All financial transactions can be classed as receipts or payments. Receipts, otherwise known as revenue , occur when a business receives money; this is usually when a customer purchases something. On the other hand, payments, known as costs, occur when a business pays out money. This might be to a supplier or to staff. To make a profit, a business must receive more money than it spends. FIGURE2 shows how this works. In the past, business owners would manually write up their financial records in books called journals. This meant writing down each time a sale was made or each time a cost was encountered. Journals are still important, but they are usually not handwritten records anymore. Instead, most businesses use simple computer programs, online banking, cash registers and an EFTPOS terminal to record transactions immediately and accurately. The process of entering and maintaining financial records is called bookkeeping. Businesses can buy software such as MYOB or QuickBooks to help with this process. These programs set up electronic journals that allow a business owner to enter details of the day’s transactions. The programs are based on spreadsheets and, with all the necessary formulas already entered, the business owner simply has to enter the figures and the program performs the necessary calculations.
SkillBuilder discussion Investigating 1. What has been happening to coffee bean prices recently? 2. How might this impact on the revenue vs cost diagram above?
FIGURE2 If revenue is greater than costs, a business should make a profit.
Money in Revenue
Money out Costs
22.4.2
Recording revenue and costs
Revenue Some businesses still keep a cash register (or box) on or under the counter. There will be some cash, coins and notes in this register. This is known as float , and it is there so a business owner can give change to customers if they pay with cash. As each customer pays, the sale is recorded on the register and the cash deposited in the register drawer. The cash register will then print a receipt for the customer. Nearly all businesses also have a card reader for EFTPOS and credit card transactions. This reader is linked to the cash register, which also records these transactions. A copy of the EFTPOS receipt will be printed for the customer, and a second one for the business. This is usually placed in the register drawer with the cash. At the end of the day, a business owner can retrieve a total of the day’s receipts from the cash register. They will then add the total of the cash and EFTPOS receipts in the drawer, subtract the amount in the float before the first transaction, and it should equal the total amount recorded in the register. A business owner will record this revenue figure in the cash receipts journal of the bookkeeping software. At some stage, the cash will be deposited into the business bank account.
638 Jacaranda Humanities Alive 8 Victorian Curriculum Third Edition
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