[MUSIC] In the second video I'm going to introduce you to a very special person, a friend of mine who started her own business. Christina loved reading books, and recommending them to her friends. So, she started a bookstore here on campus. So, if you come with me, we're going to talk with her, and she will explain to us what transactions took place in the business in this first month of preparation, so that we can help her with her accounting and learn by doing. Come with me. [MUSIC] [SOUND] Hello, how are you? >> Great. >> Nice to see you. >> Great to see you, Mark. >> This is great. >> Thanks for coming. >> I see that finally your dream came true, right? >> Yeah, I'm really excited. I'm really excited it's a new year, a new business. >> What are you studying? >> Open in two days. >> In two days, already? >> Yeah in two days I'm opening and you see I have everything all setup. >> So everything looks like ready. >> Everything all setup except for the numbers. >> The numbers. >> I'm a little bit nervous and overwhelmed about how to get started. >> You mean the accounting? >> That's what I mean, yeah, the accounting. >> Okay, so then why don't we go outside and we >> We can talk about the accounting >> That would be great. >> Because I came here with my student from and I'm sure that we can help you with your accounting. >> Okay, I hope so. >> Great, awesome. >> I'll bring a list of numbers. >> Okay, okay let's go. >> Great. Thanks. [MUSIC] >> Okay Christina so I guess we could start by making a list of all the transactions that have taken place this past month in your business. >> Okay. >> Did you start it? >> Great. >> I can take note of this. >> So I started the book store with 50,000. That was 35,000 was mine and 15,000 was my uncle. >> So this was the initial contribution of capital to the business. >> Exactly, exactly. >> Capital contribution, 50,000. What else? >> Okay, I also took out a loan, a 20,000 euro loan. It's a three year loan. >> Okay so you took a loan from a bank that you received when? Today? >> On December 31st, [CROSSTALK] December 31st that's right. >> Okay so you took a bank loan and you need to return this principle you have received 20,000, you need to return it in 3 years right? >> Exactly, in three years. >> Okay very good, bank loan 20,000 What else? >> Let's see, I also had to buy furniture and equipment. >> Okay. >> And that cost me $25,000. >> Furniture and equipment. >> This happened all over the last couple of days. Let's see, I paid $15,000 in cash. >> Okay, the total, so this furniture and equipment is worth 25,000? >> It's worth 25,000, >> I paid 15,000 in cash. >> 15,000 in cash now. >> And the other 10,000 I have on credit. >> Okay. And you have to repay the months. >> Right, right. >> Okay, very good. >> So, finance the other 10,000. >> Great. What else? >> Let me see, okay. So, I also had to buy software, bookstore management software and that I did pay in cash That was 3,000. >> Okay, 3,000 in cash. Everything paid in cash? >> Yes. The whole thing, the software was paid in cash, completely. >> Very good. >> Alright, and then I had to buy all these books, that I need to sell. And that was 40,000. >> 40,000 euros? >> Yes. >> In books? >> 40,000 euros, believe it or not. >> I guess that textbooks are very expensive. >> Yeah, and that was on account. I didn't pay- >> You didn't pay- >> [CROSSTALK] >> So you have to repay these in what? A couple of months, maybe 60 days or? >> I think it's 60 days. >> 60 days, okay. >> Yeah 60 days. >> Anyway. >> Mm-hm. >> Very good, okay? >> All right, and then finally, I signed a lease, January 1st. And I paid the whole year's rent up front and that was 6,000. >> So this is the rent for the premises? >> Exactly, for the shop itself, that space. >> And you have already paid? In advanced, the full year? >> Yeah. 6,000 that's in cash. >> Okay, so you have the right to use these premises for one year. >> Exactly. And I have until December 31st this coming year. >> Okay, very good. >> This year actually. >> Anything else? >> Let me see, I've written it all down here. No, I think that's it. >> Okay so I think that with this lease. We'll come back in a few hours, and we can come back with a summary. >> Fantastic. >> Of all the accounting. We'll see. >> Great. >> Let me stop here for a moment, our conversation with Christina. Let's think about the business cycle of finer business. So whenever you have a business idea or a business plan the first thing that you need is to raise capital so we are in the financing stage. So we go to a family friend some fools for example to get to raise new capital and in the case of Christina she contributed capital herself and also she got capital from her uncle. She also got capital from the banks in this case in the form of a loan. So all these transactions take place in this financing stage where you are raising capital. Once you have the capital, the next thing is to start making investments, so that's investing process, the investing stage in which you want to purchase long-term resources that you need in order to start a business. So for example, here in the case of the Campbell's book store they purchased furniture and equipments. They purchased a software they need to manage the business. So these are investments at the investing stage. And finally, once everything is ready, actually in a couple of days here in the case of Christina, they're going to start operations. They're going to open up to the public. And so they are going to start selling the books. And hopefully if they sell these books at a price higher than than the cost they will make some profits. Part of these profits will help to reward the capital providers. So for example in the case of the shareholders they might receive dividends. In the case of the banks with the bank loan you'll pay some interest. And whatever is left, you can reinvest it in the business. So actually it's a sort of self-financing of the business. So as you see, Christina's business, the bookstore, so far is especially in the first two stages. Now in a couple days we're going to start with the operating stage, opening up to the public. So accounting helps you control for all the transactions that take place in all these business cycle. And so, let me go back to Christina. Let me ask her if she's got any other information that can help us. Has she done any sort of accounting? Let's see then. By the way, is there anything that you have kept track off. I mean, any sort of accounting, you know. >> I do. I do. I have all the receipts. I have the cash receipts. And I have the receipts of all the payments that I made. >> Okay. So you have a list with all the cash payments and cash receipts. >> Exactly. Exactly. >> Okay. So, I'll take that with me. >> Okay. All right Gray, I'll give that to you. >> Very well. [MUSIC]
