Read and download form two business studies notes on small business management in our site. This topic helps you to understand how to manage your business.
TOPIC 3: SMALL BUSINESS MANAGEMENT
THE CONCEPT OF SMALL BUSINESS MANAGEMENT
MANAGEMENT
Management is the process of planning, organizing, leading, and controlling the efforts of people and resources to achieve specific goals effectively and efficiently. It involves making decisions, setting objectives, coordinating activities, and ensuring resources are used wisely.
FUNCTIONS OF MANAGEMENT IN SMALL BUSINESSES
Managing a small business requires applying key management functions to ensure smooth operations and growth. These functions are further explained bellow:
- Planning:
Planning is the process of setting goals and determining the best way to achieve them. In a small business, the owner must plan carefully due to limited resources, focusing on realistic short-term and long-term objectives.
- Organizing:
Organizing involves arranging resources such as people, time, and equipment to implement the plan. In a small business, this means assigning tasks among a few employees and making sure everything is in place to run smoothly.
- Leading (Directing):
Leading is the act of guiding, motivating, and supervising employees to achieve business goals. In small businesses, the owner often takes a hands-on role in inspiring staff, solving conflicts, and ensuring teamwork.
- Controlling:
Controlling means monitoring progress, comparing it with planned goals, and making adjustments as needed. In small businesses, the owner closely observes daily activities, checks financial performance, and corrects any issues quickly.
- Staffing:
Staffing refers to hiring, training, and managing employees to ensure the business has the right people. In a small business, the owner is often responsible for recruiting and training workers personally, which helps build a loyal and efficient team.
FINANCIAL RECORD KEEPING FOR SMALL BUSINESS
Financial record keeping is a vital part of managing a small business. Key financial records commonly used by small businesses, including:
- Cash Book,
- Sales Day Book, C. Purchases Day Book,
- Financial Statements:
- Income Statement, and II. Balance Sheet.
Understanding these records helps ensure transparency, accountability, and financial success.
- CASH BOOK
A cash book is a book of account used for recording daily cash transactions of the business. It records money received and money paid out in cash on a daily basis. The book usually has two sides:
- Debit side for recording receipts (cash coming in)
- Credit side for recording payments (cash going out)
THE FORMAT OF CASH BOOK
BUSINESS NAME
Dr CASH BOOK Cr
| Date | Particular | F | Amount | Date | Particular | F | Amount |
USES OF EACH COLUMN OF CASH BOOK
- Date Column: To record the exact date when the transaction occurred.
- Particulars Column: To describe the details of the transaction, such as the name of the person or business involved and the purpose of payment or receipt.
- Folio Column: To record a reference number or code that links the transaction to another book or ledger (like the General Ledger or Subsidiary Book).
- Amount Column: To enter the value of the transaction—either on the debit side (for money received) or the credit side (for money paid out).
RULES FOR RECORDING TRANSACTIONS IN CASH BOOK
|
STEPS OF BALANCING A SIMPLE CASH BOOK
- Add up both sides: Start by totaling all the amounts on the debit side (receipts) and the credit side (payments).
- Compare the Totals: The debit side (money received) is usually greater than the credit side (money paid), because you cannot spend more than you receive in cash.
- Find the Difference: Subtract the total of the credit side from the debit side:
Cash Balance = Total Receipts – Total Payments
This difference is the closing balance (Balance c/d), also called cash in hand.
- Record the balance: Write the difference on the credit side as “Balance c/d” (carried down) to make both sides equal.
- Bring the balance forward
On the next period’s debit side, write the same amount as “Balance b/d” (brought down). This shows the amount of cash you have at the beginning of the new period.
EXAMPLE 1
You are provided with the following transactions of Bright Future Stationery Shop for the first week of April 2025. Use the information below to prepare a Simple Cash Book and balance it as at the end of the month. Transactions:
April 1: The owner started the business with TZS 350,000 in cash April 2: Bought goods for cash TZS 40,000.
April 3: Sold goods for cash TZS 25,000.
April 4: Paid rent by cash TZS 30,000.
April 5: Received TZS 200,000 cash from a debtor
April 6: Received a cash from a customer TZS 50,000 for goods sold.
April 7: Paid electricity bill in cash TZS 5,000.
April 8: Withdrew TZS 10,000 from the business for personal use.
April 9: Purchased furniture and paid by cash TZS 35,000. April 10: Paid TZS 15,000 in cash to a supplier.
Answers
BRIGHT FUTURE STATIONERY SHOP
Dr CASH BOOK Cr
| Date | Particular | F | Amount | Date | Particular | F | Amount |
| April | April | ||||||
| 1 | Capital | 350,000 | 2 | Purchases | 40,000 | ||
| 3 | Sales | 25,000 | 4 | Rent | 30,000 | ||
| 5 | Debtor | 200,000 | 7 | Electricity bill | 5,000 | ||
| 6 | Sales | 50,000 | 8 | Drawings | 10,000 | ||
| 9 | Furniture | 35,000 | |||||
| 10 | Supplier | 15,000 | |||||
| 30 | Balance | c/d | 490,000 | ||||
| 625,000 | 625,000 | ||||||
| May | |||||||
| 1 | Balance | b/d | 490,000 |
EXAMPLE 2
You are given the following cash transactions for the business “Upendo Mini Shop” during the month of March 2025. Prepare a Single Column Cash Book to record the cash receipts and payments.
Transactions:
March 1: Started business with TZS 100,000 in cash.
March 2: Bought stock for cash TZS 30,000.
March 3: Paid for shop cleaning TZS 5,000.
March 3: Sold goods for cash TZS 20,000.
March 5: Paid wages to employee TZS 10,000.
March 6: Received TZS 12,000 from a customer.
March 7: Purchased packaging materials for TZS 3,000 in cash.
March 8: Paid electricity bill TZS 6,000.
March 9: Cash sales amounted to TZS 18,000.
March 10: Withdrew TZS 8,000 from the business for personal use.
ANSWERS
UPENDO MINI SHOP
Dr CASH BOOK Cr
| Date | Particular | F | Amount | Date | Particular | F | Amount |
| March | March | ||||||
| 1 | Capital | 100,000 | 2 | Purchases | 30,000 | ||
| 3 | Sales | 20,000 | 3 | Shop cleaning | 5,000 | ||
| 6 | Customer | 12,000 | 5 | Wages | 10,000 | ||
| 9 | Sales | 18,000 | 7 | Packing materials | 3,000 | ||
| 8 | Electricity bills | 6,000 | |||||
| 10 | Drawings | 8,000 | |||||
| 31 | Balance | c/d | 88,000 | ||||
| 150,000 | 150,000 | ||||||
| April | |||||||
| 1 | Balance | b/d | 88,000 |
- SALES DAY BOOK
A Sales Day Book, also known as the Sales Journal or Sales Book, is a book of original entry used to record credit sales of goods made by a business. It does not include cash sales or sales of assets—only goods sold on credit (kwa mkopo) as part of the normal business operations.
