Business Statistics and Accounting. Made Simple PDF
Preview Business Statistics and Accounting. Made Simple
In the same series Accounting Financial Management Acting and Stagecraft French Additional Mathematics Geology Advertising German Anthropology Human Anatomy Applied Economics Italian Applied Mathematics Journalism Applied Mechanics Latin Art Appreciation Law Art of Speaking Management Art of Writing Marketing Biology Mathematics Book-keeping Modern Biology British Constitution Modern Electronics Business and Administrative Modern European History Organisation New Mathematics Business Statistics and Accounting Office Practice Calculus Organic Chemistry Chemistry Philosophy Childcare Photography Commerce Physical Geography Company Administration Physics Company Law Pottery Computer Programming Psychology Cookery Rapid Reading Cost and Management Retailing Accounting Russian Data Processing Salesmanship Dressmaking Secretarial Practice Economic History Social Services Economic and Social Geography Soft Furnishing Economics Spanish Effective Communication Statistics Electricity Transport and Distribution Electronic Computers Twentieth-Century Electronics British History English Typing English Literature Woodwork Export BUSINESS STATISTICS AND ACCOUNTING Made Simple Ken Hoyle, BSc (Econ) and Geoflfrey Whitehead, BSc (Econ) Made Simple Books W.H.ALLEN London A Howard & Wyndham Company Copyright © 1979 Ken Hoyle and Geoffrey Whitehead All rights reserved, including the right of reproduction in whole or in part in any form whatsoever Printed and bound in Great Britain by Richard Clay (The Chaucer Press), Ltd., Bungay, Suffolk for the publishers W. H. Allen & Company Ltd, 44 Hill Street, London W1X 8LB This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out, or otherwise circulated without the publisher's prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser ISBN 0 491 02299 9 casebound ISBN 0 491 02309 X paperbound Foreword This book has been written to meet the requirements of modern course specifications which seek to train business and administrative students across wider fields than the traditional subjects. It covers all the elementary aspects of 'Numeracy and Accounting', giving a sound revision in Business Calcula tions, an introduction to Business Statistics and a complete coverage of the Principles of Accounting to Final Accounts level. In order to meet the needs of the mixed economy the text includes both private sector and public sector aspects of accounting. Thus the book deals with every type of Final Accounts, from the simplest form of club accounts to the Consolidated Fund of the Central Government. It is particularly appropriate for the Business Education Council's compulsory module 'Numeracy and Accounting' and will be of interest to Business Studies students in many other fields. In writing this book we have received much help from firms and other organisations whose assistance is gratefully acknowledged. We must particu larly thank Rex Ingram, Arthur Upson, Sue Bridgeland and Julia Ansell for their painstaking reading of parts of the text, and Robert Postema, the editor of the Made Simple series, for his interest in and encouragement of the project. KEN HOYLE GEOFFREY WHITEHEAD ANSWER BOOK A booklet is available containing answers to all the Exercises sections in this book, and may be obtained from booksellers (price 95p) or, in the UK, by writing to Made Simple Books, 44 Hill Street, London W1X. 8LB. (Please enclose payment with order.) Acknowledgements The firms and organisations listed below have kindly permitted the use of illustrations, statistics, etc. Their help is gratefully acknowledged. Accountants* Weekly Burroughs Machines Ltd The Consumers' Association and the magazine Which ? The Controller, Her Majesty's Stationery Office The County of Cambridgeshire—Finance Department Economic Progress Report Finance and Development Kalamazoo Ltd George Vyner Ltd 1 AN INTRODUCTION TO BUSINESS STATISTICS AND ACCOUNTING 1.1 The Subject-matter of this Book Business Statistics and Accounting Made Simple covers an extensive range of business activities involving numeracy and accounting. There are really four fields of interest here. They are: (a) Simple business calculations (b) Business statistics (c) Accounting to the Trial Balance level (d) Accounting to the Final Accounts level A few words about each of these is desirable. 1.2 Simple Business Calculations Most readers will already have a basic knowledge of business calculations, without which it is impossible to follow the statistical and accounting pro cedures which form the bulk of the book. For example, it is essential that the reader understands decimal and vulgar fractions, and can solve simple equa tions. A revision course in these is given in Chapter 2 for the benefit of those who need to brush up their knowledge of simple number work. For those who are very weak at business calculations it is strongly recommended that an introductory course in that subject should be followed first. Having said this, it remains true that students should not feel worried about the level of work that lies ahead of them as they approach a course in Business Statistics and Accounting. The difficulties are not great, and the coverage given will be sufficiently