t increases a n asse t o r an expense o r
an entry tha t de creases a liability, owne r's equity (capita l) o r income.
Also , an entry e nte red on the left side (co lumn) of a journa l o r gene ral le dge r
acco unt.
Le t’s combine the two a bove de finitio ns into o ne complete definition.
An entry (amount) ente red on the le ft side (co lumn) of a journa l o r gene ra l le dge r
acco unt tha t increases an a sse t, dra w o r an ex pense o r a n entry that de creases a
lia bility, o wne r's equity (capita l) o r re ve nue.

Credit-
An entry in the financia l books of a firm tha t increases a liability, owne r's equity
(capital) o r reve nue , or an entry that de crease s an asse t o r an expense.
Also , an e ntry e ntered on the right side (column) of a journa l o r general ledge r
acco unt.
Le t’s combine the two a bove de finitio ns into o ne complete definition.
An e ntry (amount) ente red on the right side (co lumn) o f a journa l o r gene ral le dge r
acco unt tha t increases a liability, owne r's equity (capital) o r re venue, o r an entry
tha t de crea ses a n asset, dra w, o r a n expe nse.

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Don't wo rry double entry, debits, and credits a re discussed and explained in future
lesso ns. I only wanted to introduce and make you a ware of these term s because
the y a re critical te rms fo r unde rstanding the do uble e ntry bo okkeeping system.

Account-a sepa ra te re co rd fo r each type o f a sse t, liability, equity, re ve nue , a nd

expense used to show the beginning balance a nd to re co rd the increases a nd
de creases fo r a pe riod a nd the re sulting ending balance at the end o f a pe riod.

Loss-amount a business's expenses ex ceed (grea te r than) re ve nues. In o the r wo rds,

we ea rned less than we spent.

Property-is ano the r te rm fo r asse ts. In future le ssons the te rm prope rty a nd asse ts
bo th mean the same thing-a ll the good stuff a business has.

Cash flow-is the mo vement of mone y into and out of a business as goods a re
bo ught and so ld. A hea lthy Cash flo w is when a company is ha ving eno ugh mone y to
make payments whe n ne cessa ry.

Cash register- a machine use d in sto res/shops, re staurants, e ct tha t ha s a drawe r

fo r keeping mone y in, and tha t sho ws a nd re co rds the amount of mone y re ce ive d fo r
ea ch thing tha t is sold.

Receipts- a pea ce o f pape r tha t shows that goods o r se rvices have been paid fo r.

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INCOME AND EXPENDITURE TRANSACTIONS.

Income and expenditure transa ctio ns a re bette r illustra ted by an income sta tement

The Income Sta tement is a fo rma l financial sta tement tha t summarize s a company's
ope rations (income and expense s) fo r a spe cific pe riod o f time usua lly a month o r
yea r.

The following types of a cco unts a re used to prepa re the Income Sta tement.

Revenue (A lso Called Income)

Fo rma l Definition: T he gross increase in o wne r's equity resulting from the o pe ra tions
and o the r a ctivitie s o f the business.

Info rmal De finition: Amounts a business earns by se lling se rvice s and products.
Amounts bille d to custome rs fo r se rvices a nd/o r products.

Expense (A lso Called Cost)

Fo rma l Definition: De crea se in o wner's equity resulting from the cost of goods, fixed
asse ts, and se rvices and supplies consumed in the ope ra tio ns o f a business.

Info rmal De finition: The costs of do ing business. The stuff we used and had to pa y
fo r o r cha rge to run our business.

Additiona l Explana tion: Some examples of busine ss expe nses a re o ffice supplies,
sa la ries & wa ges, advertising, building re ntal, a nd utilities.

Hopefully a business ea rns a pro fit ca lled net income (re ve nues are la rge r than
expenses). If ho we ve r, expenses a re la rge r than revenues a ne t loss re sults.

The majo r se ctions o f a n income statement a re the heading, the income se ction, the
expense se ction, and the final calcula tio n of a pro fit o r loss.

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The Income Statement fo r ABC Mo wing Company is presented be lo w.

