Author Archives: Karl

Statements? What statements?

The statements you’re making your entries into are called balance sheet and income statement. These are the ones that are the most important and the mostly used – for government officials, investors etc. Importance of those two statements is something we’ll cover in more detail further below, but let it be said that there are two or even three other statements one can present for a company – statement of cash flows, statement of comprehensive income and statement of changes in owner’s equity. Those are the statements that mostly just form from the main two and are not separate statements you make entries into. These statements come into play when you’re preparing your company’s annual report and you’ve got to present all sorts of detailed information about your company’s results and performance. However let us move now to those two main statements. Continue reading →

So I’ve set up my own business, but now there’s something called “accounting”?

Setting up your business is your first thing obviously – you’ve got your business idea and now you need a company to start putting this idea into reality in. Clients, suppliers, products etc., all of it needs some planning, communication, actions and keeping record of. It’s “keeping record” that amongst other things includes accounting. Continue reading →

Start-up expenses of a starting business

Starting the business always incurs some expenses in itself – registration, analysis, business plans etc. There’re various expenses, which depend on the business, and the situation business is started within however one thing is certain when it comes to accounting for those expenses. Those “start-up” expenses as they are called, are never capitalized as assets, as expenses you’ve made to earn future profits. Continue reading →

Accrual basis of accounting – expense

Expenses are recognized when they’re “made” and not when they’re paid for. Well, unless you’re using cash basis of accounting when all you really do is account for all your transaction just when the money is moving from hand-to-hand. Presuming this is not the case, the other method of accounting, called “accrual basis of accounting” asks you to account for expenses when they’re incurred and not when they’re finally paid for. Continue reading →

Accrual basis of accounting – revenue

Under the accrual basis of accounting, revenue is recognized when it’s earned. That’s the fundamental in short when it comes to accounting for revenue in a business that’s using accrual basis of accounting. A fundamental which has a little exception in the form that if you’ve got serious doubt you’ll receive money for the sale, you should account for it only when the money is received. But that’s an exception. Continue reading →