Republic of the Philippines

DEPARTMENT OF EDUCATION
Region I
Schools Division of Pangasinan II
PANGANIBAN NATIONAL HIGH SCHOOL
Tayug

LEARNING MATERIAL
ENTREPRENEURSHIP
QUARTER 4, WEEK 7

MELC: Manifest understanding of starting and operating a simple business

K to 12 BEC CG: CS_EP11/12B-ENTREP-IVa-i-3

Prepared by:

RANDY S. GARCIA
SHS Teacher III

Content Evaluated by: Language Evaluated by:

AMALYN B. MACUSI CESAR G. CALICA

Teacher III Teacher III
Reviewed by:

BABY JEAN O. SEREDIO JANET V. CABIENTE

Master Teacher I Principal II
General Instruction: Read and understand the lesson before you answer the activity sheets
that follow. Submit your answered activity sheets on time.

Lesson 7: BUSINESS RECORDS AND BOOKKEEPING TASKS

What Are Business Records?

Business records are specific documents that contain
information relevant to the business. A record can
be physical or digital, and can include documents that range
from meeting minutes to legal contracts. It is important to
note that not all documents created by a business, or related
to that business, are considered business records.
Basic records include business expenses, sales records, accounts receivable, accounts
payable, customer list, vendors, employee information, tax documents, invoices, purchase
orders, receipts, banks statements, and contracts. Keeping these records will help you know
how much money to invest to create your product or service, et pricing, compare budgeted
amounts to actual costs, track spending, make wise decisions about purchases, prepare for tax
time, access customer and employee information easily, protect your business in the event of
an audit or employee issue and calculate expected profit. Businesses should have a records
management system that dictates what will constitute a record for that business.
In order to easily access records, records should be placed in categories when they're
stored. The type of business will dictate the type of categories assigned to the records.

Physical or Digital
Physical records are tangible documents. You can touch them and keep them in a
physical location, such as a file cabinet or document library. Digital records are electronic
documents that you cannot physically touch. These records are kept in computers, databases,
or even virtual clouds set up to store large amounts of digital information.

Active or Inactive
Business records can also be active or inactive. Active records are those that need to
be accessed on a regular basis. For example, the current policies and procedures for a
business would be considered active. These should be current and easily accessible.
Inactive records are not needed on a regular basis, but may be needed for legal,
financial, or historical use. An example of an inactive record would be meeting minutes that
are kept for historical value, but are not needed on a regular basis. Inactive records can reach
a point where they are no longer needed and should be destroyed. The organization's
retention schedule determines the point at which inactive records are no longer needed.
Below are five types of business records that you need to keep track of.

1. Legal Documents
Your legal documents are what inform you of what your company is and how it’s
structured. It’s essential to keep track of these in cases where you need to prove to anyone
your company exists and what your role is in it.

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 This information will include the type of company you have, partnership documents,
sales tax ID, and your Employer Identification Number (EIN).

2. Insurance Documents
Running a business involves a lot of risks. If you don’t carry insurance, then you’re
putting your entire company at risk. This means that you will likely have several types of
coverage when you’re in business.
You need to be aware of what each of these types of insurance is for and how much
coverage you have with each of them. Having quick access to these documents means you
can handle problems quickly.

3. Permits
If you run a local business, then the chances are you need permits to operate. Your
business permits will tell you how big your parking lot can be, the maximum size of your
outdoor signs, what you can do to your building, and type of business you can operate.
Keeping your permits in order and on-hand means you don’t have to go hunting for
them when someone asks. This can help keep your business running and not shut down until
you find them.

4. Accounting Records
Cash flow rules all companies. This makes it vital to keep your accounting records in
order. If you don’t know how much money is going in and out of your business, then you run
the chance of running out of cash when you least expect it.
These records also include money sent out to your team members. Make sure to
find more info about tracking payments to them and making sure your staff has all the
information they need for their own records.

5. Assets
If you purchase any equipment for your business, then you need to keep an accurate
account of everything you buy. Every year you need to account for the appreciation and
depreciation of all your assets.
This matters when the time comes to sell old equipment. The profit or loss from your
sale will have tax implications the next time you file.

Everyone in business must keep records. Keeping good records is very important to your
business. Good records will help you do the following:

 Monitor the progress of your business

You need good records to monitor the progress of your business. Records can show
whether your business is improving, which items are selling, or what changes you need to
make. Good records can increase the likelihood of business success.

