What is bookkeeping?
Bookkeeping means always writing down all the money that you received, all the money that you spent, and all your costs.
What is an asset?
An asset is something that you bought for your business, for example a computer or a table. It is something that you can use over a long period. It is important to include the cost of your assets as part of the costs of your product or service, in other words what it costs you to make the product.
It’s important that you always keep your bookkeeping up to date so that you can see how much money is being made. Every day, when you have sold something or delivered a service, you must write down in a column what you have done that day. Here is a brief example of such a column. Also look at Part 2 to see how other children have done it.
In the section on finance, you worked out how much one hotdog would cost.
Let’s quickly go over all this again. You already know what you need to make your product, which in this case is hotdogs. Say for instance you want to make 10 hotdogs, then you make a column with the following:
10 rolls R5
10 vienna sausages R10
Tomato sauce R10
Thus it will cost R45 for 10 hotdogs. So, 45 divided by 10 is R4.50. So it will cost you R4.50 to make one hotdog. Decide how much you your hotdogs will cost. Say for instance you decide that a hotdog costs R7.50. Take the price of what it costs you to make the product (production costs), and subtract it from the price that you have decided to sell your product at.
What is left over, is your profit. Thus you make R3 profit on each hotdog you sell.
Every time you sell hotdogs, it is important to write down how many hotdogs you sold and how many were left over at the end of that day (this is called bookkeeping). Then you can work out how much profit you have made that day. If you don’t do this, then you’ll never really know if your business is making money!
|Number sold||Event||Date||What did it cost you? (costs)||Sales (income)||Profit|
|5 hotdogs||Church bazaar||3 April||R22.50||R37.50||R15.00|
|10 hotdogs||Sports meeting||15 April||R45.00||R75.00||R30.00|
At the church bazaar you sold five hotdogs. It costs you R4.50 to make one hotdog. Multiply R4.50 by 5 to work out that the five hotdogs cost you R22.50. You sell your hotdogs at R7.50 each. Multiply R7.50 by 5 to see that you sold five hotdogs for R37.50. Subtract R22.50 from R37.50 and you will see that you made a R15 profit at the church bazaar!
You don’t need to be scared of all the sums! If you struggle, ask your parents or teacher to help you!
Every time the ingredients that you need for your product are finished, you must buy more. Last time you bought bread rolls, vienna sausages, butter, tomato sauce and mustard. When you buy ingredients this time, you might see that you still have some of your ingredients, for example the tomato sauce, mustard and butter.So, you only need to buy bread rolls and vienna sausages.
Now you must work out from scratch how much a hotdog costs you.
10 bread rolls R5
10 vienna sausages R10
This time it costs you only R15 for 10 hotdogs. So, your expenditure for each hotdog is now R1.50. You will, however, still sell it for R7.50. If you do your sums now, you will see that you are making R6 profit on a hotdog. When you sell these 10 hotdogs, you bookkeeping for the day will look like this:
|Number sold||Event||Date||What did it cost you?||Sales||Profit|
|10 hotdogs||Sports meeting||5 May||R15.00||R75.00||R60.00|
Always write down your costs when you buy ingredients for your product. It is necessary so that you can work out exactly how much it costs you to make the product.