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Balance Sheet

The balance sheet is the summary of a business’s financial status.  It is also known as the statement of financial position as it is an overview and all-encompassing snapshot of a business at a particular moment in time.  A standard balance sheet is made up of assets, liabilities, and ownership equity. A company’s possessions are […]

Income Statement

The income statement, also known as the profit and loss statement, is used to show a business’s profitability over a particular period of time.  In essence, it is the documented process of the expenses deducted from the revenues, or “top line”, to reveal the net income, or “bottom line”.  At the top of the income […]

Cash Flow Statement

The cash flow statement is an overview of a business’s liquidity.  It includes the flow of cash acquired from operating activities, investing activities, and financing activities over a specified period of time.  Put simply, it is a record of cash made and used during that time. Operating activities refers to the action of selling a […]

Business Structures

When starting a business, there comes a time to make it official.  Deciding which entity is the best fit requires some research because of legal implications.  Each type has some tax pros and cons, as well as specific tax forms to be filed with the Internal Revenue Service.  Claiming an entity determines who is responsible […]

Sole Proprietors and General Partnerships

Many small businesses begin as sole proprietors or partnerships because they are relatively simple to set up.  Usually, an idea, some start-up money, and a business license will have an aspiring entrepreneur on his or her way in the business world. Sole proprietors are unincorporated businesses owned and operated by one person.  Because there is […]

Limited Liability Company

LLC’s did not exist in the U.S. until 1977.  A Limited Liability Company is a blend between a sole proprietorship or partnership and a corporation.  It is similar to a corporation in that its structure limits liability of the business owner in the event of bankruptcy or other circumstance.  Like a sole proprietorship or partnership, […]

Cloud-Based Accounting

Technology continues to drive most aspects of our culture.  The business world is certainly no exception.  With email, online banking, point-of-sales software, and customer management systems, cloud-based activity is becoming more and more widely used.  The main concern with this type of setup is security.  Cloud-based accounting software may be the most concerning to business […]

Accrual and Cash Based Methods of Bookkeeping

There are two systems of bookkeeping most used today: the accrual method and the cash method. Though both are utilized, the accrual method is more accurate to the financial status of a company and is the favoured option for companies earning more than $5 million in sales per year. In the accrual method, financial information is reported in […]

Accrual vs Cash Based Methods: Pros and Cons

In bookkeeping, there are two commonly used methods: accrual and cash based. The method you choose depends on your business and level of income. Many small businesses have a choice of either the accrual or cash based method. If income is above $5 million, the accrual method must be used. Also, if a business’s inventory of items for […]

Single vs Double Entry Bookkeeping Systems

Depending on the business, the single or double entry method of bookkeeping is preferred for recording transactions. As the names imply, the single entry method records one entry per financial transaction in one account, while the double entry method records two entries per transaction in two accounts. In the single entry method, transactions are recorded once as revenues […]