Accounting: Basics for All

By Mohammad Shahjahan

This book is written for basic level readers who need the primary knowledge of accounting. Every accounting works need to justify the primary level where clerical works been carried on for the organizations. Every duties need fundamental knowledge- where the organizer or directors ignore intentionally or lack of knowledge. Therefore, the mistakes remain in the basic process, which could mislead the top level of process. In the same way, students might face problem and consequently they may suffer in exam or in practical life where professionalism is vital aim. That’s why here been emphasized the thoughts into basic level of accounting, so that the process would progress very smoothly. Also in this book, has been extracted some important areas, such as:

• Basic thinking of business success;
• Comments in every chapter in italic letter;
• Two hundreds of multiple choices questions (mcq) & answers;
• FAQ (frequently ask questions & answers) which readers may ask and would enjoy;
• Included some taxation comments & computation where applicable;
• Some exceptional cases, such as transection intersection, accounts in short cut chapter for readers;
• Exam-style questions and answers which may helpful for advanced level readers;
• End of every chapter, you can find comments, reality check and ‘where you could be wrong’ explanation and identification;

• Language: English
• Publisher: AuthorHouse UK
• Release date: May 31, 2019
• ISBN: 9781728388557

Mohammad Shahjahan

Mohammad Shahjahan was born in Bangladesh in a remote rural area. His father Akhtaruzzaman was a farmer and was engaged in small business in later life- who died when Mr. Shahjahan was at age of two. His mother Sayara Khatun was house wife who also died when he was studying in accounting honours. He gained honours and Masters in accounting in Bangladesh and qualified ACCA in the UK in year 2000. He has been very much interested in accounting since his year nine class study. Gradually he completed, O’ level, A’ level, B.Com honours & Masters and ACCA. He is now FCCA. Mr. Shahjahan is currently in accounting practice, where his firm’s name is Shahjahan & Co based in Dagenham, Essex, UK. His favourite games are, Football, Tennis and Snooker. His other published book: Accountancy- out & in practice available in the market. His upcoming next book is Business & Money- interaction accounting with taxation

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ACCOUNTING-BASICS

FOR ALL

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MOHAMMAD SHAHJAHAN

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AuthorHouse™ UK

1663 Liberty Drive

Bloomington, IN 47403 USA

www.authorhouse.co.uk

Phone: [phone] (Domestic TFN)

[phone] (International)

© 2019 Mohammad Shahjahan. All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author.

Published by AuthorHouse 05/31/2019

ISBN: 978-1-7283-8850-2 (sc)

ISBN: 978-1-7283-8855-7 (e)

Any people depicted in stock imagery provided by Getty Images are models,

and such images are being used for illustrative purposes only.

Certain stock imagery © Getty Images.

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

CONTENTS

Introduction

What’s new

Suggested techniques in exam

How To Use This Book

Chapter One: Accounting Basics

Accounting & Business:

Basic business thinking

Opening & closing of a business:

Common mistakes when you are in business:

Remedy of the above difficulties:

Chapter Two: Double Entry System, Transaction and other areas

Double entry system:

Benefit of double entry book-keeping: (DEB)

Drawback of Double entry Book-keeping

Transaction

Business Accounting: most talking points:

Format of accounts:

Chapter Three: Accounting concepts & others

Users of accounting information:

Elements of financial statements:

The Areas To Think During And Before Starting The Final Accounts:

Counting & Accounting:

Objectives Of Accounting:

Difference between book-keeping and accounting:

Comparison of management accounting with financial accounting:

Opening & Closing balance

Working with Accruals & Prepayments

Cash Book

Chapter Four: Adjustments in Final Accounts

Chapter Five: Sole trader

Basic concepts

Advantages of sole trader business:

Disadvantages of sole trader business:

Example of sole traders

Chapter Six: Partnership trade

Partnerships definition & details

Advantages of a partnership

Disadvantages of a partnership

Limited Liability Partnership (LLP)

Advantages of LLP:

Disadvantages are as follows:

Partnership example

Chapter Seven: Limited Company:

Form of a limited company

Advantages of a company

Disadvantages of a company

Chapter Eight: Self-assessment: (SA)

Definition and details:

Who will be or should be register for SA?

