Working Capital I

I am frequently surprised to hear business folks misuse this term. The error often made is in connection with startup expenses as in “It is wise for a new business to have at least six months of working capital in hand.”  What they are suggesting is to have enough funds to cover expected losses until…

Income Statement II

In my last post I showed a very simplified graphic of the Income Statement to emphasize that it is a “Flow” statement as opposed to the “Static” nature of the Balance Sheet.  And by the way, the Income Statement is generally considered the more important of the two. This is because (1) it covers a…

Income Statement – I

Continuing our discussion of the basic financial statements, although in very simplistic forms, we now give you a glance at the main components of the Income Statement. The important thing to note is that unlike the Balance Sheet, which shows values at a certain date in time, the Income Statement is a “flow” statement … that…

Balance Sheet Behavior – II

   In my last post I introduced the balance sheet, emphasizing its “static” nature (as of one date in time) but also noted the classification of assets and liabilities as “current” and “non-current”. There are two other behavioral elements to the balance sheet as seen here. The items in the upper half are considered “operating”…

Balance Sheet Behavior – I

The simplified balance sheet (at left) was shown in my last post (11/29/12). A very important notion is conveyed by the word “Static” at the top.  This means that the balance sheet, unlike the income statement (which we will cover soon), is a reflection of the state of the business only at a “point in…

Your Accounting Audiences – II

On November 1st we talked about accounting as the “language of business”. Now we focus on the several audiences, how they differ and why they are important. Regardless of the form of your business, you undoubtedly have several of the audience members shown on the nearby slide.  I covered the first three in my post…

Your Accounting Audiences – I

On November 1st we talked about accounting being the “language of business”. Now we focus on those groups with whom you need to communicate and share accounting information, how they differ and why they are important. These audiences will vary according to the size and legal form of your business. Whether a sole proprietorship, partnership,…