 Prepare your financial statements

You need good records to prepare accurate financial statements. These include income
(profit and loss) statements and balance sheets. These statements can help you in dealing with
your bank or creditors and help you manage your business.

 An income statement shows the income and expenses of the business for a given
period of time.

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  A balance sheet shows the assets, liabilities, and your equity in the business on a
given date.

 Identify sources of your income

You will receive money or property from many sources. Your records can identify the
sources of your income. You need this information to separate business from nonbusiness
receipts and taxable from nontaxable income.

 Keep track of your deductible expenses

Unless you record them when they occur, you may forget expenses when you prepare
your tax return.

 Keep track of your basis in property

Your basis is the amount of your investment in property for tax purposes. You will use
the basis to figure the gain or loss on the sale, exchange, or other disposition of property, as
well as deductions for depreciation, amortization, depletion, and casualty losses.

 Prepare your tax return

You need good records to prepare your tax returns. These records must support the
income, expenses, and credits you report. Generally, these are the same records you use to
monitor your business and prepare your financial statement.

 Support items reported on your tax returns

You must keep your business records available at all times for inspection by the Internal
Revenue Service (IRS). If the IRS examines any of your tax returns, you may be asked to
explain the items reported. A complete set of records will speed up the examination.

Bookkeeping basics for startups: Manage your financial records

Bookkeeping is the recording of all financial transactions, including financial records

of purchases, sales, receipts and payments, as well as accruals for payables or receivables.
The goal of bookkeeping is to record all of the company’s financial transactions in a detailed
way that provides useful information without being overwhelming.

Bookkeeping also involves storing and retrieving the records of the company’s
financial transactions. It requires knowledge of debits and credits and a basic understanding
of the financial statements. Bookkeeping can be done manually using spreadsheets, but,
increasingly, bookkeeping software is used.

In bookkeeping, it is important to consider who will be using the records. Senior

managers will have significantly different needs for analyzing the company’s performance,
compared to the accountant who prepares and files the financial statements or various tax
returns and government remittances. Also, if an auditor is to use the records, they may need
to be able to track the details of transactions in their testing.

For small businesses, there are four main steps in the bookkeeping process:

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  Gather the source documents, including cheque records, deposit records, bank
statements, bills from vendors, receipts for purchases and invoices issued to
customers
 Enter the information from the source documents into journals and accounts
 Perform end-of-period procedures: balance accounts and perform reconciliations
 Close the books for that period

Here are 10 basic types of bookkeeping accounts for a small business:

Cash. It doesn’t get more basic than this. All your business transactions pass through
the Cash account, which is so important that often bookkeepers actually use two journals,
Cash Receipts and Cash Disbursements, to track the activity.

Accounts Receivable. If your company sells products or services and doesn’t collect
payment immediately, you have “receivables,” or money due from customers. You must
track Accounts Receivable and keep it up to date so that you send timely and accurate bills or
invoices.

Inventory. Unsold products are like money sitting on a shelf and must be carefully
accounted for and tracked. The numbers in your books should be periodically tested by doing
physical counts of inventory on hand.

Accounts Payable. No one likes to send money out of the business, but a clear view of
everything via your Accounts Payable makes it a little less painful. Concise bookkeeping
helps assure timely payments and avoid paying someone twice! Paying bills early can also
qualify your business for discounts.

Loans Payable. If you’ve borrowed money to buy equipment, vehicles, furniture or other
items for your business, this account tracks payments and due dates.

Sales. The Sales account tracks all incoming revenue from what you sell. Recording sales
in a timely and accurate manner is critical to knowing where your business stands.

Purchases. The Purchases Account tracks any raw materials or finished goods that you
buy for your business. It’s a key component of calculating “Cost of Goods Sold” (COGS),
which you subtract from Sales to find your company’s gross profit.

Payroll Expenses. For many businesses, payroll expenses can be the biggest cost of all.
Keeping this account accurate and up to date is essential for meeting tax and other
government reporting requirements. Shirking those responsibilities will put you in serious hot
water.

Owners’ Equity. This account has a nice ring to it. Basically, it tracks the amount an
owner (or owners) puts into the business. Also referred to as net assets, owners’
equity reflects the amount of money an owner has once liabilities are subtracted from assets.