ABC Mowing Company

Income Sta tement
Fo r The Pe riod Ending De cembe r 31, 2007

Re venue/income from ope ra tions R1, 205

Expe nses
Adve rtising Expe nse R225
Mulch Expense R160
To ta l Expense s R385

Net Income R820

No te : In the re al world a n income sta tement wo uld ha ve many mo re expense

ca tego rie s than the two types illustra ted in our simple example . Some additiona l
expenses that wo uld no rma lly be included are:

Office Supplie s Used

Te lephone
Building/Office Rent
Utilities
Depre cia tion Expense
Ma inte nance and Repairs
Inte rest Expense
Membe rships
Dona tions
Bank Fees and Cha rges
Sa la ries & Wages
Emplo yment Taxes
Equipment Re ntal
Contra ct Labour
Pro fessiona l Fee s
Tra ve l

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CASH FLOW ANALYSIS

The cash flo w ana lysis is a ve ry e ffective and simple tool which ca n assist mana ge rs
to be tter manage their budge ts and de te ct de viations from budge ts in a numbe r o f
areas. It can:

• pre ve nt financia l mana gers re-a llo ca ting funds within expenditure classe s;
• a ct as an ea rly wa rning of possible o ve r and unde r expenditures in ce rta in
expenditure cla sses; and
• provide a wa rning to manage rs to be proa ctive to request funds timeously be fo re
the y a re required to be a va ilable fo r disbursement.

A cash flo w statement is an exte nsion of the o pe rationa l pla n. In the example be lo w,
the NPO wanted to purchase compute r ha rdwa re and softwa re:

Activity 1 Responsibility Cost Timeframe

Purchase compute r Ntombi R10 000 01 July – 31 August

Purchase license fo r Khanyisile R7 000 1 August – 31

compute r September
Sta tionery James R2 000 01 June – 31
September

This ca n be conve rte d to a cash flo w sta tement:

Activity 1 June July August September Total

Purchase R0 R10 000 R0 R0 R10 000
compute r

Purchase license R0 R0 R3 500 R3 500 R7 000

fo r compute r
Sta tionery R500 R500 R500 R500 R2 000
Total for month R500 R10 500 R4 000 R4 000 R19 000

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The learne r must diffe rentiate be twee n costs tha t ca n be divided across multiple
months (such as sta tione ry abo ve) o r that need to be expended once o ff (such as
with the purchase of the computer). It is clear tha t some expe nditures can be
divided and o the rs not.

CASH FLOW PROJECTIONS

Cash flow pro jectio n is an impo rtant pa rt of the financia l management pro cess. Ea ch
expenditure item is pro je cted o n a monthly ba sis fo r an entire financial yea r. Some
items, such as pe rsonnel and a dministrative expe nditure are regula r monthly
expenses and ha ve almost equa l distribution througho ut the yea r. Howe ve r, some
items such as equipment o r transfe r pa yments a re o nce-off expenditure, a nd
the re fo re monthly expe nditure va ries depending on when those once -off pa yments
are made.

Fo r example Depa rtments are a llo ca ted funds on a mo nthly basis i.e. tra nsfers a re
made from the Na tiona l Reve nue Fund to na tio nal, pro vincia l and lo cal gove rnment
depa rtme nts. The refo re cash flow pro jectio n must take into a ccount monthly
allo ca tions from the Na tiona l Re venue Fund.

Cash flow pro je ctio n enables manage rs to plan monthly expenditure and to align it
with the planned a ctivitie s. It a lso allo ws fo r budge t monito ring and control, as the
pro je cted monthly budge t can be easily compa red with the a ctual expenditure .

The depa rtments must re vie w the ir cash flow o n a monthly basis – o ver-expe nditure
or under-expenditure ha s serio us implica tions and domino effect o n go ve rnment’s
bo rro wings, infla tion ta rge ting and economy.

The financial status of the organization is determined with the assistance of

an accountant.

Mo st a ccounta nts when asked will recommend that a busine ss use the do uble entry
bookkeeping system and the a ccrual basis or method o f accounting which is based
on the re venue rea lization principle and a principle ca lled the matching co ncept. T he

Tra ining ma te ria l is copyright 36

re venue rea lization principle sta tes tha t reve nue should be re co rded when a ctua lly
ea rned.

