Recording Your Revenues – What Are You Selling? When it comes to recording your revenues, what your company sells plays a big part in how transactions are written up. There are basically three things you can sell: products, services, or a combination product and service. The main transaction differences are with cost of goods sold … Read more
The Accounting Equation – Assets Equal Liabilities Plus Equity This equation, which is at the very core of accounting, expresses one of the biggest accounting basics: everything must remain in balance. Changes in one side of the equation require changes in the other. The form of this equation comes from the basic idea that assets … Read more
The Accounting Equation – Equity Means Ownership When you first start a business, you (along with any co-owners) put some of your own assets into the company. Those original contributions form the first entries in your equity account and get your business on its way. Adding resources into the company is one way to beef … Read more
The Accounting Equation – Liabilities Are What Your Company Owes Most businesses owe something to someone. Whether you take out a bank loan to start the company, use a company credit card to pay for expenses, or buy your inventory from vendors on account, your company will show liabilities on the balance sheet. Even if … Read more
The Accounting Equation – A Closer Look at Fixed Assets Fixed assets take more work than other assets, from both a real-life maintenance perspective and from the accounting viewpoint. The more substantial fixed assets, from vehicles to factories, can require a lot of planning, drawn-out purchase arrangements, and the burden of long-term liabilities to go … Read more
The Accounting Equation – Breaking Out Asset Categories The accounting way to separate assets into categories uses liquidity as the measure. Anything that is expected to be converted to cash within one year of your balance sheet date is considered a current asset; all others are plunked down into one of the long-term categories. Long-term … Read more
The Accounting Equation – Every Business Has Assets No matter how small your business, no matter what industry your company is part of, your company has assets. From a computer used to prepare customer invoices to a 20,000-square-foot processing plant, every single thing your company owns is an asset, as long as you can assign … Read more
Setting Up a System – What to Keep, What to Toss Accounting is full of paperwork. To keep your office from being overrun, you need to know which papers you can safely toss, because there are some your company is required to hold on to for a pretty long time. The government, through various agencies, … Read more
Setting Up a System – Reconciling Your Accounts The best way to verify your account balances is to reconcile them with out- side (meaning outside that account) information. Reconciling accounts sim- ply means making sure they are in agreement with something else. Doing that assures the accuracy of your books, or lets you find and … Read more
Setting Up a System – The Everyday Transactions Most companies have the same types of day-to-day transactions, and almost all of these involve revenue and expense accounts. Each of these common transactions involves some kind of document, whether it’s an invoice, a receipt, a check stub, or some cash register tape. From these source documents, … Read more