detailed to enable a serious student to master them. 1.3 Business Statistics An understanding of statistics is very important to all who propose to enter the business field today. Organised society is increasingly aware of the value of collecting numerical data: individuals are expected to contribute numerical facts to the Inland Revenue, local authority, bank, insurance company, hire- purchase company, etc. It is important that they appreciate the uses to which such data are put. The study of statistics can help here, as it can also in an understanding of modern business operations. Effort at work today may be measured by activity sampling; rewards may be partly decided by reference to the retail price index; pricing policy may be influenced by data collected about the price elasticity of demand, etc. Although these sound difficult matters they are in fact quite simple to follow. The statistics taught on most business studies courses (and certainly those contained within this textbook) require little more than an appreciation of arithmetic and simple mathematics. It is therefore a great pity if students are frightened away from the subject by thoughts of complicated mathematics. 3 4 Business Statistics and Accounting Made Simple 1.4 Accounting to the Trial Balance Level There are two basic stages in the study of accounting. The reader who scans the advertisements in any evening paper will find many requests for employees who can do 'Book-keeping to the Trial Balance level'. This is the level of routine entries, where documents are entered into books of account called books of original entry and are then 'posted' from the book of original entry to the main book of account, which is called the ledger. At the end of every month this ledger is balanced to see if any errors have been made. This activity is called a 'trial balance', and hence the name of this section. The reader might like to turn to page 130 where a layout of the elementary accounting processes will show how much is involved in 'Book-keeping to the Trial Balance level'. A book-keeper who can keep books to the trial balance level knows how to make all the different entries in the books of original entry and how to post them to the ledger without making any mistakes. The result will be that the trial balance balances correctly. Most people can learn this work in two to three weeks (full-time study, i.e. one lesson per day) or in about six weeks to two months of evening classes. It is a very satisfactory level of work to attain, and countless book-keepers throughout the world never learn any more than this level. 1.5 Accounting to Final Accounts Level As the chart on page 131 shows, the only remaining activity after book-keeping to the trial balance level is the preparation of the 'Final Accounts'. There are only two of these 'Final Accounts': the Trading Account and the Profit and Loss Account. The Trading Account is used to find the difference between the cost price of goods and their selling price. This is of course the profit, but as there are a great many overhead expenses to deduct as well we call the profit found in the Trading Account the gross profit or overall profit. This gross profit is then taken into the Profit and Loss Account, where it is reduced by deducting the various overheads from it—so that the final result is the net profit, or clean profit, after all deductions have been made. Finally a Balance Sheet is prepared, which lists the situation at the end of the financial year. What assets does the business have and what liabilities? The last stage of accounting seems very simple, and indeed it is—but it is made rather more lengthy because of the different types of business units. We have to do Final Accounts for sole traders, partnerships, limited companies, non-profit-making clubs, public authorities and even for Central Government. This makes accounting a very large body of knowledge, well worthwhile as a major field of study. 1.6 Conclusion The reader will see from the above that this is not a difficult book. It covers a field of human knowledge which many students have already experienced. At the same time it is comprehensive—there is much to learn, and all of it is well worth learning. Students who master calculations, statistics and accounting have a world of opportunity open to them. They can work in the private sector or the public sector, in almost any country in the world, and will know exactly how the organisation they serve is thriving. Statisticians and accountants take the pulse of Industry, Commerce and the Nation. 2 BASIC NUMERICAL KNOWLEDGE 2.1 The Importance of Business Calculations Before proceeding to learn about Business Statistics and Accounting it is essential for the student to have a sound grasp of basic business calculations. Whilst a reasonable knowledge of elementary number work, fractions, deci mals and percentages is assumed, the present chapter is intended as a rapid revision course for those who feel they are a trifle 'rusty' in calculations. The reader should work one or two sums from each exercise. (A seperate Answer Book is available - see Foreword.) When confident about a particular aspect he should then proceed to the next section, and so on. Explanations have been kept to a bare minimum because of lack of space. 