Don't tell me accountants a ctua lly pla y matchmakers o r promo te a da ting se rvice ! No
the matching principle is re co rding the revenue s ea rned during a pe rio d using the
re venue rea liza tion principle a nd ma tching (offse tting) the re venues with the
expenses incurred in ge nera ting this revenue. Why is this so impo rtant? All
businesses small a nd la rge need informa tion to dete rmine ho w we ll o r ba dly the y a re
pe rfo rming; ho we ve r, if this informatio n is misleading it could lead to fa lse
co nclusions and unne cessa ry a ctio ns. Sho w me wha t you mean.

The following sample busine ss tra nsa ctions fo r a mo wing and landscaping company
will be used to illustrate the accrual basis of a cco unting/matching concept a nd the
cash basis o f accounting.

• Janua ry 2007 Billed R30, 000 to Custome rs fo r Services Pe rfo rmed &
Completed In Janua ry 2007
• Janua ry 2007 Re ce ived Pa yments from Custome rs o f R 15, 000
• Janua ry 2007 Billed R12, 000 by Outside Contra ctors fo r Se rvices Pe rfo rmed
& Complete d In January 2007
• Janua ry 2007 Pa id O utside Contra ctors R8, 000

Februa ry 2007 Re ce ived Pa yments from C ustome rs of R15, 000

Februa ry 2007 Pa id Outside Contra cto rs R 4, 000

Cash Basis A ccrual Basis

Jan 2007 Feb 2007 Tota l

Re venue R15,000 R15,000 R 30,000
Expe nses R8, 000 R4, 000 R12, 000
Pro fit/Loss R7, 000 R11, 000 R18, 000

Possible Conclusio ns from the Cash Me thod

Ma de mone y in January and Februa ry.

Tra ining ma te ria l is copyright 37

The implication of the financial status on the organisation.

Our company is making more profit on the same amount of reve nues. We had
re venues of R15, 000 in both Janua ry & Februa ry but made a bigge r pro fit in
Februa ry.

In Februa ry, we must ha ve implemente d some expense sa ving measures o r got

che ape r prices on our contracted services.
Are any o f these conclusio ns va lid? No not a o ne! The "real" world as illustrated by
the a ccrua l method sho ws we had a gre at Janua ry and made R 18, 000 but Februa ry
wa s te rrible . We ce lebra ted our grea t Janua ry and sa t on our "yo u know what" a nd
didn't go out and ge t additiona l business and mow some mo re ya rds and do some
mo re landsca ping.

FUNDRAISING

Fundra ising is not ne cessarily a bookkeeping te rm but it is necessa ry tha t

organisations tha t exist to help communities de ve lop income-ge nera ting
pro je cts(NPO ’s) should understand ho w it should be conducted.

Fundra ising is the co lle ction of money fo r a cha rity o r an organizatio n.

Mo st NPO’s have to re ly on grants and do natio ns from fundraising be cause NPO ’s
usua lly se rve se ctio ns o f the community tha t could no t affo rd to pa y the full cost o f
the se rvice . NPO’s do no t usually choose the ir target groups acco rding to who can
pa y fo r the se rvice , but a cco rding to who needs the se rvice most.

Fundraising events

The re are many differe nt fundra ising e vents you can use, like fe tes, cake sa les,
jum ble sa les, film shows, discos, dances, ta lent sho ws, pla ys and so on. Some a re
easy to o rganize (like a cake sa le ) and o thers a re much mo re difficult (like a fete).

Tra ining ma te ria l is copyright 38

Alwa ys wo rk out ve ry ca refully whethe r an eve nt will be pro fitable . For example , T -
shirt sales o ften run a t a loss be cause you ha ve to buy the T-shirts and the y a re
expensive .

The suppo rt of e ve ryo ne in the o rga nization is ne cessa ry fo r the success o f any
fundraising e vent. Fundraising e ve nts a lso he lp build the organization.

PLANNING A FUNDRAISING EVENT

Step 1: W hat to do?

• De cide ho w much mone y you want to raise
• Wha t reso urces do you ha ve a va ila ble ? (time, mo ney, people)
• Ho w much is the eve nt going to cost you to run?

Step 2: W hen to do it?

• Wha t date fo r the e vent?
• Wha t time of the da y will the e vent happen?

Step 3: W here to do it?

