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Finance 101 for Non Financial Managers
Lunch & Learn Session
Toronto International Film Festival
Sharon Barnes-Simmonds
 The Language - Key Terms explained
 Balance Sheet
 Assets & Liabilities
 Income Statement
 The Accounts Receivable (AR) Process - Revenues
 The Accounts Payable (AP) Process - Expenses
 Cash Flow Statement
 Budgeting & Forecasting [Part 2]
 The Reporting Process.
 Q & A
Objectives
General Accounting Transactions
 General Ledger (GL): is an account or record used to sort
and store balance sheet and income statement transactions
over the life of a company (TIFF).
 Chart of Accounts (COA): A listing of all the accounts to be
found in the company’s (TIFF) General Ledger
 GL /Account Code: A unique identifying code in the GL
which is used for a category of transactions.
The Language [1]
 Project Code: A unique identifying code (either alpha or
numeric) used to categorize a batch of transactions which
are all related to one particular activity.
 Department Code: A unique identifying code used to
identify all transactions for a particular department (at
TIFF).
 Accounts Receivable [AR]: A list of all the amounts due (to
TIFF) by other companies or individuals for services
provided to them.
 Accounts Payable [AP]: Amount due to another individual
for a service or item provided (to TIFF).
The Language [2]
 Debit: Under the double entry system transactions are
either debited or credited in the GL. A debit transaction
increases an expense or an asset.
 Credit: A credit transaction increases a revenue or a liability
(or reduces an expense).
 Purchase Order (PO): A document authorizing an individual
from the organization (TIFF) to make a purchase from
another company or individual (Vendor).
 A PO is numbered and MUST be approved before being sent to vendor
The Language [3]
 Cost Centre: A department which costs the organization money to
operate because it provides essential services. Measured by their
ability to contain costs.
 Revenue Centre: A department that directly generates revenue for
the organization. Measured by their ability to generate revenues.
 Profit Centre: A department that is responsible for both revenue
and costs. Measured by their ‘bottom line’ results.
 Budget Holder: Any person who is responsible for the Department’s
budget. Responsible for approving spends and/or generating
revenues.
The Language [4]
 Balance Sheet: A Summary statement showing all the
Assets and Liabilities that an organization (TIFF) has at a
particular period in time.
 Assets: Something of value which the organization (TIFF) owns and
which will be used over a number of fiscal years (ie Capital Assets).
 On the COA for TIFF all Assets have GL codes in the 10000 series
 Capital Expenditures are physical assets that are amortized over a # of years
 Eg: Computer Purchases, Furniture & Equipment Purchases
Balance Sheet [Assets]
Assets – Current & Capital: Current Assets can be
converted to cash within 1 year:
 Bank/Cash
 Prepaid: Expense paid for in a period before it is actually
incurred
 AR: Clients billed for services/prod who have not yet paid
 Inventory :Items held for Resale (Concessions & Retail store)
Capital Assets are all the Capital Expenditures less their
accumulated amortization
Balance Sheet [Asset Types]
 Liabilities : The Value of something that the organization
(TIFF) owes to someone else.
 On the COA for TIFF all Liabilities have GL codes in the 20000
series Eg:
 Customer Deposit
 Gift Cards (unredeemed)
 Payroll Taxes deducted
 Deferred Revenue Items
Balance Sheet [Liabilities]
Liabilities- Short & Long Term:
Short Term (Current) Liabilities are those becoming due
within 1 year:
 Deferred Revenue: Funds received before it is recognized
 Accrued Expenses: Incurred but not yet paid for
 Current Portion of Long Term Liabilities (due within 1 Year)
Long Term Liabilities are those becoming due longer than
1 year
Balance Sheet [Liability Types]
BALANCE SHEET As At Dec 31, 2014
ASSETS:
Current Assets:
Cash
Accounts Receivable
Inventory
Prepaid Expenses
Investments (Restricted for BF)
Investments (Restricted for EF)
Capital Investments
TOTAL ASSETS
LIABILITIES & FUND BALANCES
Current Liabilities:
Current portion of Long Term Deb
Accounts Payable & Accrued Liab.
Deferred Revenue
Long Term Debentures:
Fund Balances: Operating
Building
Endowment Fund
TOTAL LIABILITIES & FUND BAL
2014
5,453,088
3,333,725
176,486
359,695
3,691,307
1,818,345
113,539,877
128,372,523
3,790,711
3,593,155
1,851,638
35,863,977
(3,912,216)
85,365,970
1,819,288
128,372,523
2013
2,370,374
3,179,126
149,347
505,834
6,560,717
1,628,943
116,985,442
131,379,783
3,755,112
3,791,999
2,295,998
38,425,441
(6,132,340)
87,387,296
1,856,277
131,379,783
 Income Statement: A Summary showing all the
revenues received and all the expenses paid out for a
particular period for the company (TIFF).