Advantage of SA:

Who should not register for SA:

Important areas to be looked for SA:

Suggested SA termination date:

Allowable costs for SA:

Accounting method for SA:

Penalty:

What’s unlikely to be a reasonable excuse?

Example of SA penalty computation:

Chapter Nine: VAT (Value Added Tax)

Definition

VAT rates:

Difference between Zero rate & Exempt rate VAT:

Points to remember: VAT matter:

VAT and Cash discount:

VAT check list: 1

VAT check list: 2

Chapter Ten: Miscellaneous examples

Chapter Eleven: Accounts in short cut & other issue

Limited companies examples:

Chapter Twelve: Joint Venture, Ratio Analysis, & Holding Company

Joint Venture (JV) accounts & Consignment business:

The benefits of JV are as follows:

Risk of JV:

Features of Joint Venture

Joint Venture V Consignment

Memorandum Account:

Ratio analysis

Holding Company-basic

Goodwill:

Cost of investment (COI):

Chapter Thirteen: Transaction Intersection & Other issues:

A comprehensive analysis

In context of taxed income:

In the context of untaxed income:

In context of Partnership:

In context of limited company-advanced level:

Conclusion:

Chapter Fourteen: Multiple Choices Questions (MCQ)

Chapter Fifteen: FAQ (Frequently Ask Questions)

Chapter Sixteen: Complete knowledge: Case study

Chapter Seventeen: Back to basic

Final accounts from cash book:

Limited company accounts-from bank statement:

Important adjustments regarding final account:

Application at a glance: 1

Application at a glance: 2

Chapter Ten: Miscellaneous examples: Answers

Answer of Chapter Twelve: Multiple Choices Questions’ Answers

This book is dedicated to:

■ Mr Md Rafiqul Islam FCCA

■ Aziz Mahmud Masudul Haque

Also thanks for technical support:

■ Wife: Mrs Zeenat Sultana

■ Son: Arnob Shahriar

■ Daughter: Suzana Noboni Anjum

Thanks to Author House and officials

INTRODUCTION

Technology has an important impact in modern business, but as we leave the information age and enter the age of intelligence, nothing is as effective as the human brain which needs knowledge, ideas and exercise. Use it well and reap the rewards.

Success, success and success!

Welcome everyone.

Everyone expects success but some may achieve while others will not. The difference between success and failure is little bit exceptional.

For example, in a cricket field, one batsman is surrounded by eleven opponent players. Their aim is to either catch the ball or somehow keep this player out through another logical way. These eleven players know where this player normally place his ball in the field. Accordingly, these players take their positions. But the batsman shows something that the opponents cannot imagine. The batsman becomes successful if he can operate exceptionally.

In the same way, a businessman has thousands of competitors, so he should do something exceptional to succeed. And say, a student is surrounded by examiners, the students should show something to convince their examiners. Therefore, for exceptional operation, you need to study more than one book. I tried to include most of the exceptional components in my previous book: Accountancy-out & in practice and in this book, which differs from other published books in the market. The aim is not to just make a difference, it is also very much applicable in convincing the examiners but also further decision-making process. In a very simple way, I have tried to explain everything so far where I intentionally avoid the IAS, FRSs etc. which are changes every now and then. Therefore, this book is for basic level readers who are studying in ACCA, CA, CIMA, ICMA, AAT or O’ level to A’ level including Masters in accounting. I believe this book will help students, examiners and readers.

The theme of this book is, break the boundaries and come out into reality.

Good luck.