• Wha t venue will be suitable?
• Is the venue easy to ge t to ?

Step 4: W hat extras to offer?

• Will you offe r refreshments?
• Will you offe r a pla ce whe re people can lea ve the ir children?

Step 5: Publicity
• Wha t kinds of publicity will you use? (pamphle ts, poste rs, banners, sticke rs,
ne wspape r adve rtisements, radio, and so on)
• Whe re will you adve rtise , fo r example whe re will you distribute your
pamphlets?
• Whe n will you adve rtise?

Step 6: W ho does the work?

Yo u will need people to do the preparation work and to work on the day.

Tra ining ma te ria l is copyright 39

Without committed worke rs no fundra ising e ve nt can be a success. There must be a
co -coo rdina to r who takes o ve ra ll respo nsibility. But the re a re a lso hundre ds of small
jo bs and the co -coo rdina to r ca nno t do them all. The co-coo rdina to r must delega te
many of the jobs. His o r he r job is to make sure tha t e ve ryone e lse does what the y
promised

Step 7: Evaluation
Whe n it is all ove r the mone y is co unted. Then it is impo rta nt to ask:
• Wha t did yo u do right?
• Wha t did yo u do wro ng?

ACTIVITY – PLA NNING A FUNDRAISING EVENT

Purpose: How to plan fo r a fundraising e vent

Time: 30 m inutes

Task:

1. Fo llo w the 6 steps in the fundra ising planning proce ss to plan your o wn
fundraising e ve nt
2. Step 7 e valua tes the e vent – e va lua te your planning and list the things you
did wro ng a nd the things yo u did right,

How to prepare an organizational budget

Income is the mone y an o rga nization re ceives. Expenses a re the amounts of

mone y an o rganiza tion pa ys out.

A budget se ts out the amounts the o rganiza tion expe cts its income and ex penses to
be fo r a fixed pe riod o f time, such as a yea r. In o the r wo rds, the budget tells you
ho w much mone y the o rga niza tio n thinks it will need to do its wo rk in the nex t
months o r year, whe re it hopes some o f the mone y will come from , and ho w much
mone y it still needs to find.

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Once the budge t ha s bee n prepa red, it needs to be che cked a nd discussed by othe r
members of the exe cutive . Then it must be a ppro ved by the trustees, mana gement
committee o r whoe ver has autho rity in the o rganiza tion.
• The budge t should be presente d to the membe rship, e ither a t the Annual
Gene ra l Mee ting o r in the Annual Repo rt, and it sho uld be use d re gula rly as a
wa y of monito ring the spending o f the o rganiza tion.
• Budge ts a re a lso an impo rtant pa rt of trying to ra ise mone y from funders. You
ca nno t foo l funde rs with made-up amounts. Amounts must be prope rly
mo tiva te d, eithe r in the funding proposa l o r in a no te with the budge t. An
example o f such a no te is 'A mo tor ve hicle is essential fo r the fie ldwo rke r
be ca use the settlements a re, on a ve rage , 150 k ilome te rs apa rt, and the re is
no public transpo rt.'

What period of time should a budget cover?

There is no fixed rule about this. A budget can cover any time from months
to years. With an overall budget for an organization, you need to budget for
at least two years. This shows a sense of commitment and continuity.

How to calculate expected expenses and income

Before you can work out what your organization’s expenses will be, and how
much money you will need, you must be clear about the organization’s
objectives, and how you plan to achieve them in the period for which you are
preparing a budget.

What does the organization spend money on?

Once you are clear about what work the organization will do for the time the
budget covers, you must write down everything that costs the organization
money. Start off with a list of everything you can think of. Afterwards you
can put the items into groups or categories.

So yo ur fina l list could lo ok like this:

Staff: A ccommodation:

sa la ries rent
medica l a id e lectricity, wa te r
pe nsion fund
UIF

Administration: Training Department:

Tra ining ma te ria l is copyright 41

sta tionery transpo rt
te lephone, fax food
po sta ge cost o f venues
ba nk cha rges a ccommoda tion fo r pa rticipants
gro ce ries

Equipment: Publications:

re nt / purcha se printing costs

repa ir and ma intenance distribution costs

How much does each category cost?