 Usually done Monthly; Quarterly or Annually
 Usually done for each Department or Subgroup
Income Statement
Revenue: Funds flowing into TIFF for goods or services
provided to others
 All Revenue GL Accounts at TIFF begins with a 4 (40000 series) in
the COA
 Most Companies will have different types of revenues
 For TIFF: Earned vs Contributed Revenue
Income Statement [Revenues]
INCOME STATEMENT For period ending Dec 31, 2014
REVENUE:
Earned Revenue:
Ticket Sales
Rentals
Membership
Retail & Concessions
Service Fees & Commissions
Investments
Total Earned Revenue
Contributed Revenue:
Sponsorships
Grants:
Federal
Provincial
Municipal
Other
Philanthropic Donations
TOTAL REVENUES
2014
13,628,010
1,851,310
1,168,809
1,266,295
1,117,221
606,385
19,638,030
14,256,113
1,484,543
2,224,700
1,059,500
95,860
4,864,603
6,299,929
45,058,675
2013
11,615,245
1,668,754
1,108,559
1,074,380
867,160
639,086
16,973,184
14,610,229
1,964,227
2,740,404
957,500
127,316
5,789,447
6,825,925
44,198,785
Expenses: Funds paid by TIFF for Goods/Services received
from others
 All Expense GL Accounts at TIFF begins with a 5 (50000 series) in
the COA
 Expenses are usually combined into different categories
 For TIFF: Staff Exp; Admin Exp; Operating Exp; Travel & Ent etc
Income Statement [Expenses]
Profits/Loss: The balance remaining after revenues are
received and expenses are deducted
 TIFF is a Not for Profit and as such should run a balanced budget
(zero profits)
Income Statement [Profit/(Loss)]
INCOME STATEMENT For period ending Dec 31, 2014 cont’nd
EXPENSES:
Staff Expenses
Travel & Ent (Staff + Guest)
Administrative Expenses
Operating Expenses
Fees (Audit, Legal & Other)
Interest Expenses
Amortization
Donations transf to Foundations
TOTAL EXPENSES
NET INCOME/(EXPENSES)
2014
21,024,607
2,739,641
2,596,102
11,095,682
817,118
1,798,875
4,824,842
-
44,896,866
161,809
2013
20,671,265
2,747,159
2,037,137
12,846,291
765,472
1,906,943
4,533,420
22,393
45,530,080
(1,331,295)
ROLE PLAY & EXERCISE
 Some Revenues are collected for immediately and entered
directly to the GL:
 Box Office – Film/Exhibitions/Workshop Tickets
 Retail – Sale from TIFF Shop
 Concessions – Sale of snacks from Concessions Stands
 Industry Passes
 Memberships
TIFF’s AR (Revenue) Process [1]
 Any revenue not collected for immediately must be
invoiced by submitting an Invoice Request Schedule to AR:
 Sponsorship
 Event Space Rentals
 Government Grants
 P&M Pledges & Donations (some)
TIFF’s AR (Revenue) Process [2]
 Once the AR invoice is created it is credited to the Revenue
GL and debited to the Customer’s account in the AR Sub-
ledger
 An Accounts Receivable Schedule is created for each period
 When it is paid the AR Balance is credited and bank account
debited clearing the customer from the AR schedule
 At the end of the month and the year all revenues for each
Department are collated to form the Income Statement.
TIFF’s AR (Revenue) Process [3]
 Most expenses are submitted on an approved Purchase
Order before incurred
 The GL Expense Code; Dept and Project Codes must be
ascertained
 At TIFF any expense over $50 should be on a PO
 At TIFF any expense under $50 should be via Petty Cash or can be
combined and submitted on an Expense Report
 When the item or service is received the PO must be updated to
confirm this
TIFF’s AP (Expense) Process [1]
 Once the invoice is received it is debited to the expense GL
and credited to the Vendor account in the AP Sub-ledger
 An Accounts Payable Schedule is prepared for each period
 When it is paid the Vendors AP Balance is debited and bank
account credited clearing the vendor from the AP schedule
 At the end of the month and the year all expenses for each
Department are collated to form the Income Statement.