THE FORMAT OF SALES DAY BOOK
BUSINESS NAME
SALES DAY BOOK
| DATE | PARTICULARS | INVOICE NO. | FOLIO | INVOICE DETAILS | INVOICE TOTAL |
USES OF EACH COLUMN IN THE SALES JOURNAL
- Date Column.
This is the column special for recording dates on which a transaction took place in a chronological order
- Particulars Column.
This is the column for recording short descriptions of the particular transaction occurred. The symbol @ is often used to describe the word “each”.
- Invoice Number Column.
This is the column special for recording specific invoice numbers of different invoices received sent to the customer at a given trading period. Note that in most of questions invoice numbers are not provided, hence its column is ignored.
- Folio Column
This is the column for recording folio number or page number in which a particular account will be found in a particular ledger book.
- Invoice Details Column
This is the column for recording details of amount of money per each transaction on a particular debtor on specific date.
- Invoice Total Column
This is the column for recording total amount of money for each transaction of a particular creditor on a specific date. See examples that follows.
EXAMPLE 1
Shufa made the following sales on credit during the month of January 2021
JANDETAILS
2nd Sold on credit to Annastazia
10 boxes of biscuits @ TZS 10,000
5 bottles of Juice @ TZS 5,000
10 bottles of Soda @ TZS 500
3rd Sold on credit to Faustine
15 crates of Soda @ TZS 6,000
10 tomato sauce cases @ TZS 3,000
15 packets of biscuits @ TZS 5,100
- boxes of biscuits @ TZS 5,000
10th Credit sales to Flora
- trays of eggs @ TZS 6,500
- kg of wheat flour @ TZS 3,500
15 kg of sorghum @ TZS 2,500
26thSold goods to Justine
2 bags of maize @ TZS 35,000
30 kg of sugar @ TZS 2,000
- Juice bottles @ TZS 5,000 a bottle
Required: Prepare Sales Journal and record the above transactions
Answer
SHUFA’S BUSINESS
SALES JOURNAL
| Date | Particulars | Folio | Invoice details | Invoice total |
| Jan. | ||||
| 2nd | Annastazia | |||
| 10 boxes of biscuits @ TZS 10,000 | 100,000 | |||
| 05 bottles of Juice @ TZS 5,000 | 25,000 | |||
| 10 bottles of Soda @ TZS 500 | 5,000 | 130,000 | ||
| 3rd | Faustine | |||
| 15 crates of Soda @ TZS 6,000 | 90,000 | |||
| 10 cases of tomato sauce @ TZS 3,000 | 30,000 | |||
| 15 packets of biscuits @ TZS 5,100 | 76,500 | |||
| 04 boxes of biscuits @ TZS 5,000 | 20,000 | 216,500 | ||
| 10th | Flora | |||
| 12 trays of eggs @ TZS 6,500 | 78,000 | |||
| 13 kg of wheat flour @ TZS 3,500 | 45,500 | |||
| 15 kg of sorghum @ TZS 2,500 | 37,500 | 161,000 | ||
| 26th | Justine | |||
| 2 bags of maize @ TZS 35,000 | 70,000 | |||
| 30 kg of sugar @ TZS 2,000 | 60,000 | |||
| 5 Juice bottles @ TZS 5,000 a bottle | 25,000 | 155,000 | ||
| Transferred to Sales Account | 662,500 | |||
EXAMPLE 2
The following transactions were extracted from the books of Christina’s Shop during the month of December 2020. Prepare Sales Journal to record the given transactions.
| DEC | DETAILS |
| 2nd | Credit sales to Saraphina: 5 crates of soda @ TZS 12,000; 3 trays of eggs @ TZS 5,000 and 10 cartons of drinking water @ TZS 3,500. All goods were subject to 5% trade discounts. |
| 11th | Sold goods on credit to Rozalia: 10 boxes of Pen @ TZS 5,000; 15 boxes of table salts @ TZS 250 and 10 boxes of biscuits @ TZS 3,000. |
| 26th | Sold goods to Saraphina: 5 litres of milk @ TZS 500; and 13 kg of White flour @ TZS 1,400. All were subject to 10% trade discounts. |
ANSWER
CHRISTINA’S SHOP
SALES DAY BOOK
| Date | Particulars | Folio | Invoice details | Invoice total |
| Dec | ||||
| 2nd | Saraphina | SL01 | ||
| 5 crates of soda @ TZS 12,000 | 60,000 | |||
| 3 trays of eggs @ TZS 5,000 | 15,000 | |||
| 10 cartons of drinking water @ TZS 3,500 | 35,000 | |||
| 110,000 | ||||
| Less 5% trade discount | 5,500 | 104,500 | ||
| 11th | Rozalia | SL02 | ||
| 10 boxes of Pen @ TZS 5,000 | 50,000 | |||
| 15 boxes of table salts @ TZS 250 | 3,750 | |||
| 10 boxes of biscuits @ TZS 3,000. | 30,000 | 83,750 | ||
| 26th | Saraphina | |||
| 5 litres of milk @ TZS 500 | 2,500 | |||
| 13 kg of White flour @ TZS 1,400. | 18,200 | |||
| 20,700 | ||||
| Less 10% trade discount | 2,070 | 18,630 | ||
| 31st | Transferred to Sales Account | 206,880 | ||
- PURCHASES DAY BOOK
A Purchases Day Book, also known as a Purchases Journal, is a book of original entry used to record credit purchases of goods made by a business. This book is used specifically to record the purchase of goods for resale or materials for manufacturing purposes, but it does not include cash purchases. Like the Sales Day Book, the Purchases Day Book only records credit transactions, as cash purchases are recorded directly in the cash book.
THE FORMAT OF PURCHASES DAY BOOK
The format of the purchases day book is the same like that of Sales day book. The only difference is that, Sales day book contains details of credit sales and respective customers, while purchases day book contains details of credit purchases and respective suppliers.