Retained Earnings. The Retained Earnings account tracks any company profits that are
reinvested in the business and are not paid out to the owners. Retained earnings are
cumulative, which means they appear as a running total of money that has been retained since

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the company started. Managing this account doesn’t take a lot of time and is important to
investors and lenders who want to track how the company has performed over time.

Why is bookkeeping important for businesses?

Proper bookkeeping helps you maintain accurate financial records; which businesses are
required by law to do for taxation purposes. Besides the legal requirement, good bookkeeping
offers practical business benefits. Some of the reasons why good bookkeeping is essential to
a successful business are:

 Budgeting: When income and expenses are recorded, it is easier to review your
financial resources and estimate cash flow.

 Organization: Bookkeeping is an important tool for others – the IRS,

investors, accountants and lenders – who have an interest in your financial records.
When your records are well organized, it is easier to locate and provide information
when needed, it can be easier to file your taxes, and it can improve your chances of
securing funding.

 Analysis: Bookkeeping helps your company generate financial statements. These

statements can be used as a tool to track cash flow and assist you in analyzing your
company's strengths and weaknesses.

 Planning: Financial statements can also indicate initiatives that have or haven't
worked, which can help business owners and shareholders plan for the future.

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REFERENCES:

A. Book

De Guzman, Ines A. 2016. The Young Entrepreneur. Golden Cronica Publishing,

Inc. Quezon City

B. Online Sources

https://quizizz.com/admin/quiz/61dd2bf934b326001e9df516/bookkeeping
https://quizizz.com/admin/quiz/615c4ba776415f001db27920/bookkeeping

https://study.com/academy/lesson/business-records-classification-categories.html

https://www.academia.edu/45032285/ENTREPRENEURSHIP_12_Q4

https://learn.marsdd.com/article/bookkeeping-basics-startups-manage-financial-
records/

https://www.businessnewsdaily.com/16053-what-is-bookkeeping.html

https://www.score.org/resource/10-bookkeeping-basics-you-cant-ignore

https://www.practicalbusinessskills.com/managing-a-business/record-keeping

https://www.sdgyoungleaders.org/business/the-5-types-of-business-records-every-
owner-needs-to-track/

https://www.irs.gov/businesses/small-businesses-self-employed/why-should-i-keep-
records
https://www.irs.gov/businesses/small-businesses-self-employed/why-should-i-keep-
records
https://quizizz.com/admin/quiz/5d891b6fd5c690001bb6181d/keeping-business-
records

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Name: __________________________________________________ Date: _____________

Grade-Section: ___________________________________________ Score: ____________

Quarter 4-ENTREPRENEURSHIP

Worksheet No. 7
Title of the Activity #1: CHOOSE THE BEST

Most Essential Learning Competency: Manifest understanding of starting and operating

a simple business

K to 12 BEC CG: CS_EP11/12B-ENTREP-IVa-i-3

Directions: Read each statement carefully. Write the letter of the best
answer on the space provided in each number.

_____ 1. Record keeping is the orderly and _____ practice of storing business records.
A. corporate B. legal C. financial D. disciplined
_____ 2. An active record is:
A. A record that is used on a regular basis
B. A record that has just been created
C. A record that has been consulted recently
D. all of the above

_____ 3. Accurate bookkeeping helps a business ___.

A. manage its cash flow
B. meet its financial obligations
C. plan its investments.
D. all of the above

_____ 4. Which of the following is a task of the bookkeeper?

A. Prepares and provides on going report
B. Focus on the analysis of financial data
C. Provides overview of bookkeeping process

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 D. Assist with key financial planning decisions

_____ 5. All of the following are examples of source documents, EXCEPT

A. Check B. Invoice C. Contract D. Journal

_____ 6. Who is a person whose job is to keep records of the financial affairs of a business?
A. Accountant B. Bookkeeper C. Marketer D. Seller

_____ 7. Among are the task of the bookkeeper EXCEPT _____.

A. Prepares and provides on going report
B. Focus on the analysis of financial data
C. Archives and stores data for easy retrieval
D. Classifies and records transactions accurately

_____ 8. What is the most liquid form of asset that can be used anytime to purchase another
assets or pay liabilities?
A. Inventories B. Receivables C. Payable D. Cash

_____ 9. How long should you keep your records?

A. Forever
B. Until I no longer need them
C. When my filing cabinet is full
D. It depends on what type of record it is and whether I created it

_____ 10. When creating a record keeping system, it’s a good idea to ___.
A. Wait until enough information is available to get started.
B. Start simple and refine later.
C. Get a sophisticated system to anticipate future needs.
D. Start after one year of operations.