M Shahjahan

B.Com. (Honours), M. Com. FCCA

…

WHAT’S NEW

Most of the readers ask or intend to ask what’s new in this book? The first book I wrote in February 2015 contains many basic areas as well as advanced level concepts. The advanced level concepts were introduced for better preparation and exam technique for those who are already comfortable with the semi-advanced level scenarios. But at the same time, the basic areas been depicted might not be enough for many professionals and examiners. That is why I intended to write a second book on accounting and this contains the very basic areas of accounting.

As well as basic areas, I tried to introduce some new topics such as:

• Business solution by definition;

• Most talking points;

• Frequently Asked Questions (FAQ) and answers;

• Self-assessment in details;

• Complete knowledge-case study;

• Accounts in short cut;

• Transaction intersection and other issues.

• Back to basics

• Application of Brexit aftermath where applicable.

• The areas where you could be wrong-explanation;

Therefore, the new areas may fulfil the answer for what’s new question. Also you can see note in every section which may make bridge with readers & writer. In addition of that, these notes and analysis which I felt necessary for readers which would not find in any books in the market.

I believe these new section with other general explanations may help to gain students, examiners and readers enormous benefit throughout. So, take time, try to understand and be cool, success is in your hand.

Billie Jean King who is the founder of women tennis, cited, ‘pressure is privilege’. It means when you are under pressure, you can reveal something which you could not do without pressure. Therefore, practice more, be yourself in under pressure, you will do better in the exams.

…

SUGGESTED TECHNIQUES IN EXAM

You cannot always get what you want. Things may happen differently. So, we have to move on that way. Similarly, in the exam hall, you may not achieve what you expect. Questions may come that you have never heard of, but think carefully, be cool and calm-you can get the solution.

Many writers & teachers suggest that you pick the question you know better, I do not disagree with that, but also consider the allocation of marks with time in it. If you use a lot of pages and time for one question, which is allocated two marks, it will not help you in the exam.

Therefore, allocate yourself how long you would take for each mark’s answer. If the question is for twenty marks or fifty marks, then different issues. Always keep some space at the bottom and you may come back when you finish other answers in exam.

Apart from that, for discussion type of question, you need to conclude at the end of your answer. In this context, it is difficult to conclude at the time when you answer, so you can take time and keep some space to put some valuable words for the attention of the examiners.

In the context of accounting questions and answers, you may have a problem to equalise the both side of balance sheet-if it is difficult, just leave and go to the next question. Un-equalisation of balance sheet side means you may not achieve maximum two marks, but for that correction you might lose more if cannot move to next. In my many exams, all the time I was shaken for a few minutes to start the exam, even though I had answered and passed all exams from year one to A’ level, Bachelors Honours and Masters in accounting including ACCA. So, everyone may feel that. All the time nervousness is surrounding us. Relevant answer is also important. Therefore, take some time to think about what you are going to do.

Plans may not always work; so, be ready what may cause you obstruct in the exam hall. That obstruction always can tackle if you read more books than just a text book. As you know study means not just to pass, it relates to life and lifestyle if you work for professionalism.

Thanks all, be sensible when you answer.

HOW TO USE THIS BOOK

For those who want to just pass the exam, they do not need to go for advanced questions, but those who want to gain more knowledge you should study more.

In another way, those who understand less or who have come to this subject newly, should read more and more to get the perfect picture of the accounting world. Therefore, it depends on the audience in which level you are. Basically, this book has been written for beginners.

The more you know the subject areas of accounting and can compare with other writers, the more able you are on this particular area of the subject. But you should always think what a reasonable and acceptable answer for the examiners should be, if you are a student.

Suppose, in the context of multiple choices questions (mcq), the question is: You are going on holiday for two days to Europe from London. Nowadays you feel there are few thieves around your area-where you have £2,000 cash in your home. What action would you take?

a) Phone mum to come from America to stay two days in London;

b) Take £2,000 with you as you are suspicious minded;

c) Inform police, as you are going on holiday.

The most correct answer will be (b).

In connection with mcq, sometime more than one answers are possible and accepted such as:

You are driving a car, police officer wanted you to stop, what you will do?

a) Stop car somewhere safe;

b) Call your mum to have advice what to do;

c) Ignore the police officer;

d) Sign the policeman to go little bit far as this place has double yellow line.