BUSINESS NAME
PURCHASES DAY BOOK
| DATE | PARTICULARS | INVOICE NO. | FOLIO | INVOICE DETAILS | INVOICE TOTAL |
EXAMPLE 1
Chiku Enterprise made the following credit purchases during the month of June 2020. You are required to prepare Purchases Day book and record the information therein.
| DATE | DETAILS |
| 4th | Bought from Glory Classic Fashion Shop: 150 baby napkins @ TZS 1,500 and 150 pairs of baby shoes @ TZS 3,500 |
| 16th | Bought from Charity Fashion Store: 10 pairs of shoes @ TZS 5,500; 12 pairs of bed sheets @ TZS 6,000 and 10 pairs of Vitenge @ TZS15,000. |
| 25th | Bought goods from Khalid Enterprise TZS 200,000. |
ANSWER:
CHIKU ENTERPRISE
PURCHASES DAY BOOK
| Date | Particulars | Folio | Invoice details | Invoice total |
| June | ||||
| 4th | Glory Classic Fashion Shop | |||
| 150 baby napkins @ TZS 1,500. | 225,000 | |||
| 150 pairs of baby shoes @ TZS 3,500 | 525,000 | 750,000 | ||
| 16th | Charity Fashion Store | |||
| 10 pairs of shoes @ TZS 5,500. | 55,000 | |||
| 12 pairs of bed sheets @ TZS 6,000. | 72,000 | |||
| 10 pairs of Vitenge @ 15,000. | 150,000 | 277,000 | ||
| 25th | Khalid Enterprise | |||
| Goods worth TZS 200,000. | 200,000 | 200,000 | ||
| 30th | Transferred to Purchases Account | 1,227,000 | ||
EXAMPLE 2
Mkilindi Enterprise made the following credit purchases in the month of June, 2020.
| June | DETAILS |
| 2nd | Purchased goods from Jacob: 10 pieces of timber, @ TZS 20,000; 5 chairs @ TZS 50,000 and 2 tables @ TZS 150,000 |
| 10th | Purchased goods from Jeremiah: 15 exercise books @ TZS 4,000; 20 writing pens @ TZS 500 and 10 rulers @ TZS 300 |
| 15th | Credit purchases from Jacob: 2 Sofa set @ TZS 1,500,000 and 2 Tables @ TZS 150,000 |
| 20th | Purchased goods from Jeremiah: 5 ream paper @ TZS 20,000 and 10 exercise books, each costing TZS 4,000 |
| 30th | Purchased from Joseph: 3 staplers, each costing TZS 6,500 |
Required: Prepare a purchases journal and post transactions to the respective ledgers Answer:
MKILINDI ENTERPRISE
PURCHASES JOURNAL
| Date | Particulars | Folio | Invoice details | Invoice total |
| 2nd | Jacob | |||
| 10 pieces of timber @ TZS 20,000 | 200,000 | |||
| 5 chairs @ TZS 50,000 | 250,000 | |||
| 2 tables@ TZS 150,000 | 300,000 | 750,000 | ||
| 10th | Jeremiah | |||
| 15 exercise books @ TZS 4,000 | 60,000 | |||
| 20 writing pens @ TZS 500 | 10,000 | |||
| 10 rulers @ TZS 300 | 3,000 | 73,000 | ||
| 15th | Jacob | |||
| 2 Sofa set, @ TZS 1,500,000 | 3,000,000 | |||
| 2 Tables, @ TZS 150,000 | 300,000 | 3,300,000 | ||
| 20th | Jeremiah | |||
| 5 ream paper, @ TZS 20,000 | 100,000 | |||
| 10 exercise books, @ TZS 4,000 | 40,000 | 140,000 | ||
| 30th | Joseph | |||
| 3 staplers, @ TZS 6,500 | 19,500 | 19,500 | ||
| Transferred to Purchases Account | 4,282,500 | |||
FINANCIAL STATEMENT FOR SMALL BUSINESS
Financial statements are essential tools for understanding the financial performance and position of a small business. They provide a clear picture of how a business earns and spends its money, as well as what it owns and owes at a specific point in time.
MAIN TYPES OF FINANCIAL STATEMENTS
Two of the most important financial statements for any small business are the
- Income Statement
The Income Statement shows the business’s revenues, expenses, and profit or loss over a given period, helping owners assess profitability and operational efficiency.
- The Statement of Financial Position (also known as the Balance Sheet).
The Statement of Financial Position provides a picture of the business’s assets, liabilities, and owner’s equity, helping stakeholders understand its financial health.
- INCOME STATEMENT
An Income Statement, also known as a Profit and Loss Statement, is a financial report that summarizes a business’s revenues, costs, and expenses over a specific period—usually monthly, quarterly, or annually. Its main purpose is to show whether the business made a profit or incurred a loss during that period
MAIN COMPONENTS OF AN INCOME STATEMENT
- Revenue (Sales or Income)
This is the total amount of money earned from selling goods or providing services before any expenses are deducted.
- Cost of Goods Sold (COGS)
These are the direct costs of producing the goods sold by the business. It includes costs like raw materials, packaging, and direct labor.
3. Gross Profit
This is calculated as Revenue – COGS. It shows the profit made before operating expenses are deducted.
- Operating Expenses
These include all other business expenses like rent, salaries, utilities, advertising, and transport. These are not directly linked to the production of goods.
5. Net Profit (or Net Loss)
This is the final profit after subtracting all expenses from the gross profit. Formula: Net Profit = Gross Profit – Operating Expenses
THE FORMAT OF SIMPLE INCOME STATEMENT
BUSINESS NAME
INCOME STATEMENT FOR THE YEAR ENDED _________
| DETAILS | AMOUNT (TZS) | |
| Sale revenue | xxxxx | |
| Less: Cost of Goods Sold | (xxxxx) | |
| Gross Profit | xxxxx | |
| Less: Operating Expenses: | ||
| Rent | xxxx | |
| Salaries and wages | xxxx | |
| Electricity bills | xxxx | |
| Meals | xxxx | |
| Stationary expenses | xxxx | (xxxxx) |
| Net profit / Loss | xxxxx | |
THE EXTENDED (FULL) FORMAT OF INCOME STATEMENT
BUSINESS NAME
INCOME STATEMENT FOR THE YEAR ENDED _________
| DETAILS | AMOUNT (TZS) | |
| Sale revenue | xxxxx | |
| Less: Sales returns | xxxxx | |
| Net Sales | xxxxx | |
| Less: Cost of Goods Sold | ||
| Opening Inventory | xxxxx | |
| Add: Purchases | xxxxx | |
| Carriage Inwards | xxxxx | |
| xxxxx | ||
| Less: Purchases Returns | xxxxx | |
| Cost of Goods Available for Sale | xxxxx | |
| Less: Closing Inventory | xxxxx | xxxxx |
| Gross Profit | xxxxx | |
| Add: Other Incomes | ||
| Discount received | xxxxx | |
| Interest recevide | xxxxx | |
| Total Income | xxxxx | |
| Less: Operating Expenses: | ||
| Rent | xxxx | |
| Salaries and wages | xxxx | |
| Electricity bills | xxxx | |
| Meals | xxxx | |
| Stationary expenses | xxxx | (xxxxx) |
| Net profit / Loss | xxxxx | |
EXAMPLE 1
Upendo Mini Shop is a small retail business operating in Mwanza. The owner wants to assess the shop’s financial performance for the month of March 2025. Using the account balances provided below, prepare an Income Statement for Upendo Mini Shop for the month ended 31st March 2025.
