"Learning Bookkeeping"

Stewardship Lesson #11

Learning Bookkeeping

Parents & students need to understand bookkeeping principles & how - to's to be successful in managing finances. The following information is designed for a 3-4 day period, or longer of needed. During this time period the student will be keeping an entire set of books for a two-month period.

Income Statement

You are an Engineer for a major corporation. Your gross (that means before any taxes are taken or anything is paid from the money you earn) wages are $52,000 per year. To determine how much you will take home each month, you need to divide $52,000 by 12 (there are 12 months in a year). Your total should equal $4,333.33 per month. This is still considered your gross income. To determine your net income (taxes have to be taken from your gross income. A net income is the amount you really get to take home), subtract 18% of your gross monthly income. To do this take $4,333.33 times 18%. The subtract the 18% from $4,333.33.

This is your net income. Enter this amount in your check book as a beginning balance.

Now, you must pay the necessary bills. Write checks for each of the following bills.

For February:

02/01/14	Norco Christian Church	$355.33
02/01/14	Mexico Missions	$150.00
02/01/14	Mercury Insurance Company	$45.00
02/01/14	Stater Bros (Groceries)	$89.90
02/04/14	City of Riverside (Elec/Water)	$110.00
02/05/14	Cash (for personal use)	$50.00
02/08/14	Pacific Bell Telephone	$45.00
02/08/14	Ryan's Elec. Repair	$20.00
02/08/14	Stater Bros (Groceries)	$122.20
02/10/14	Dr. Dividian, D.D.S	$15.00
02/18/14	Command Performance	$8.95
02/18/14	Stater Bros (Groceries)	$115.25
02/20/14	Cash (for personal use)	$50.00
02/21/14	Toyota Motor Corp.	$255.00
02/21/14	Mobil Oil Company (Gas-Car)	$75.00
02/22/14	Mervyn's (Clothes)	$105.00
02/23/14	Stater Bros (Party)	$145.00
02/25/14	Home Mortgage Company	$925.00
02/25/14	To Savings	$450.00
02/25/14	Gifts Galore	$20.00

Note: Ending balance for February should be $401.70

For March:

03/01/14	Deposit Paycheck	$3,553.33
03/01/14	Norco Christian Church	$355.33
03/01/14	Philippine Missions	$100.00
03/01/14	Mercury Ins. Co.	$45.00
03/01/14	Stater Bros	$45.90
03/04/14	City of Riverside (Elec/Water)	$92.00
03/05/14	Cash (for personal use)	$50.00
03/08/14	Pacific Bell Telephone	$30.00
03/08/14	Stater Bros (Groceries)	$118.15
03/10/14	Dr. Dividian, D.D.S	$15.00
03/18/14	Command Performance (Hair)	$8.95
03/18/14	Stater Bros (Groceries)	$89.50
03/20/14	Cash (for personal use)	$50.00
03/21/14	Toyota Motor Corp.	$255.00
03/21/14	Mobil Oil Company (Gas-Car)	$75.00
03/23/14	Stater Bros	$115.00
03/25/14	Home Mortgage Company	$925.00
03/25/14	Gifts Galore (Birthday)	$400.00
03/25/14	To Savings	$450.00
03/25/14	Missions	$25.00

Note: Your ending balance should be $660.12

1. Look at the above budget: Your goal is to be able to reduce your debt ratio. You want to be able to pay off your car early. You still have 20 payments to make on it at $255.00 per month. What can you do to (1) pay it off early, & (2) continue to put money in savings for a new car? Where will you cut?

2. Look at the above budget: If your income fell by ¼, what or where would you cut? Restructure the budget to fit a monthly net income of $2,665. Home mortgage, care payment & insurance must remain the same. In a column list each item for a one-month period. List what was spent in that month. Now list your new budget.

3. Look at the above budget: Suppose your income increased by 50%. You want to do three things immediately: First is to reduce your debt structure – you want to pay off everything you owe. Make a reasonable plan to do that within 10 years. Your outstanding debt is $85,510 (without interest). Second, you want to begin to put aside more money into savings so that you won't need to go into debt again. You want to put away at least $3,000 over the next 3 years. Third, you want to begin giving more to missions. You want to give an extra 4% of your income to missions.

To reach the first goal of paying off all debt, list how much each year you will need to pay to pay off entire debt. Then divide this number by 12. This is how much you will need to pay on your debt each month. Add this amount to your monthly payments, subtract the total from your monthly income.

To reach the goal of saving $3,000 in three years, how much will you need to save each month? Add this amount to your monthly payments, & then subtract the total from your monthly income.

Determine what an additional 4% of your income is. This is the amount you want to give yearly to missions. Divide this amount by 12 to determine how much extra you will give each month. Add this amount to your monthly payments, & then subtract the total from your monthly income.

After having done this, determine if you can successfully meet all your goals with this increase in income. How much money is left (or short)? If you have money left, what priority will you out on how to spend that money? Can you pay off your debt earlier? How much earlier if you applied all if the extra money to debt reduction? Do you want to divide the extra just like you did before between the three areas? If so, how will you divide it? List how much more you want to go to each area, & then list a total.

Last check:

Be sure your checkbook is balanced correctly.

List the four Biblical principles for finances.

Assuming that you were employed for $8.00 per week, divide the money according to the five short-term areas. This is the most important thing you have done so far, because this applies to you!