The right answer will be (a) and (d). So, if examiner ask for one most relevant then the answer will be (a) or if just mcq then (a) & (d).

For better understanding, you should practice as much as you can. You can score yourself-if you answer the question first and then see the solution. I think it is the best way to know and gain knowledge.

Apart from that, you see some are open-ended questions-in those respect, your answer may be better than me, or you may refer to more than my points, so that will be very much appreciated. Finally, try to understand the problem, read the discussion and then start your answer.

CHAPTER ONE: ACCOUNTING BASICS

KEY CONCEPTS:

Accounting is systemic and logical activities to determine end results of a business organisation in a given period of time. In this chapter I explained and identified few basic areas such as:

• Definition;

• Basic business thinking which are essential to organise a sound business environment;

• Opening & closing primary technique of a business;

• Difficulties you can face in business & ways to overcome;

Accounting & Business:

Accounting is the process of valid transactions which are used for business and to keep as a record in order to help it run efficiently.

Accounting is a systematic & logical process of

• Identifying: select or observing a transaction

• Correcting: realising error and take action of a transaction

• Recording: systematic way to write, type or keep in the process

• Measuring: that should be measurable by monetary value

• Classifying: division of expenses and income, say revenue expenses or income, assets, liability etc.

• Verifying: test the genuineness of transaction and amounts

• Summarizing: presentation of the result on acceptable way so that looks nice and users can understand

• Interpreting: description of activities in easy way to understand and

• Communicating: connection with other section/division or reality which purely related to financial information. It reveals profit or loss for a given period, and the value and nature of a business’s assets, liabilities and owners’ equity.

Therefore, accounting is the way to keep, prepare, justify and review the financial records which are measured in monetary value although accounting has option to describe non-monetary aspects as well, such as to describe reasons to decrease in profit margin, increase in dividend or value of market share.

On the other hand, business is something which does activity for determine profit or loss for a particular period. For determination of profit or loss, business uses accounting. So, accounting is the language of business. It means when business explains or talks about something-need direct help of accounting.

Therefore, business depends on accounting, but accounting does not always depend. Accounting has link to business. You can perform accounting for personal need and as well as business; but accounting is the best use in business which are always provide guard and way finder of it for its efficient operation.

As also finance relates to accounting, therefore, without accounting, business will unable to do its operation. Finance is the heart of business, but the blood of heart is accounting. So accounting supplies blood to finance and finance helps business.

Accounting keeps financial records and generates statements which show profit, loss, assets liabilities etc. by using relevant and reliable information for a particular period of time.

Here relevant means valid transactions, reliable means towards third parties involvement. It means, when we receive information-if that comes from reputable organisation than the clients’ documents or information would be the best as evidence in respect of reliability. Say, the documents come from bank, those would be bank statement rather clients handmade own documents. Therefore, in accounting, relevant and reliable are two vital points to remember and to act.

For example, you bought a car for £10,000 and you are using for business and personal. You have to determine relevant portion of use of car for business which would most acceptable to third party such as hmr&c etc.

If you consider your car cost £10,000 for business, that would not the best justification on above scenario.

Therefore, justification and judgement also important to determine relevancy.

In respect of reliable, if you make a statement yourself for your income for a particular period; that would be less reliable if your income information come from bank or bank statements. In the same way, for your expenses, third parties confirmation would always most appropriate than client.

Say, you bought a machine for £30,000; in this respect, if the vendor/ seller confirms that price including date, description that would be the best acceptable documents for determining the reliability.

Suppose, your income statements are showing that, income generated on:

26.03.2020;

28.03.2020;

31.03.2020 and

16.04.2020.

If the accounting/tax year end is 05.04.2020; here the income of 16.04.2020 will be irrelevant for this accounting period. That will be relevant for next year.

Therefore, although there are many other concepts in accounting, relevant & reliable-these two are vital.