Account Balances for March 2025 were as follows:
| TZS | TZS | ||
| Sales Revenue | 1,500,000 | Electricity Expense | 30,000 |
| Purchases | 800,000 | Inventory at Beginning | 100,000 |
| Salaries Expense | 200,000 | Inventory at End | 120,000 |
| Rent Expense Answer | 150,000 | ||
| UPENDO MINI SHOP | |||
INCOME STATEMENT FOR THE MONTH ENDED 31st MARCH 2025
| DETAILS | AMOUNT (TZS) | |
| Sale revenue | 1,500,000 | |
| Less: Cost of Goods Sold: | ||
| Opening Inventory | 100,000 | |
| Add: Purchases | 800,000 | |
| Cost of Goods Available for Sale | 900,000 | |
| Less: Closing Inventory | 120,000 | 780,000 |
| Gross Profit | 720,000 | |
| Less: Operating Expenses: | ||
| Salaries Expense | 200,000 | |
| Rent Expense | 150,000 | |
| Electricity Expense | 30,000 | 380,000 |
| Net profit | 340,000 | |
EXAMPLE 2
Bright Electronics is a small business located in Dodoma, dealing with the sale of electronic appliances. The owner, Mr. Bright, has provided the following account balances. Using the data below, prepare an Income Statement for Bright Electronics for the year ended 31st December 2024.
| TZS | TZS | ||
| Sales Revenue | 25,000,000 | Transport and Delivery | 900,000 |
| Purchases | 12,000,000 | Advertising and Promotion | 1,200,000 |
| Opening Inventory | 3,000,000 | Repairs and Maintenance | 600,000 |
| Closing Inventory | 2,500,000 | Office Supplies Expense | 350,000 |
| Salaries and Wages | 4,000,000 | Depreciation on Equipment | 750,000 |
| Rent Expense | 2,400,000 | Miscellaneous Expenses | 200,000 |
| Insurance Expense | 500,000 | Utilities (Electricity & Water) | 800,000 |
| Telephone and Internet | 300,000 |
Answer
BRIGHT ELECTRONICS
INCOME STATEMENT FOR THE YEAR ENDED 31st DECEMBER 2024
| DETAILS | AMOUNT (TZS) | |
| Sale revenue | 25,000,000 | |
| Less: Cost of Goods Sold: | ||
| Opening Inventory | 3,000,000 | |
| Add: Purchases | 12,000,000 | |
| Cost of Goods Available for Sale | 15,000,000 | |
| Less: Closing Inventory | 2,500,000 | 12,500,000 |
| Gross Profit | 12,500,000 | |
| Less: Operating Expenses: | ||
| Salaries and Wages | 4,000,000 | |
| Rent Expense | 2,400,000 | |
| Insurance Expense | 500,000 | |
| Telephone and Internet | 300,000 | |
| Transport and Delivery | 900,000 | |
| Advertising and Promotion | 1,200,000 | |
| Repairs and Maintenance | 600,000 | |
| Office Supplies Expense | 350,000 | |
| Depreciation on Equipment | 750,000 | |
| Miscellaneous Expenses | 200,000 | |
| Utilities (Electricity & Water) | 800,000 | 12,000,000 |
| Net profit | 500,000 | |
EXAMPLE 3
Miss Massawe had the following list of balance as at 31st December 2023. You are required to prepare income statement for the year ended 31st December 2023.
| TZS | TZS | ||
| Wages and Salaries | 125,000 | Stock 31/12/2022 | 260,000 |
| Purchases | 408,200 | Stock 31/12/2023 | 150,000 |
| Carriage outwards | 20,300 | Rent | 60,000 |
| Sales | 1,860,500 | Advertisement | 31,600 |
| Carriage inwards | 211,000 | Interest received | 200,300 |
| Sales returns | 230,500 | Commission received | 35,200 |
| Purchases returns Answer | 43,000 | General expenses | 182,400 |
| MISS MASSAWE’S BUSINESS | |||
INCOME STATEMENT FOR THE YEAR ENDED 31st AUGUST 2013.
| DETAILS | AMOUNT (TZS) | |
| Sales | 1,860,500 | |
| Less: Sales returns | (230,500) | |
| Net Sales | 1,630,000 | |
| Less: Cost of Goods Sold: | ||
| Opening Stock | 260,000 | |
| Add: Purchases | 408,000 | |
| Carriage Inwards | 211,000 | |
| 879,000 | ||
| Less: Purchases returns | (43,000) | |
| Cost of Goods Available for Sale | 836,000 | |
| Less: Closing Stock | 150,000 | 686,000 |
| Gross Profit | 944,000 | |
| Add: Other Income: | ||
| Interest received | 200,300 | |
| Commission received | 35,200 | 235,500 |
| Total Income | 1,179,500 | |
| Less: Operating Expenses: | ||
| Carriage outwards | 20,300 | |
| Wages and salaries | 125,000 | |
| Rent | 60,000 | |
| Advertisement | 31,600 | |
| General expenses | 182,400 | 419,300 |
| Net profit | 760,200 | |
- STATEMENT OF FINANCIAL POSITION OF A SMALL BUSINESS
The Statement of Financial Position, also known as the Balance Sheet, is a key financial statement that shows the financial status of a small business at a specific point in time. It presents what the business owns (assets), what it owes (liabilities), and the owner’s investment in the business (equity).
COMPONENTS OF THE STATEMENT OF FINANCIAL POSITION
The Statement of Financial Position is made up of three main components:
- ASSETS
These are resources owned by the business that are expected to bring future economic benefits. Assets are usually divided into:
- Current Assets: Items that can be converted into cash within one year (e.g., Bank balance, cash, closing inventory, accounts receivable).
- Non-Current Assets: Long-term resources used in the business (e.g., buildings, equipment, vehicles, furniture).
- LIABILITIES
These represent the business’s obligations or debts owed to others. They are also classified into:
- Current Liabilities: Debts payable within one year (e.g., accounts payable, short-term loans, bank-overdraft).
- Non-Current Liabilities: Long-term debts (e.g., bank loans, mortgage).
- OWNER’S EQUITY (CAPITAL)
This shows the owner’s claim on the business after all liabilities are paid. It includes the initial capital invested, any additional contributions, and retained profits or losses.
