Basic Accounting for Founders — slides
Financial Literacy Club
Entrepreneurship · Lesson 8
Basic Accounting for Founders
Tracking money in and out, and keeping business money separate.
12-minute lesson · learnwithflc.org
Basic Accounting for Founders · 1 / 19
Financial Literacy Club
Entrepreneurship · Lesson 8
Basic Accounting for Founders
Tracking money in and out, and keeping business money separate.
12-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Record income and expenses in a simple ledger
- Explain why business and personal money should be kept separate
- Recognize when self-employment income may require filing a tax return
Warm-up
If you sold $300 of things this month, how would you know how much you actually made?
Think, then write your answer.
The big idea
Basic Accounting for Founders
Tracking money in and out, and keeping business money separate.
Entrepreneurship · Lesson 8
Accounting is how you know whether your business is working. Without it, you're guessing.
Entrepreneurship · Lesson 8
- Track every dollar in and out, with the date and what it was for.
- Keep receipts — photos in a folder work.
- Separate business money from personal money, even if it's just a separate account or envelope.
- Review monthly: revenue, costs, profit, and cash on hand.
Entrepreneurship · Lesson 8
A simple ledger — a spreadsheet with date, description, money in, and money out — is enough for most student businesses.
Entrepreneurship · Lesson 8
Taxes on business income
Business income can be taxable, even for students. Under IRS rules, if your net earnings from self-employment are $400 or more in a year, you generally need to file a tax return and pay self-employment tax (Social Security and Medicare). Some states also require collecting sales tax on certain goods or services. Ask a parent, guardian, or tax professional.
Entrepreneurship · Lesson 8
Under 18?
Many payment apps, business bank accounts, and contracts require you to be 18 or to have a parent or guardian involved. Plan for that from the start.
See it
In October, Marcus earned $744 from 62 cleans. He spent $310 on cleaning supplies and laces, $150 on a market booth, and $40 on ads. Profit was $244.
- Revenue: 62 cleans at $12
- $744
- Cleaning supplies and laces
- −$310
- Weekend market booth
- −$150
- Social media ads
- −$40
- Profit for October
- $244
Real example
Why Marcus's bank balance didn't match
At the end of October, Marcus's ledger showed $244 in profit — but his business account had only $150 more than at the start of the month. What happened?
- Six Clean Club members prepaid in September, so that cash had arrived the month before.
- He bought extra cleaning supplies in bulk for November.
- He'd paid himself $40 from the business account for a personal expense — which is exactly why separate accounts and clear records matter.
Profit and cash tell different stories. The ledger is what lets him understand both.
Activity · pairs · 10 min
Ledger Lab
- A small business account has these transactions: sale +$40, sale +$60, supplies −$35, sale +$25, ads −$20, sale +$80, lunch for the owner −$12, supplies −$18.
- Pairs record each in a ledger with columns for date, description, money in, money out, and category.
- Pairs calculate the business's profit and the change in the bank balance.
- Pairs explain why the two numbers differ.
Check for understanding · 1 of 3
Why keep business money separate from personal money?
- AIt makes it clear what the business actually earns and spends.
- BIt's required to use a debit card.
- CIt doubles your profit.
- DIt avoids all taxes.
A. It makes it clear what the business actually earns and spends.
Mixing money makes it nearly impossible to know if the business is profitable — or to prove it at tax time.
Check for understanding · 2 of 3
A student earns $1,200 in net profit from a summer business.
Under IRS rules, what's generally true?
- AStudents never owe taxes.
- BNet self-employment earnings of $400 or more generally mean filing a return and paying self-employment tax.
- COnly businesses over $10,000 file taxes.
- DCash payments don't count as income.
B. Net self-employment earnings of $400 or more generally mean filing a return and paying self-employment tax.
The $400 self-employment threshold applies regardless of age. Cash income counts too.
Check for understanding · 3 of 3
If your ledger shows a profit, your bank balance must have grown by that same amount.
- True
- False
False
Timing of payments, prepaid orders, bulk purchases, and owner withdrawals all make cash differ from profit.
Remember
Key takeaways
- Track every dollar with a simple ledger.
- Keep receipts.
- Separate business and personal money.
- Profit ≠ cash.
- $400+ in net self-employment earnings generally means filing a tax return.
Discuss
Talk it over
- What would you use to track a small business's money: an app, a spreadsheet, or paper? Why?
- Why do so many small businesses get surprised by taxes?
Exit ticket
Generally, what level of net self-employment earnings means you need to file a federal tax return?
Answer on your exit ticket before you leave.
Nice work today.
Review this lesson anytime — free, no account needed:
learnwithflc.org/courses/entrepreneurship/basic-accounting
Next up: finish your worksheet.