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If you don't keep track of how much money you're making, you have no idea whether your business is successful or not. You can't tell how well your marketing is working. And I don't just mean you should know the amount of your total sales or gross revenue. You need to...

Building a financial cushion for your business is never easy. Experts say businesses should have anywhere from six to nine months' worth of income safely stored away in the bank. Suppose you're a business grossing $250,000 per month. In that case, the mere thought of...

Cash Flow Statement - Investing Section Another portion of the statement of cash flows reports the investment that the company took during the reporting year. New investments are signs of growing or upgrading the business's production and distribution facilities and...

In an accountant's reporting systems, depreciation of a business's fixed assets such as its buildings, equipment, computers, etc., is not recorded as a cash outlay. When an accountant measures profit on the accrual basis of accounting, they count depreciation as an...

Depreciation is a term we hear about frequently but don't understand. It's an essential component of accounting, however. Depreciation is an expense recorded at the same time and in the same period as other accounts. When you own long-term operating assets not held...

The prepaid expenses asset account works in much the same way as the change in inventory and accounts receivable accounts. However, changes in prepaid expenses are usually much more minor than changes in those other two asset accounts. The company charges the...

In most businesses, what drives the balance sheet are sales and expenses. In other words, they cause the assets and liabilities in a business. One of the more complicated accounting items is the accounts receivable. As a hypothetical situation, imagine a landlord that...

A balance sheet is a quick picture of the financial condition of a business at a specific period in time. Your business activities fall into two separate groups that an accountant reports over a specific time. They are profit-making activities, which include sales and...

Accountants are responsible for preparing three primary types of financial statements for a business. The income statement reports the profit-making activities of the business and the bottom-line profit or loss for a specified period. The balance sheets report the...