TIFF’s AP (Expense) Process [2]
 The Cash Flow Statement is the Wallet of the
Business
 It focuses on the Cash Position vs the Accrual
Position (like the Income Statement)
 It Accounts for cash transactions from Operations,
Financing & Investing activities
 Cash is a liquid asset on the Balance Sheet
The Cash Flow Statement
 The Cash Flow Equation is the following:
Net Cash Flow =
 Beginning Cash Balance +
 Cash Inflows –
 Cash Outflows
 This is just like operating your own cheque book!
The Cash Flow Equation
STATEMENT OF CASH FLOWS Dec 31, 2014
Cash provided by (used in):
Operations:
Excess/(deficiency) Rev over Exp
Charges to Ops not affecting cash:
Amortization
Loss on disposal of capital assets
Unrealized gain on Investments
Interest accrued on debentures
Changes in non-cash working cap:
Accounts Rec Inventory & Prepaids
Accounts Pay and accrued liabilities
Deferred Revenue
Financing:
Principal Repayments on deben.
Payment of Int Accrued on deben
2014
161,809
4,824,842
-
(98,481)
1,229,247
(35,599)
(198,844)
(444,360)
5,438,614
(2,447,871)
(1,307,241)
(3,755,112)
2013
(1,331,295)
4,533,420
2,708
(274,860)
1,307,241
(1,010,460)
(1,144,777)
(448,403)
1,633,574
(1,792,257)
(985,398)
(2,777,655)
STATEMENT OF CASH FLOWS Dec 31, 2014[2]
Cash provided by (used in):
Investments:
Additions to capital assets
Red to Capital Assets due to HST
Proceeds on disposal of capital ass
Net change in investmnts (BF)
Net change in investmnts (EF)
Increase / (decrease) in cash
Cash at the Beginning of the year
Cash at the End of the year
Supplemental Cash Flow
information:
Interest paid on Debentures
2014
(1,379,277)
-
-
2,869,410
(90,921)
1,399,212
3,082,714
2,370,374
$5,453,088
$1,875,516
2013
(1,184,762)
1,438,353
2,500
(733,810)
(34,727
(512,446)
(1,656,527)
4,026,901
$2,370,374
$1,579,008
 Key Accounting Terms Explained:
 General Terms
 General Documents & Reports
 Different Department Types
 Audited Financial Statements have been explained:
 Balance Sheet – Assets & Liabilities
 Income Statement – Revenues & Expenses
 Cash Flow Statement – Cash Balance
 The Accounts Payable & Accounts Receivable Processes explained
 Personal Financial Statements
Summarizing the Key Items
Finance101 for Non FInancial Managers - TIFF -Revised

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Finance101 for Non FInancial Managers - TIFF -Revised

  • 1. Finance 101 for Non Financial Managers Lunch & Learn Session Toronto International Film Festival Sharon Barnes-Simmonds
  • 2.  The Language - Key Terms explained  Balance Sheet  Assets & Liabilities  Income Statement  The Accounts Receivable (AR) Process - Revenues  The Accounts Payable (AP) Process - Expenses  Cash Flow Statement  Budgeting & Forecasting [Part 2]  The Reporting Process.  Q & A Objectives
  • 4.  General Ledger (GL): is an account or record used to sort and store balance sheet and income statement transactions over the life of a company (TIFF).  Chart of Accounts (COA): A listing of all the accounts to be found in the company’s (TIFF) General Ledger  GL /Account Code: A unique identifying code in the GL which is used for a category of transactions. The Language [1]
  • 5.  Project Code: A unique identifying code (either alpha or numeric) used to categorize a batch of transactions which are all related to one particular activity.  Department Code: A unique identifying code used to identify all transactions for a particular department (at TIFF).  Accounts Receivable [AR]: A list of all the amounts due (to TIFF) by other companies or individuals for services provided to them.  Accounts Payable [AP]: Amount due to another individual for a service or item provided (to TIFF). The Language [2]
  • 6.  Debit: Under the double entry system transactions are either debited or credited in the GL. A debit transaction increases an expense or an asset.  Credit: A credit transaction increases a revenue or a liability (or reduces an expense).  Purchase Order (PO): A document authorizing an individual from the organization (TIFF) to make a purchase from another company or individual (Vendor).  A PO is numbered and MUST be approved before being sent to vendor The Language [3]