2.2 Electronic Calculators and Business Calculations In recent years a wide range of electronic calculators has appeared on the market which have rendered mechanical calculators and comptometers ob solete. Branches of calculations which were formerly performed rather labor iously by logarithms are now performed in fractions of a second. A multi plication sum involving ten digits in both the multiplier and the multiplicand —for example: 2 786 495 236 X 1 598 721 686 would be performed in one-fifth of a second. The answers are shown in a display panel or, in the more expensive printing calculators, the machine prints out a record of the calculation and the result on a roll of paper like an ordinary adding-listing machine. The reader may feel as a result that there is no need to do business calculations at all. Unfortunately, it still remains true that one can only use such machines well if one is reasonably familiar with general processes in arithmetic. Since mechanical errors in putting numbers into the machine are quite common, and electronic mis-circuits are not un known, it is important to have a rough idea what the answer is likely to be so that an obviously incorrect answer is detected. Almost everyone uses these calculators today, and the student who is quite good at business arithmetic, but not used to using calculators, might like to use the exercises in this chapter for familiarising himself with the machine of his choice. Before purchasing a calculator it is advisable to seek the help of a qualified shop assistant in this field. Many assistants have no idea what the machines they sell are supposed to do. All calculators will add up, subtract, multiply and divide. Most will perform almost all the routine calculations required in business, but some are much more useful than others. For example, a 'clear last entry' facility is very useful if an entry is miskeyed. It removes the last entry without cancelling out any earlier work in the machine. Some calculators cannot be cleared in this way, and a mis-key means the whole calculation must be reworked. Some machines will work out percentages, mark-ups, mark- downs and discounts at the touch of a button. In statistical work, where it is 7 8 Business Statistics and Accounting Made Simple frequently necessary to do the same type of calculation on a whole column of different figures, a 'constant factor' facility is a great help. Many of the more expensive calculators will provide intricate scientific and statistical data in stantaneously, but they may be more expensive and sophisticated than most students need. Readers of this book should opt for a commercial machine of medium price, with a display panel of 8-10 digits, for personal use. For class use a machine of the type illustrated in Fig. 2.1 would be appropriate. Fig. 2.1. A medium-price calculator suitable for class use. (Courtesy of Facit-Addo Ltd) 2.3 Calculating Percentages of Quantities One of the commonest calculations in business life is the calculation of per centages of given quantities. Such routine calculations as 'What is 30% of 800 tons ?', or 'What is 55 % of £27 300 ?' are easily solved. Rule for calculating a percentage of a quantity (a) Write down the required percentage as a fraction, with 100 as the denominator. (b) Multiply this fraction by the full quantity given. (c) Cancel if you can. (d) Finally, multiply out. Example 2.1. What is 30 % of 800 tons ? 30% of 800 tons = 30_x 800 (Cancellingby 100) 100 = 240 tons Basic Numeral Knowledge Example2.2. Whatis55%of £27 300? 55% of £27 300 c= 55_x 27 300 (Cancelling by 100) 100" «= 55 x 273 273 «= £15 015 55 1365 13 650 15 015 2.4 Exercises: Calculating Percentages of a Quantity Calculate the following percentage parts: 1. 35%of£2 800 6. 88%of£19 250 2. 28 % of £4 200 7. 42 % of 76 500 electors 3. 12i%of3 600kg 8. 49%of£38 240 4. 48 % of 25 250 kg 9. 82± % of 34 000 members 5. 65 % of 10 500 hectares 10. 62 % of £7 140 2.5 Calculating Quantities as Percentages of Other Quantities Frequently statistical calculations require us to state one quantity as a per centage of another. We are all familiar with television personalities who pre dict the percentage swing required in elections, for example. Similarly, a mailing to consumers might be evaluated on the basis of a percentage res ponse. We might in the planning stages calculate certain percentage responses which we hoped to achieve from particular groups, and then when the res ponses begin to come in we can compare the actual response with the estimated response. In the latter case, to express the response received as a percentage of the mailing, we proceed as shown below. Rule for calculating one quantity as a percentage of another (a) Write down the first quantity and rule a line under it. (b) Write down the second quantity underneath the line (thus giving the first quantity as a fraction of the second). (c) Multiply this fraction by 100 to make it a percentage. Example 2.3. A mailing to 44 000 consumers is planned to achieve a 15% response. In fact 2 560 responses are received. What was the planned objective, and what per centage was in fact achieved ? (a) Planned objective: 15 % of 44 000 = i^x 44000 440 IUU 15 — 6 600 replies 2 200 4400 6600
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