THE FORMAT OF STATEMENT OF FINANCIAL POSITION
The statement of financial position consists of two parts. The arrangement of these parts is according to accounting equation. Both parts should be equal. Its format is as follows:
NAME OF THE BUSINESS
STATEMENT OF FINANCIAL POSITION AS AT DD/MM/YYYY
| DETAILS | Amount (TZS) | |
| ASSETS | ||
| Non-Current Assets: | ||
| Land and Building | xxxxx | |
| Machines | xxxxx | |
| Furniture | xxxxx | |
| xxxxx | ||
| Add: Current Assets | ||
| Closing stock | xxxxx | |
| Debtors | xxxxx | |
| Bank | xxxxx | |
| Cash | xxxxx | xxxxx |
| Total Assets | XXXXX | |
| OWENER’S EQUITY & LIABILITIES | ||
| OWENER’S EQUITY | ||
| Capital: Opening balance | xxxxx | |
| Add: Net profit for the year | xxxxx | |
| xxxxx | ||
| Less: Drawings | xxxxx | |
| xxxxx | ||
| LIABILITIES | ||
| Long-Term Liabilities | ||
| Loan from Bank | xxxxx | |
| Mortgages | xxxxx | xxxxx |
| Add: Current Liabilities | ||
| Creditors | xxxxx | |
| Bank overdraft | xxxxx | xxxxx |
| Total Owener’s Equity & Liabilities | XXXXX | |
EXAMPLE 1
Tumaini runs a grocery store in Tanga. At the end of the year, he wants to check the financial health of his business. Use the following balances to prepare a Statement of Financial Position for Tumaini Grocery Store as at 31st December 2024
| TZS | TZS | ||
| Cash in Hand | 800,000 | Accounts Payable | 1,000,000 |
| Bank Account | 1,500,000 | Loan from Family (Due in 3 years) | 1,500,000 |
| Inventory | 3,200,000 | Capital | 5,000,000 |
| Refrigerator | 1,800,000 | Net Profit for the year | 800,000 |
| Shelves and Racks | 1,000,000 |
Answer
TUMAINI GROCERY STORE
STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2024
| DETAILS | AMOUNT (TZS) | |
| ASSETS | ||
| Non-Current Assets: | ||
| Refrigerator | 1,800,000 | |
| Shelves and Racks | 1,000,000 | |
| 2,800,000 | ||
| Add: Current Assets | ||
| Closing Inventory | 3,200,000 | |
| Bank Account | 1,500,000 | |
| Cash | 800,000 | 5,500,000 |
| Total Assets | 8,300,000 | |
| OWENER’S EQUITY & LIABILITIES | ||
| OWENER’S EQUITY | ||
| Capital | 5,000,000 | |
| Add: Net profit | 800,000 | |
| 5,800,000 | ||
| LIABILITIES | ||
| Long-Term Liabilities | ||
| Loan from Family | 1,500,000 | |
| Add: Current Liabilities | ||
| Accounts Payable | 1,000,000 | 2,500,000 |
| Total Owener’s Equity & Liabilities | 8,300,000 | |
EXAMPLE 2
Kazi IT Solutions is a small tech business based in Dar es Salaam offering computer repair and software services. The owner, Mr. Mushi, has provided the following information. Prepare a Statement of Financial Position for the business as at 31st December 2024.
| TZS | TZS | ||
| Cash at Bank | 2,200,000 | Prepaid Rent | 600,000 |
| Accounts Receivable | 1,300,000 | Accounts Payable | 500,000 |
| Office Computers | 4,500,000 | Long-term Bank Loan | 3,000,000 |
| Office Furniture | 1,400,000 | Net Profit for the Year | 1,000,000 |
| Capital Answer | 5,500,000 | ||
| Kazi IT Solutions | |||
STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2024
| DETAILS | AMOUNT (TZS) | |
| ASSETS | ||
| Non-Current Assets: | ||
| Office Computers | 4,500,000 | |
| Office Furniture | 1,400,000 | |
| 5,900,000 | ||
| Add: Current Assets | ||
| Accounts Receivable | 1,300,000 | |
| Prepaid Rent | 600,000 | |
| Cash at Bank | 2,200,000 | 4,100,000 |
| Total Assets | 10,000,000 | |
| OWENER’S EQUITY & LIABILITIES | ||
| OWENER’S EQUITY | ||
| Capital | 5,500,000 | |
| Add: Net profit | 1,000,000 | |
| 6,500,000 | ||
| LIABILITIES | ||
| Long-Term Liabilities | ||
| Long-term Bank Loan | 3,000,000 | |
| Add: Current Liabilities | ||
| Accounts Payable | 500,000 | 3,500,000 |
| Total Owener’s Equity & Liabilities | 10,000,000 | |
EXAMPLE 3
The following list of balances were found in the books of Mr. Mbwana as at 31st Dec 2014. You are required to prepare Statement of Financial Position as at 31st Dec 2014.
| TZS | TZS | |
| Bank Overdraft 260,000 | Account Payable | 400,000 |
| Cash in Hand 380,000 | Long-term loan | 2,500,000 |
| Fixtures and Fittings 350,000 | Mortgages | 2,700,000 |
| Stock at 31st December, 2014 260,000 | Net profit | 651,000 |
| Account Receivable 411,000 | Drawings | 560,000 |
| Capital as at 31st December, 2013 2,800,000 Motor van 2,500,000 | Premises | 4,850,000 |
Answer:
MBWANA’S BUSINESS
A STATEMENT OF FINANCIAL POSITION AS AT 31st DECEMBER, 2014
| DETAILS | AMOUNT (TZS) | |
| ASSETS | ||
| Non-current Assets: | ||
| Premises | 4,850,000 | |
| Motor van | 2,500,000 | |
| Fixtures and Fittings | 350,000 | |
| Total Fixed Assets | 7,700,000 | |
| Add: Current Assets | ||
| Closing stock | 260,000 | |
| Account Receivable | 411,000 | |
| Cash in Hand | 380,000 | 1,051,000 |
| 8,751,000 | ||
| OWENER’S EQUITY & LIABILITIES | ||
| OWENER’S EQUITY | ||
| Capital | 2,800,000 | |
| Add: Net profit | 651,000 | |
| 3,451,000 | ||
| Less: Drawings | 560,000 | |
| 2,891,000 | ||
| LIABILITIES | ||
| Long-term liabilities | ||
| Mortgage | 2,700,000 | |
| Long-term loan | 2,500,000 | 5,200,000 |
| Add: Current Liabilities | ||
| Account Payable | 400,000 | |
| Bank Overdraft | 260,000 | 660,000 |
| 8,751,000 | ||
BUDGETARY CONTROL AND ADMINISTRATION
BUDGET
A budget is a financial plan that outlines a business’s expected income and expenses over a specific period— such as a week, month, or year. It helps estimate how much money the business will earn and how much it will spend, allowing for better control of finances. In simple terms, a budget acts like a roadmap that guides a business on how to allocate its resources wisely.
IMPORTANCE OF A BUDGET IN SMALL BUSINESS
- Helps in Planning and Forecasting
A budget helps small business owners plan for the future by estimating revenues and expenses. This allows them to set realistic goals and avoid surprises. For example, planning ahead for high-demand seasons like holidays or school openings.