  • 7.  Cost Centre: A department which costs the organization money to operate because it provides essential services. Measured by their ability to contain costs.  Revenue Centre: A department that directly generates revenue for the organization. Measured by their ability to generate revenues.  Profit Centre: A department that is responsible for both revenue and costs. Measured by their ‘bottom line’ results.  Budget Holder: Any person who is responsible for the Department’s budget. Responsible for approving spends and/or generating revenues. The Language [4]
  • 8.  Balance Sheet: A Summary statement showing all the Assets and Liabilities that an organization (TIFF) has at a particular period in time.  Assets: Something of value which the organization (TIFF) owns and which will be used over a number of fiscal years (ie Capital Assets).  On the COA for TIFF all Assets have GL codes in the 10000 series  Capital Expenditures are physical assets that are amortized over a # of years  Eg: Computer Purchases, Furniture & Equipment Purchases Balance Sheet [Assets]
  • 9. Assets – Current & Capital: Current Assets can be converted to cash within 1 year:  Bank/Cash  Prepaid: Expense paid for in a period before it is actually incurred  AR: Clients billed for services/prod who have not yet paid  Inventory :Items held for Resale (Concessions & Retail store) Capital Assets are all the Capital Expenditures less their accumulated amortization Balance Sheet [Asset Types]
  • 10.  Liabilities : The Value of something that the organization (TIFF) owes to someone else.  On the COA for TIFF all Liabilities have GL codes in the 20000 series Eg:  Customer Deposit  Gift Cards (unredeemed)  Payroll Taxes deducted  Deferred Revenue Items Balance Sheet [Liabilities]
  • 11. Liabilities- Short & Long Term: Short Term (Current) Liabilities are those becoming due within 1 year:  Deferred Revenue: Funds received before it is recognized  Accrued Expenses: Incurred but not yet paid for  Current Portion of Long Term Liabilities (due within 1 Year) Long Term Liabilities are those becoming due longer than 1 year Balance Sheet [Liability Types]
  • 12. BALANCE SHEET As At Dec 31, 2014 ASSETS: Current Assets: Cash Accounts Receivable Inventory Prepaid Expenses Investments (Restricted for BF) Investments (Restricted for EF) Capital Investments TOTAL ASSETS LIABILITIES & FUND BALANCES Current Liabilities: Current portion of Long Term Deb Accounts Payable & Accrued Liab. Deferred Revenue Long Term Debentures: Fund Balances: Operating Building Endowment Fund TOTAL LIABILITIES & FUND BAL 2014 5,453,088 3,333,725 176,486 359,695 3,691,307 1,818,345 113,539,877 128,372,523 3,790,711 3,593,155 1,851,638 35,863,977 (3,912,216) 85,365,970 1,819,288 128,372,523 2013 2,370,374 3,179,126 149,347 505,834 6,560,717 1,628,943 116,985,442 131,379,783 3,755,112 3,791,999 2,295,998 38,425,441 (6,132,340) 87,387,296 1,856,277 131,379,783
  • 13.  Income Statement: A Summary showing all the revenues received and all the expenses paid out for a particular period for the company (TIFF).  Usually done Monthly; Quarterly or Annually  Usually done for each Department or Subgroup Income Statement
  • 14. Revenue: Funds flowing into TIFF for goods or services provided to others  All Revenue GL Accounts at TIFF begins with a 4 (40000 series) in the COA  Most Companies will have different types of revenues  For TIFF: Earned vs Contributed Revenue Income Statement [Revenues]
  • 15. INCOME STATEMENT For period ending Dec 31, 2014 REVENUE: Earned Revenue: Ticket Sales Rentals Membership Retail & Concessions Service Fees & Commissions Investments Total Earned Revenue Contributed Revenue: Sponsorships Grants: Federal Provincial Municipal Other Philanthropic Donations TOTAL REVENUES 2014 13,628,010 1,851,310 1,168,809 1,266,295 1,117,221 606,385 19,638,030 14,256,113 1,484,543 2,224,700 1,059,500 95,860 4,864,603 6,299,929 45,058,675 2013 11,615,245 1,668,754 1,108,559 1,074,380 867,160 639,086 16,973,184 14,610,229 1,964,227 2,740,404 957,500 127,316 5,789,447 6,825,925 44,198,785
  • 16. Expenses: Funds paid by TIFF for Goods/Services received from others  All Expense GL Accounts at TIFF begins with a 5 (50000 series) in the COA  Expenses are usually combined into different categories  For TIFF: Staff Exp; Admin Exp; Operating Exp; Travel & Ent etc Income Statement [Expenses]
  • 17. Profits/Loss: The balance remaining after revenues are received and expenses are deducted  TIFF is a Not for Profit and as such should run a balanced budget (zero profits) Income Statement [Profit/(Loss)]