Whe n you ha ve wo rked out wha t you spend money o n, you can wo rk out ho w much
ea ch item and ea ch catego ry co sts. You ca n use your o wn re co rds to work out the
costs.

Doing an initial budget for an organization

If this is the first time tha t your o rganiza tion is prepa ring a budget, you sho uld make
a list of the items and ca tegories you think yo u will have to spend money o n.

Remembe r to include those items which you will nee d in the beginning, but that yo u
will no t ha ve to buy aga in, such as desks, cha irs, ke ttle , filing cabine ts, rent deposit,
te lephone installa tion, adve rtising jobs, compute r and printe r. This is called capital
outlay.

Running costs a re tho se costs tha t yo u spe nd o n a re gular basis to keep the
organization going. It is important to include a section in your budge t o n expected
income. This means the income that you expe ct to ge t from your o wn fundra ising o r
membership fees and so on. You are then te lling the funde r wha t your needs a re ,
and a lso ho w you expe ct to pa y fo r these needs.

W riting your budget

Whe n you ha ve ca lcula ted your expe cted expenses a nd income, the nex t step is to
write your budge t do wn in a wa y that is useful fo r the o rganisa tion and fo r funde rs.
Fo r the o rganisa tion's o wn use it should be po ssible to unde rstand, at any time, ho w
amounts we re de cide d upon and what the y a re .

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Mo tiva tions for pa rticula r items in the budge t do no t ha ve to be written into the
budge t, but they can be pa rt of the written proposa l, o r the y can be a tta che d to the
budge t a s no tes.

Whe re yo u think tha t something in the budge t ma y be unclear to the reader, it is

wo rth including a no te to explain it. Fo r example , when in the first yea r o f the budge t
you have a fairly small amount, but in the se co nd yea r it is much bigger, you should
ha ve a no te expla ining the big increase .

What should you send with your budget?

If yo u are pre pa ring a budget to se nd to funde rs, you will ha ve to send ce rta in o the r
do cuments with it.
The se co uld include:
• ove ra ll funding propo sal
• pro je ct proposal
• annua l re po rt
• programme o f a ction fo r the yea r to come
• audited sta tement
• co pies of publicatio ns (if a vailable )
• co pies of ne wsle tte rs (if ava ilable)

Example o f an o rganisa tiona l budget

This is an example o f a simple o ve rall budge t fo r an advice office.

Expected Expenditure
2001/2002
(in Rands)

Adm inistra tion: Audito rs 1 500

Bank charges 300

Equipment 2 500

Gene ra l office expenses 1 800

Rent 4 800

Sta tione ry 1 200

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 Telepho ne a nd postage 2 400

SUBTOTA L 14 500

Staff: Sala ries (1 pe rson) 21 600

Staff training 800

SUBTOTA L 22 400

Publications P rinting 15 000

SUBTOTA L 15 000

T ra ining Pho to copying 1 200

T ra ve ling 8 500

SUBTOTA L 9 700

OVERALL
61 000
EXPENDITURE TOTAL

Expected Income (in

1998/99
Rands)

Income ge ne rated: Raffle 3 500

Disco * 2 6 000

Mo nthly jumble sa le 7 200

SUBTOTA L 16 700

OVERALL INCOME
61 700
TOTA L

Da ted: 1 July 2001

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 A CTIVITY – BUDGETING FOR A FUNDRA ISING EVENT

A im: Ho w to budge t fo r a fundra ising eve nt

Time: 30 minutes

Task:

1. Expla in in yo ur o wn wo rds wha t a budget is.

2. P ro vide info rma tion on what your compa ny will be spending money on fo r 2006

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 BIBLIOGRAPHY
Brigham E F,Gapenski L C & Daves P R (1999) Intermediate Financial
Management. Fort Worth, The Dryden Press

Brigham E.F, Houston J.F (2004) Fundamentals of Financial Management;

Thomson/South-Western

Horngren C.T, Gary L and Sundem G.S., Stratton (1990) Introduction to

Management Accounting Prentice-Hall

Pinson L. (2007) Keeping the Books: Basic Recordkeeping for Successful

Small Business, Paperback

http://www.foe.co.uk/resource/how_tos/cyw_17_fundraising

www.mnc.com

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