- Controls Spending and Reduces Waste
Budgets help track and limit unnecessary spending. By knowing how much to spend in each area, business owners can avoid overspending and reduce waste. For example, Limiting advertising costs to a set monthly amount.
- Improves Financial Decision-Making
With a clear picture of available funds and planned expenses, small businesses can make smarter decisions about purchases, investments, or hiring staff. For example, deciding whether the business can afford to buy a new fridge for a small café.
4. Enhances Profitability
Budgeting allows businesses to identify areas of high cost and low income. This helps them adjust operations to increase profit margins. For example, reducing stock of slow-moving goods and investing more in fast-selling items.
- Supports Monitoring and Evaluation
Budgets make it easier to compare actual performance with planned performance. This allows the business to monitor whether it is on track and adjust if necessary. For example, if sales are lower than expected, the owner might increase promotions or review pricing.
- Builds Financial Discipline
Sticking to a budget encourages responsible financial habits, especially for small businesses with limited capital. It helps avoid debts and ensures smooth operations. For example, avoiding impulse purchases or non-essential spending.
- Facilitates Access to Loans or Investors
Lenders and investors often require a clear budget to assess whether the business is being managed well and if it has potential for growth. For example, presenting a budget plan when applying for a small business loan.
- Supports Emergency Preparedness
Budgeting helps small businesses prepare for unexpected expenses or downturns by setting aside emergency funds. For example, saving for equipment breakdowns or slow seasons.
THE FORMAT OF A BUDGET
Budget format can be of three types, depending on the need of the business / questions.
1. ONE PERIOD / MONTH BUDGET
This is the budget that covers only one month, or one week. It shows the expected imcome and expenditures for that particular month only.
BUSINESS NAME
BUDGET PERIOD: ___________________________
| CATEGORY | AMOUNT (TZS) |
| EXPECTED INCOME | |
| Sales Revenue | xxxxx |
| Service Income | xxxxx |
| Other Income (if any) | xxxxx |
| Total Income (A) | xxxxx |
| EXPECTED EXPENSES | |
| Rent | xxxxx |
| Salaries and wages | xxxxx |
| Utilities (Electricity, Water) | xxxxx |
| Transport | xxxxx |
| Advertising | xxxxx |
| Supplies (Raw Materials) | xxxxx |
| Maintenance (Repairs) | xxxxx |
| Other expenses | xxxxx |
| Total Expenses (B) | xxxxx |
| Cash surplus / deficit (A-B) | xxxxx |
EXAMPLE 1
Ushauri Women’s Group is planning a one-day health awareness campaign in their village. They plan to receive funds from the following sources: Expected Sources of Income:
| Member contributions | TZS 100,000 |
| Support from the village council | TZS 200,000 |
| Grant from a health organization | TZS 300,000 |
| Sale of snacks and water Planned Expenditures: | TZS 50,000 |
| Hiring a tent and chairs | TZS 150,000 |
| Paying guest speakers | TZS 100,000 |
| Printing educational materials | TZS 80,000 |
| Sound system rental | TZS 60,000 |
| Buying hand sanitizers and masks | TZS 90,000 |
| Transport for health workers | TZS 70,000 |
| Refreshments | TZS 50,000 |
| Cleaning and waste disposal | TZS 30,000 |
Required: Prepare a budget for the campaign and determine the financial result (surplus or deficit).
Answers
USHAURI WOMEN’S GROUP
ONE-DAY BUDGET FOR HEALTH AWARENESS CAMPAIGN
| CATEGORY | AMOUNT (TZS) |
| EXPECTED INCOME | |
| Member contributions | 100,000 |
| Support from the village council | 200,000 |
| Grant from a health organization | 300,000 |
| Sale of snacks and water | 50,000 |
| Total Income (A) | 650,000 |
| EXPECTED EXPENSES | |
| Hiring a tent and chairs | 150,000 |
| Paying guest speakers | 100,000 |
| Printing educational materials | 80,000 |
| Sound system rental | 60,000 |
| Buying hand sanitizers and masks | 90,000 |
| Transport for health workers | 70,000 |
| Refreshments | 50,000 |
| Cleaning and waste disposal | 30,000 |
| Total Expenses (B) | 630,000 |
| Cash Surplus (A-B) | 20,000 |
EXAMPLE 2
A student at college expects to receive income from three sources during the month of June. These include TZS 150,000 from monthly pocket money provided by parents, TZS 30,000 from selling mobile accessories on campus, and TZS 20,000 from weekend tuition classes offered to lower secondary students.
During the month, the student expects to spend TZS 80,000 on food, TZS 20,000 on mobile data and airtime, TZS 15,000 on transport, TZS 10,000 on academic materials, TZS 25,000 on hostel rent, TZS 10,000 for offering at church, and TZS 5,000 on personal care items.
Required: Help the student to prepare her monthly budget. Answer
BUSINESS NAME
BUDGET PERIOD: ___________________________
| CATEGORY | AMOUNT (TZS) |
| EXPECTED INCOME | |
| Pocket money | 150,000 |
| Sales of mobile accessories | 30,000 |
| Weekend tuition classes | 20,000 |
| Total Income (A) | 200,000 |
| EXPECTED EXPENSES | |
| Food | 80,000 |
| Mobile data and airtime | 20,000 |
| Academic materials | 10,000 |
| Hostel rent | 25,000 |
| Offering at church | 10,000 |
| Personal Care items | 5,000 |
| Total Expenses (B) | 150,000 |
| Cash surplus (A-B) | 50,000 |
2. MORE THAN ONE PERIOD BUDGET
This is the budget that covers more than one month, or one week. It shows the expected imcome and expenditures for that particular periods. Note that Closing cash balance of one month is the opening balance of the next month
BUSINESS NAME
BUDGET PERIOD: ___________________________
| CATEGORY | JANUARY | FEBRUARY | MARCH |
| Opening balance | – | xxxxx | xxxx |
| EXPECTED INCOME | |||
| Sales Revenue | xxxxx | xxxxx | xxxxx |
| Service Income | xxxxx | xxxxx | xxxxx |
| Other Income (if any) | xxxxx | xxxxx | xxxxx |
| Total Income | xxxxx | xxxxx | xxxxx |
| Total Available Cash (A) | xxxxx | xxxxx | xxxxx |
| EXPECTED EXPENSES | |||
| Rent | xxxxx | xxxxx | xxxxx |
| Salaries and wages | xxxxx | xxxxx | xxxxx |
| Utilities (Electricity, Water) | xxxxx | xxxxx | xxxxx |
| Transport | xxxxx | xxxxx | xxxxx |
| Advertising | xxxxx | xxxxx | xxxxx |
| Supplies (Raw Materials) | xxxxx | xxxxx | xxxxx |
| Maintenance (Repairs) | xxxxx | xxxxx | xxxxx |
| Other expenses | xxxxx | xxxxx | xxxxx |
| Total Expenses (B) | xxxxx | xxxxx | xxxxx |
| Closing Cash balance (A-B) | xxxxx | xxxxx | xxxxx |
Total Available Cash (A) = Opening balance + Total Income
EXAMPLE 1
Daniel operates a cybercafé in town. He starts July with an opening balance of TZS 500,000 and expects to earn TZS 3,000,000 from computer services and TZS 500,000 from printing and photocopying. In August, these earnings will increase to TZS 3,500,000 and TZS 600,000, respectively.