Basic business thinking

Business thinking means the way or systems we will or have to develop thinking before and during the trading activities. These may be internal or external factors. Sometimes we ignore those factors or we do not care about those or we know what we need to do for better performance of business, but we do not generally take any action until the advice from an advisor. When we receive advice then we realise that we could do that without advice, but it is true that normally we do not take any sorts of attempts beforehand, as a result we face a bigger problem or no idea we can generate in our mind. Therefore, for mind setting and thinking purposes, we have to know, practice and employ these ideas which are very important for growing and keep sustainable position of your business. These are follows:

1. What is business: in one line, profit and/ or loss makes a business. Trade means profession to manufacturing works to baseline labour’s activities. Before we start a business, we should understand the meaning of business or trade. If we cannot separate out the trade and trader, we cannot do business. Therefore we need to know these two things first. Trade is what a trader does to gain profit and intention of gaining profit. Nobody’s aim to suffer a loss, so profit making is the prime objective in trade. But loss may suffer even we do not expect. Therefore, for back up of that loss we have to ready all the times. Suppose, you have £50,000 cash to do business. If you are a good businessman you should not invest all the moneys at one goes. You have to plan for business investment which links to definition of business.

2. How much I should get my salary: it is very much important to consider and understand, how much your salary would be. At least one year a businessman should not get full salary-what would get from employment. As you know, a new business means, a tiny small plant of tree which we need to care day by day. If this tiny tree survives we will get result thereafter-not expecting much benefit during the time of development.

3. Which is my best selling line: before going to the end of first year, many businessman can realise which will be the best selling line where multiple product line employed. You can get enough idea if you are engaged day by day in business. The product you can choose which you will make more margin and you are already making. For new businessman, it is quite analytical process to advance the decision. It also need the experience of buying and selling technique including ongoing product ranges. Some of the owners or directors do not take any decision until the anniversary of the business. It is always better to take late decision than quicker one which may result favourable for the trade. Therefore, various analysis and application can help a trader to get better position in profit margin and profitability in the business.

4. Who is / will be successor: acknowledgement of successor in mind of a businessman is very important factor all the times. As a result of indecision of selection of successor may dissolve the organisation in near future. Here successor means, your next organiser, manager or director who can successful carry on your business in absence of you. A proper business –person must take in mind for future chairperson, so that step by step the organisation-owner can hand over the power to next better person. We can say about the Apple Inc. and Steve Jobs. He was the original founder of Apple-when he returned to the organisation in 1977, the share price was not very healthy. But his hard labour and excellent efficiency of work the price starts to go high and high. When the price was the highest of the mountain, it was announced that Steve is ill. He has cancer in his cell. Everyone believes that the Apple will be dissolve in absence of Steve Jobs, but from beginning, it was Steve’s mind that he would get off one day and will hand over power to an employee who may have better quality from other. He choose Tim Cook –who was the chief operating officer for day to day action. At last Steve Jobs stepped down just before he died in October 2011. Steve Jobs probed that the early acknowledgement of successor and selection procedure can establish and continue the flow of business activities with confidence forever with world-highest profit margin for longer period. Therefore, early searching of successor or acknowledgement of successor will give confidence to the business, consumer, clients which continue as wealthy business in the market with paramount value of goodwill.

5. Where I am standing after one year: Where you are after one year, that you will be the best known person. You need to analyse the good product and bad product, you need to justify the way of profitability and find a good product line which makes you most profitable trader. You should reject the lower margin product as well as change and improve the better margin product. If you see in Nike clothing business, even they are making good margin on a popular product, but still change to new one so that new product will attract the consumers as a whole. New attraction means new higher price, means higher profit margin. Therefore, at least after one year a good trader should analyse the trade, consumer’s choices, profitability, trend of sustainable margin etc. and fix according the plan for future.