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Name: __________________________________________________ Date: _____________

Grade-Section: ___________________________________________ Score: ____________

Quarter 4-ENTREPRENEURSHIP

Worksheet No. 7
Title of the Activity #2: TRULSE

Most Essential Learning Competency: Manifest understanding of starting and operating

a simple business

K to 12 BEC CG: CS_EP11/12B-ENTREP-IVa-i-3

Directions: Read each statement carefully. Write TRUE if the statement is

correct, FALSE if otherwise.

1. Well organized records make your tax preparations easier and help
prove expenses if you are audited by the IRS, your state, or other
taxing authorities.
2. Business records include meeting minutes, memoranda,
employment contracts, and accounting source documents and must
be retrievable at a later date so that the business dealings can be
accurately reviewed as required.
3. In keeping business records, know which records to keep and how
long to keep them, separate funds, and understand journal entry
basics.
4. Most business records have specified retention periods based on
legal requirements or internal company policies.
5. No business or government entity can survive without making
records of its activities.
6. Bookkeeping is the process of recording your company’s financial
transactions into organized accounts on a monthly basis.
7. Bookkeeping involves verifying receipts, depositing payments into a
bank account, and keeping clear records so that some financial
information is easily accessible when needed.
8. To get started with bookkeeping, you need to become familiar with
and set up a chart of accounts, record some financial transactions,
reconcile bank accounts, and run monthly financial statements.
9. Bookkeeping involves consistently recording a company's financial
transactions, as well as the archiving and secure storage of financial
documentation.
10. When bookkeeping is handled properly, the information is accurate,

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 well organized and helpful so that business owners or shareholders
can make key psychological decisions involving the company.

Name: __________________________________________________ Date: _____________

Grade-Section: ___________________________________________ Score: ____________

Quarter 4-ENTREPRENEURSHIP

Worksheet No. 7
Title of the Activity #3: WRITE YOUR THOUGHTS

Most Essential Learning Competency: Manifest understanding of starting and operating

a simple business

K to 12 BEC CG: CS_EP11/12B-ENTREP-IVa-i-3

Directions: Write on the blanks your concise and precise answers to the
following questions. You will be rated using the scoring rubric below.

Point(s) Description
5 Excellent expression of thoughts and very easy to understand
4 Very good expression of thoughts and easy to understand
3 Good expression of thoughts and quite easy/difficult to understand
2 Fair expression of thoughts and difficult to understand
1 Poor expression of thoughts and very difficult to understand

1. Why is it keeping good records is very important to your business?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

2. Why is bookkeeping important for businesses?

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

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___________________________________________________________________________

___________________________________________________________________________

ANSWER KEY:

Activity #1.
1. D 6. B
2. A 7. B
3. D 8. D
4. A 9. D
5. D 10. B

Activity #2.
True 1.
True 2.
True 3.
True 4.
True 5.
False 6.
False 7.
False 8.
True 9.
False 10.

Activity #3.
Possible answers
1. Good records will help you do the following:

 Monitor the progress of your business

 Prepare your financial statements
 Keep track of your deductible expenses
 Keep track of your basis in property
 Prepare your tax return
 Support items reported on your tax returns

2. Some of the reasons why good bookkeeping is essential to a successful business

are:

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 Budgeting: When income and expenses are recorded, it is easier to review your
financial resources and estimate cash flow.

 Organization: Bookkeeping is an important tool for others – the IRS,

investors, accountants and lenders – who have an interest in your financial records.
When your records are well organized, it is easier to locate and provide information
when needed, it can be easier to file your taxes, and it can improve your chances of
securing funding.

 Analysis: Bookkeeping helps your company generate financial statements. These

statements can be used as a tool to track cash flow and assist you in analyzing your
company's strengths and weaknesses.

 Planning: Financial statements can also indicate initiatives that have or haven't
worked, which can help business owners and shareholders plan for the future.

12