His monthly expenses include TZS 700,000 for salaries, TZS 400,000 for rent, and TZS 300,000 for electricity and internet. In July, he plans to upgrade his computers, costing TZS 1,200,000. In August, he will spend TZS 200,000 for antivirus software and system backup. Other regular costs include TZS 100,000 for maintenance and TZS 150,000 for stationery each month.
Required: Prepare a 2-month budget for July and August showing monthly net cash.
DANIEL’S CYBERCAFÉ
BUDGET FOR JULY AND AUGUST
| PARTICULARS | JULY (TZS) | AUGUST (TZS) |
| Opening Balance | 500,000 | 1,150,000 |
| EXPECTED INCOME | ||
| Computer services | 3,000,000 | 3,500,000 |
| Printing & Photocopying | 500,000 | 600,000 |
| Total Income | 3,500,000 | 4,100,000 |
| Total Available Cash (A) | 4,000,000 | 5,250,000 |
| EXPECTED EXPENSES | ||
| Salaries | 700,000 | 700,000 |
| Rent | 400,000 | 400,000 |
| Electricity & Internet | 300,000 | 300,000 |
| Computer upgrade | 1,200,000 | – |
| Antivirus & Backup | – | 200,000 |
| Maintenance | 100,000 | 100,000 |
| Stationery | 150,000 | 150,000 |
| Total Expenses (B) | 2,850,000 | 1,850,000 |
| Closing Balance (A) – (B) | 1,150,000 | 3,400,000 |
EXAMPLE 2
Fatuma runs a small bakery business in her local town. She is preparing a budget for the months of April, May, and June to manage her finances properly. Her expected sources of income come from the sale of bread, cakes, snacks, and soft drinks. Fatuma starts April with an opening balance of TZS 200,000.
In April, she expects to earn TZS 800,000 from bread, TZS 600,000 from cakes, TZS 400,000 from snacks, and TZS 200,000 from soft drinks. In May, she projects an increase in sales, earning TZS 900,000 from bread, TZS 650,000 from cakes, TZS 500,000 from snacks, and TZS 300,000 from soft drinks. In June, she expects TZS 850,000 from bread, TZS 700,000 from cakes, TZS 450,000 from snacks, and TZS 250,000 from soft drinks.
Her monthly expenses include purchasing baking ingredients, paying workers’ wages, utility bills (electricity and water), packaging materials, transport, equipment maintenance, and phone and internet costs.
In April, she expects to spend TZS 500,000 on ingredients, TZS 300,000 on wages, TZS 100,000 on utilities, TZS 70,000 on packaging, TZS 50,000 on transport, TZS 40,000 on maintenance, and TZS 30,000 on phone and internet. In May, expenses are projected at TZS 550,000 for ingredients, TZS 320,000 for wages, TZS 110,000 for utilities, TZS 80,000 for packaging, TZS 60,000 for transport, TZS 50,000 for maintenance, and TZS 35,000 for phone and internet. In June, she expects to spend TZS 530,000 on ingredients, TZS 310,000 on wages, TZS 120,000 on utilities, TZS 75,000 on packaging, TZS 55,000 on transport, TZS 45,000 on maintenance, and TZS 30,000 on phone and internet.
Required: Prepare a three-month budget for April, May, and June showing monthly columns for each income and expenditure item
FATUMA’S BAKERY
BUDGET FOR APRIL, MAY, AND JUNE
| PARTICULARS | APRIL (TZS) | MAY (TZS) | JUNE (TZS) |
| Opening Balance | 200,000 | 1,110,000 | 2,255,000 |
| EXPECTED INCOME | |||
| Sale of Bread | 800,000 | 900,000 | 850,000 |
| Sale of Cakes | 600,000 | 650,000 | 700,000 |
| Sale of Snacks | 400,000 | 500,000 | 450,000 |
| Sale of Soft Drinks | 200,000 | 300,000 | 250,000 |
| Total Income | 2,000,000 | 2,350,000 | 2,250,000 |
| Total Available Cash (A) | 2,200,000 | 3,460,000 | 4,505,000 |
| EXPECTED EXPENSES | |||
| Baking Ingredients | 500,000 | 550,000 | 530,000 |
| Workers’ Wages | 300,000 | 320,000 | 310,000 |
| Electricity & Water | 100,000 | 110,000 | 120,000 |
| Packaging Materials | 70,000 | 80,000 | 75,000 |
| Transport | 50,000 | 60,000 | 55,000 |
| Equipment Maintenance | 40,000 | 50,000 | 45,000 |
| Phone & Internet | 30,000 | 35,000 | 30,000 |
| Total Expenses (B) | 1,090,000 | 1,205,000 | 1,165,000 |
| Closing Balance (A – B) | 1,110,000 | 2,255,000 | 3,340,000 |
3. BUDGET REPORT
A budget report is a financial document that summarizes the planned (budgeted) and actual income and expenditures over a specific period, and shows the differences (variances) between them. It helps individuals, businesses, or organizations monitor their financial performance, control spending, and make informed decisions.
COMPONENTS OF BUDGET REPORT
Components of a Budget Report are as follows:
- Item or Description
This is the name of the thing you are budgeting for — for example, “sales”, “salaries”, or “transport”.
- Budgeted Amount
The amount of money you expected or planned to receive (if income) or to spend (if expense).
- Actual Amount
The real amount of money you actually received or spent.
- Variance
This is the difference between what you planned (budgeted) and what really happened (actual). Formula: Variance = Actual Amount – Budgeted Amount
- Variance Type (Comments)
This shows if the variance is good or bad.
- Favorable (F): You earned more or spent less than expected (a good thing).
- Unfavorable (U): You earned less or spent more than expected (not good).