6. Who are my rivals: in business context, rival means competitor. Competitors are everywhere if you cannot engaged in monopoly market. To go over of the competitors, you need to establish a lots of areas, such as;

- Quality of product or services,

- Pricing control,

- Actively response of customers queries,

- On-time delivery,

- Relationship with staff and consumers,

- Better manage to top executives,

- Brand creativity within the organisation,

- Customers care and help they need.

You should not reduce the price or quality to tackle the rivals, you should establish yourself with service and quality of goods. Many of the establish businesses, never reduce price or quality even though the rival firm selling same product at lower price. So lower price does not mean higher profit or tackling the rivals.

7. Who will be my best client: the selection of the best client or customer is difficult for a trader or a professional all the times. When an accountant believes that Mr X is the best customer, in next month may be payment is nil or business is closed (may not happen always). So instead of selection of best customer, your service quality should be incomparable and unique, so that you can create some aspect for yourself in future. The best consumers always may not best in a market where competition is high. If you are in supply business, you list out the best customers to whom you can give extra care so that they will come back every time to you. As you know come back means business, come back of customers mean profitability. Therefore, best consumers mean come back consumers.

8. What the worst may happen and recovery way: Nobody knows what will happen in future. May be good or bad in business. But you should be ready and alert to tackle that if adverse happens. So you need to have good outlook for back up, so that you can survive if you have money or monetary reserve with you. But that does not work all the times, if strike called by staff or suppliers. That mostly occurs in less development country and developing countries. Therefore you need extra provision in hand to recover the problems. That depends on knowledge and experience. Even a good and experienced director may fail in India or in Bangladesh with the staff association or suppliers of goods or government administration hazards, so need extra expertise in those countries.

If you are in beginning of the business, you need to plan first, then it will be easier to tackle other things may happen in business. The more engagement you have with environment, the easier for you to realisation of the problems and find a way to reach solution accordingly.

9. Director’s bonus consideration: Especially in the UK, director’s bonus is most thinkable areas now a day. Many of the organisation, have to pay bonus even the organisation faces a lots of difficulties in the business. Therefore, director’s bonus rule should be justified as well as emoluments which are harder for a company to pay. In many companies, as a result of extra bonus claimed by directors, the share prices have gone down and prospective buyers are less interested to buy the shares. In the same way, the value of the business has gone down, what ultimately faced by existing shareholders. Therefore, for the new business, director’s bonus consideration is important to think at first.

10. Business addition: business addition is not possible all the times for a new trader which has been establish just few months or weeks. Addition means new liability arises at any time, so careful consideration may need to establish an addition of business. The areas need to consider such as,

- Is the addition improve the current business and profitability;

- Addition is in same area or different area;

- Employee or staff management aspect;

- Director or manager selection;

- Existing business extension or separate business addition, as the gain of synergy advantage may not possible if the nature of addition differs;

- Competitiveness with other business which are already exist and established;

- Creativity and innovation in goods or services;

- Effect of addition in market and in industries;

- Local government’s future plan;

- Source of additional funding;

- Building construction or let property;

- Other pros and cons such as, contingency plan, staff bonus, recruitment, retirement, compensation, insurance etc. for employees.

Opening & closing of a business:

Opening phases:

Opening a business is always easier than the closing. Opening means your start of business. There are few ways to do that. Basically it depends on your aim and experience. The aim does not work if you do not have experience about your business. Suppose, you would like to open a restaurant, if you do not know the chef’s experience, it will be difficult for you to open and success in restaurant business. This discussion regarding the basis of small, semi medium or medium types of business. But in regard of larger business, you will have administration which should have HR (Human resource) section, training, selection etc. which would manage the employee recruitment and find appropriate employee. There are still gap between the business and businessman. Suppose, you are not an accountant, but you have knowledge of accountancy, you can go for accountants business; but future will uncertain. If you think about non-professional business, you could carry out a business, say corner shop where you would sell cigarettes, newspapers, sweet etc. on daily basis. In this regards, you need to have some basic ideas such as:

i. Area and premises: it means you should find better area to do business and required optimal space in the premises so that the premises would not cost you more than in context your business boundary. If you acquire more than you need, you have to pay fixed costs than normal you should need.