  • 18. INCOME STATEMENT For period ending Dec 31, 2014 cont’nd EXPENSES: Staff Expenses Travel & Ent (Staff + Guest) Administrative Expenses Operating Expenses Fees (Audit, Legal & Other) Interest Expenses Amortization Donations transf to Foundations TOTAL EXPENSES NET INCOME/(EXPENSES) 2014 21,024,607 2,739,641 2,596,102 11,095,682 817,118 1,798,875 4,824,842 - 44,896,866 161,809 2013 20,671,265 2,747,159 2,037,137 12,846,291 765,472 1,906,943 4,533,420 22,393 45,530,080 (1,331,295)
  • 19. ROLE PLAY & EXERCISE
  • 20.  Some Revenues are collected for immediately and entered directly to the GL:  Box Office – Film/Exhibitions/Workshop Tickets  Retail – Sale from TIFF Shop  Concessions – Sale of snacks from Concessions Stands  Industry Passes  Memberships TIFF’s AR (Revenue) Process [1]
  • 21.  Any revenue not collected for immediately must be invoiced by submitting an Invoice Request Schedule to AR:  Sponsorship  Event Space Rentals  Government Grants  P&M Pledges & Donations (some) TIFF’s AR (Revenue) Process [2]
  • 22.  Once the AR invoice is created it is credited to the Revenue GL and debited to the Customer’s account in the AR Sub- ledger  An Accounts Receivable Schedule is created for each period  When it is paid the AR Balance is credited and bank account debited clearing the customer from the AR schedule  At the end of the month and the year all revenues for each Department are collated to form the Income Statement. TIFF’s AR (Revenue) Process [3]
  • 23.  Most expenses are submitted on an approved Purchase Order before incurred  The GL Expense Code; Dept and Project Codes must be ascertained  At TIFF any expense over $50 should be on a PO  At TIFF any expense under $50 should be via Petty Cash or can be combined and submitted on an Expense Report  When the item or service is received the PO must be updated to confirm this TIFF’s AP (Expense) Process [1]
  • 24.  Once the invoice is received it is debited to the expense GL and credited to the Vendor account in the AP Sub-ledger  An Accounts Payable Schedule is prepared for each period  When it is paid the Vendors AP Balance is debited and bank account credited clearing the vendor from the AP schedule  At the end of the month and the year all expenses for each Department are collated to form the Income Statement. TIFF’s AP (Expense) Process [2]
  • 25.  The Cash Flow Statement is the Wallet of the Business  It focuses on the Cash Position vs the Accrual Position (like the Income Statement)  It Accounts for cash transactions from Operations, Financing & Investing activities  Cash is a liquid asset on the Balance Sheet The Cash Flow Statement
  • 26.  The Cash Flow Equation is the following: Net Cash Flow =  Beginning Cash Balance +  Cash Inflows –  Cash Outflows  This is just like operating your own cheque book! The Cash Flow Equation
  • 27. STATEMENT OF CASH FLOWS Dec 31, 2014 Cash provided by (used in): Operations: Excess/(deficiency) Rev over Exp Charges to Ops not affecting cash: Amortization Loss on disposal of capital assets Unrealized gain on Investments Interest accrued on debentures Changes in non-cash working cap: Accounts Rec Inventory & Prepaids Accounts Pay and accrued liabilities Deferred Revenue Financing: Principal Repayments on deben. Payment of Int Accrued on deben 2014 161,809 4,824,842 - (98,481) 1,229,247 (35,599) (198,844) (444,360) 5,438,614 (2,447,871) (1,307,241) (3,755,112) 2013 (1,331,295) 4,533,420 2,708 (274,860) 1,307,241 (1,010,460) (1,144,777) (448,403) 1,633,574 (1,792,257) (985,398) (2,777,655)
  • 28. STATEMENT OF CASH FLOWS Dec 31, 2014[2] Cash provided by (used in): Investments: Additions to capital assets Red to Capital Assets due to HST Proceeds on disposal of capital ass Net change in investmnts (BF) Net change in investmnts (EF) Increase / (decrease) in cash Cash at the Beginning of the year Cash at the End of the year Supplemental Cash Flow information: Interest paid on Debentures 2014 (1,379,277) - - 2,869,410 (90,921) 1,399,212 3,082,714 2,370,374 $5,453,088 $1,875,516 2013 (1,184,762) 1,438,353 2,500 (733,810) (34,727 (512,446) (1,656,527) 4,026,901 $2,370,374 $1,579,008
  • 29.  Key Accounting Terms Explained:  General Terms  General Documents & Reports  Different Department Types  Audited Financial Statements have been explained:  Balance Sheet – Assets & Liabilities  Income Statement – Revenues & Expenses  Cash Flow Statement – Cash Balance  The Accounts Payable & Accounts Receivable Processes explained  Personal Financial Statements Summarizing the Key Items