BUSINESS NAME
BUDGET PERIOD: ___________________________
| CATEGORY | PLANNED AMOUNT | ACTUAL AMOUNT | BUDGET VARIANCE | NOTES |
| INCOME | ||||
| Sales Revenue | xxxxx | xxxxx | xxxxx | xxxxx |
| Service Income | xxxxx | xxxxx | xxxxx | xxxxx |
| Other Income (if any) | xxxxx | xxxxx | xxxxx | xxxxx |
| Total Income (A) | xxxxx | xxxxx | xxxxx | xxxxx |
| EXPENSES | ||||
| Rent | xxxxx | xxxxx | xxxxx | xxxxx |
| Salaries and wages | xxxxx | xxxxx | xxxxx | xxxxx |
| Utilities (Electricity, Water) | xxxxx | xxxxx | xxxxx | xxxxx |
| Transport | xxxxx | xxxxx | xxxxx | xxxxx |
| Advertising | xxxxx | xxxxx | xxxxx | xxxxx |
| Supplies (Raw Materials) | xxxxx | xxxxx | xxxxx | xxxxx |
| Maintenance (Repairs) | xxxxx | xxxxx | xxxxx | xxxxx |
| Other expenses | xxxxx | xxxxx | xxxxx | xxxxx |
| Total Expenses (B) | xxxxx | xxxxx | xxxxx | xxxxx |
| Net Cash (A-B) | xxxxx | xxxxx | xxxxx | xxxxx |
EXAMPLE 1
Consider the following details
Business Name: Asha’s Mini Mart
Period: Monthly Budget for May 2025
Asha owns a small retail shop in her local town. She wants to prepare a budget for the month of May 2025 to manage her income and expenses effectively. Based on her past records and plans for growth, she has estimated the following:
Planned Income: TZS Sales Revenue 3,000,000
Mobile Money Commission 150,000
Other Income (Plastic Bag Sales) 50,000
Planned Expenses:
Rent 400,000
Salaries (for two assistants) 600,000
Utilities (Electricity and Water) 120,000
Transport 80,000
Advertising 50,000
Inventory Purchases 1,500,000 Repairs & Maintenance 70,000
Miscellaneous 30,000
At the end of the month, Asha recorded the actual amounts as follows:
Actual Income
Sales Revenue 2,800,000
Mobile Money Commission 170,000
Other Income 60,000
Actual Expenses
Rent 400,000
Salaries 600,000
Utilities 140,000
Transport 90,000
Advertising 30,000
Inventory Purchases 1,600,000 Repairs & Maintenance 100,000
Miscellaneous 40,000
Required: Prepare a budget report for the month of May 2025 Answer
ASHA’S MINI MART
A BUDGET REPORT FOR THE MONTH OF MAY 2025
| CATEGORY | PLANNED AMOUNT | ACTUAL AMOUNT | BUDGET VARIANCE | NOTES |
| INCOME | ||||
| Sales Revenue | 3,000,000 | 2,800,000 | (200,000) | Unfavorable |
| Mobile Money Commission | 150,000 | 170,000 | 20,000 | Favorable |
| Other Income (Plastic bag sales) | 50,000 | 60,000 | 10,000 | Favorable |
| Total Income (A) | 3,200,000 | 3,030,000 | (170,000) | Unfavorable |
| EXPENSES | ||||
| Rent | 400,000 | 400,000 | 0 | Accurate |
| Salaries (for two assistants) | 600,000 | 600,000 | 0 | Accurate |
| Utilities (Electricity and Water) | 120,000 | 140,000 | 20,000 | Unfavorable |
| Transport | 80,000 | 90,000 | 10,000 | Unfavorable |
| Advertising | 50,000 | 30,000 | (20,000) | Favorable |
| Inventory Purchases | 1,500,000 | 1,600,000 | 100,000 | Unfavorable |
| Repairs & Maintenance | 70,000 | 100,000 | 30,000 | Unfavorable |
| Miscellaneous | 30,000 | 40,000 | 10,000 | Unfavorable |
| Total Expenses (B) | 2,850,000 | 3,000,000 | 150,000 | Unfavorable |
| Net Profit (A-B) | 350,000 | 30,000 | (320,000) | Unfavorable |
EXAMPLE 2
Business Name: Emmanuel’s Stationery and Printing Shop Period: Monthly Budget for October 2024
Emmanuel operates a stationery and printing shop near a school. October is exam season, so he expects increased activity. His services include photocopying, printing, and selling academic materials.
| Planned Income | TZS |
| Photocopy and printing | 1,500,000 |
| Stationery sales | 1,000,000 |
| Binding and lamination Planned Expenses | 500,000 |
| Rent | 400,000 |
| Salaries for 1 assistant | 300,000 |
| Paper and ink supplies | 800,000 |
| Electricity | 180,000 |
| Equipment maintenance | 90,000 |
| Internet and software | 50,000 |
| Miscellaneous Actual Income | 30,000 |
| Photocopy and printing | 1,600,000 |
| Stationery sales | 950,000 |
| Binding and lamination Actual Expenses | 600,000 |
| Rent | 400,000 |
| Salaries | 320,000 |
| Paper and ink supplies | 850,000 |
| Electricity | 200,000 |
| Equipment maintenance | 110,000 |
| Internet/software | 60,000 |
| Miscellaneous | 40,000 |
Required: Prepare a budget report for the month of October 2024
Answer
EMMANUEL’S STATIONERY AND PRINTING SHOP
A BUDGET REPORT FOR THE MONTH OF OCTOBER 2024
| CATEGORY | PLANNED AMOUNT | ACTUAL AMOUNT | BUDGET VARIANCE | NOTES |
| INCOME | ||||
| Photocopy and printing | 1,500,000 | 1,600,000 | 100,000 | Favorable |
| Stationery sales | 1,000,000 | 950,000 | (50,000) | Unfavorable |
| Binding and lamination | 500,000 | 600,000 | 100,000 | Favorable |
| Total Income (A) | 3,000,000 | 3,150,000 | 150,000 | Favorable |
| EXPENSES | ||||
| Rent | 400,000 | 400,000 | 0 | Accurate |
| Salaries for 1 assistant | 300,000 | 320,000 | 20,000 | Unfavorable |
| Paper and ink supplies | 800,000 | 850,000 | 50,000 | Unfavorable |
| Electricity | 180,000 | 200,000 | 20,000 | Unfavorable |
| Equipment maintenance | 90,000 | 110,000 | 20,000 | Unfavorable |
| Internet and software | 50,000 | 60,000 | 10,000 | Unfavorable |
| Miscellaneous | 30,000 | 40,000 | 10,000 | Unfavorable |
| Total Expenses (B) | 1,850,000 | 1,980,000 | 130,000 | Unfavorable |
| Net Profit/Loss (A-B) | 1,150,000 | 1,170,000 | 20,000 | Favorable |
ADMINISTRATION AND CONTROL
Administration
Administration refers to the process of organizing, managing, and coordinating the daily activities of a business or organization. It involves planning, setting policies, maintaining records, and ensuring that operations run smoothly and efficiently.
Control
Control refers to the process of monitoring and evaluating business activities to ensure that they are being carried out according to plans, policies, and standards. It involves setting performance targets, comparing actual results with expected outcomes, and taking corrective actions where necessary.
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