ii. Capital investment: capital investment is vital area to think. If you invest all your money, that will not be genius approach for your starting trade. If you make a loan from bank or other third party, you have to compute your ability to pay interest or repayment. So here also optimisation is big question.

iii. Employee: there are no need to employ any staff at beginning, most of the small business where you can carry on. This sometimes depend on what types of business you are going to start. Suppose, you are going to start restaurant business, so whatever size your business is, you require to set up PAYE for employer-as it is harder to maintain a business without staff.

iv. Supplier: suitable supplier is also important who can provide you timely goods supply as you need. Larger supplier means bigger order to make, so you have to optimise your order how large your order may need. Accordingly, your order would be say, for 2 weeks times or 4 weeks’ time period.

v. Return policy: many organisation set the return policy at the beginning of trade. Customer satisfaction is most important phase for your business. So favourable return policy means your business is sustainable.

vi. Competitors: think about your competitors. Competitors are everywhere. So, try to tie your customer for longer time. Therefore, price comparison is another area to think so that customer would not choose where they find better price.

vii. Add on product: you may have to add another similar types of product to your business where possible. This will be possible if your business is in small scale. For larger business it could be difficult to maintain for all the times. Add on product for example, in umbrella business you can add rain court not ice cream.

viii. Customer care: customer care always is vital part of the business. You do not have to have new customer every day, your customers will bring new customer by themselves. So, customer care is totally depend on your service and activity. You may not need advert if your service quality is better.

ix. Helping hand: this normally require for unable or disable customers. It may refer delivery of product or services on time and better behaviour with customers.

x. Breakeven point: break even means the cost and benefit indication. The optimum quantity of goods or services you need to compute so that your costs may cover your disposal. Suppose, your product cost is £30 per unit that includes materials, labour, marketing, supply cost. Top of that you may add your opportunity cost means your income lost as a result of employ yourself. Suppose, your weekly product cost is £3,000 and your income lost-valued £280; so opportunity cost will be £3,280 and you have earn by selling the product at least £3,280 in that week; this is breakeven point for that week. For 100 units, per unit will be £32.80.

xi. Opportunity cost: as discussed above, income lost is called opportunity cost. You may add some other cost which may relate to the targeted product say, spare space you could rent out, so that cost/income lost portion may add to the above costs where applicable to determine the breakeven.

xii. Accountant: do not ignore accounting work for your business. Ignorance of need of accountant means you are losing something in your absent mind. You may have degree in accounting, but you do not have application knowledge. So, please think twice before doing yourself re accounting for your new business.

In terms of other larger business, you have to think differently as the competitors are everywhere. The ideas you need to grow or gain experiences depend on the nature of business. If you like to open a restaurant business or printing business in small scale, the above are appropriate. On the other hand, if you go for manufacturing business or larger restaurant or printing business, then thinking will be in addition of above as follows:

1. Business administration: for larger business, admin is important. It means determination of section the employees are work with. Accountability of duty, you have to organise the admin so that the management becomes sound.

2. Plan: plan ahead where the activities are more and growing. Plan refers, your product, price, quality and service to customers. So it needs experience and knowledge you need to apply.

3. Structure: means the admin type of business, will it be sole trader, partnership or limited company. Normally tax wise, sole trade business is not recommended. If your business is partnership, you should decide how many partners will be. More partner means more problems and upcoming decision would difficult. In context of limited company, you should decide the directors and shareholder who will be. Normally, in small limited company, every shareholder has to be self-employment in the UK provided that the business is in acting. Director and shareholder may be one person rather than two different persons.

4. Loan: at the beginning, you may not allow to have loan if you are in limited company. Secured loan may be possible, but think about the interest pay and terms and condition of loan or borrowing.

5. Logo, software & name: these should be unique so that third party would not sue you by any means.

6. Red tape knowledge: local council law including trade industry or other organisation may impose any penalty for product or other reason. The process may take