Apr 27

https://www.youtube.com/watch?v=qDEuHwbiqqE

DEFINITION of ‘Financial Statements’

Records that outline the financial activities of a business, an individual or any other entity. Financial statements are meant to present the financial information of the entity in question as clearly and concisely as possible for both the entity and for readers. Financial statements for businesses usually include: income statements, balance sheet, statements of retained earnings and cash flows, as well as other possible statements. Source: Investopedia

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Mar 22

A budget is a plan for your future income and expenditures that you can use as a guideline for spending and saving. Although many Americans already use a budget to plan their spending, the majority of Americans also routinely spend more than they can afford. The key to spending within your means is to know your expenses and to spend less than you make. A good monthly budget can help ensure you pay your bills on time, have funds to cover unexpected emergencies, and reach your financial goals.

Most of the information you need is already at your fingertips. To create or rework your budget, follow the simple steps outlined below to get a clear picture of your monthly finances. You can also use our free online budgeting calculators below to budget for certain specific purchases or events.

1. Add Up Your Income 
To set a monthly budget, you first need to determine how much income you have. Using the worksheet at the bottom of this page, write a dollar figure next to each relevant income source. Make sure you include all sources of income such as salaries, interest, pension and any other income–including a spouse’s income if you’re married.

If you get a salary, be sure to use your take-home pay rather than your gross pay. Taxes are usually taken out automatically, but if they’re not, remember to include them as another expense. If you receive money from somewhere not listed, enter the source along with the amount under “other income.”

2. Estimate Expenses 
The best way to do this is to keep track of how much you spend for one month. The worksheet below divides spending into fixed and flexible expenses. Fixed expenses are those that generally do not change from month to month, such as rent and insurance payments. Flexible expenses are those that do change from month to month, such as food or entertainment. If some of your expenses for one or more categories change significantly each month, take a three-month average for your total.

3. Figure Out The Difference 
Once you’ve totaled up your monthly income and your monthly expenses, subtract the expense total from the income total to get the difference. A positive number indicates that you’re spending less than you earn–congratulations. A negative number indicates that your expenses are greater than your income. This means you will need to trim your expenses in order to begin living within your means.

Well done–you’ve created a budget. The next step is to track your budget over time to make sure you’re sticking to it. If you find you aren’t able to follow your budget successfully, it may mean that your plan isn’t flexible enough. It can take revisiting your budget a few times to find the balance that works for you.

 

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Pedro Marques
PHC-BR International
Skype: chagas-es

Click here to work with me personally.

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Feb 12

Running a business is not the most secure profession you can indulge. However if you have a good idea and a burning desire to grow chances are you will keep your business. But that doesn’t depende entirely upon you because there are a few external factors that should be studied before you take action.

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Just because you watched the whole video there is a free gift waiting for you

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Pedro Marques
PHC-BR International
Skype: chagas-es

Click here to work with me personally.

Check our website: http://www.phcbrinternational.com
Watch our bloghttp://www.businessexpertsonline.net
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Jan 15

Just shoot this video  after a two and half hour meeting on business strategies to  tell you the benefits of taking good care of your personal and business finances. Watch now

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Just because you watched the whole video there is a free gift waiting for you

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Pedro Marques
PHC-BR International
Skype: chagas-es

Click here to work with me personally.

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Watch our bloghttp://www.businessexpertsonline.net
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Aug 17

The Difference Between Accounting and Bookkeeping
Bookkeeping is an unglamorous but essential part of accounting. It is the recording of all the economic activity of an organization – sales made, bills paid, capital received – as individual transactions and summarizing them periodically (annually, quarterly, even daily). Except in the smallest organizations, these transactions are now recorded electronically; but before computers they were recorded in actual books, thus bookkeeping.

The accountants design the accounting systems the bookkeepers use. They establish the internal controls to protect resources, apply the principles of standards-setting organizations to the accounting records and prepare the financial statements, management reports and tax returns based on that data. The auditors that verify the accounting records and express an opinion on financial statements are also accountants, as are management, tax and forensic accounting specialists.

Double-Entry Bookkeeping
The economic events of a business are recorded as transactions and applied to the accounts (hence accounting). For example, the cash account tracks the amount of cash on hand; the sales account records sales made. The chart of accounts of even small companies has hundreds of accounts; large companies have thousands.

The transactions are posted in journals, which were (and for some small organizations, still are) actual books; nowadays, of course, the journals are typically part of the accounting software. Each transaction includes the date, the amount and a description.

For example, suppose you have a stationery store. On April 19, a saleswoman for an antiques company visits you, and you buy a lamp for your office for $250. A journal entry to record the transaction as a debit to the Office Furniture account and a $250 credit to Accounts Payable could be written as follows (Dr. is the abbreviation for debit, while Cr. is for credit):

Date Account Dr. Cr.
April 19 Office Furniture 250
Accounts Payable 250
(Bought antique lamp; voucher #0016)

 

Each accounting transaction affects a minimum of two accounts, and there must be at least one debit and one credit.

Keeping Good Accounting Records
Even a seemingly simple transaction like this one raises a host of accounting issues.
Date:Suppose you had already agreed by phone to buy the lamp on April 15, but the paperwork wasn’t done until April 19. And the lamp wasn’t delivered on the 19th, but the 23rd. Or even as you bought it, you were thinking that you didn’t like it that much, and there’s a strong chance you’ll return it by the 30th, when the sale becomes final. On which date – 15th, 19th, 23rd, or 30th – did an economic event occur for which a transaction should be recorded?

Amount:The sales price is $250, but you get a 10% discount (to $225) if you pay in 30 days; business is bad, though, so you may need the full 90 days to pay. Similarly, however, you know the antique business is also lousy; even though you agreed to pay $250, you can probably chisel another $50 off the price if you threaten to return it. On the other hand, being in the stationery business, you know one of your customers has been looking for a lamp like that for a long time; he told you in February he’d pay $300 for one.

So what amounts should you record on April 19 (if indeed you record a transaction on that date)? $250 or $225 or $200 or $300?

Accounts:You’ve debited the Office Furniture account. But actually you buy and sell antiques frequently to your customers, and you’re always ready to sell the lamp if you get a good offer. Instead of an Office Furniture account used for fixed assets, should the lamp be recorded in a Purchases account you use for inventory? And if this was a big company, there might be dozens of office furniture sub-accounts to choose from.

Accountants rely on various resources to answer such questions. There are basic, time-honored accounting conventions: standards set forth by various rules-making bodies, long-standing industry practices and, most important, their own judgment honed through years of experience.

But the important point is that even the most basic accounting questions – when did an economic event take place? What is the value of the transaction? Which accounts are affected by the transaction? – can get very complex and the right answers prove very elusive. There’s no excuse for out-and-out misrepresentation of company results and sloppy auditing that certainly occurs. But the seeming precision of financial statements, no matter how conscientiously prepared, is belied by the uncertainty and ambiguity of the business activities they seek to represent.

Debits and Credits
We’re accustomed to thinking of a “credit” as something “good” – our account is credited when we get a refund; you get “extra credit” for being polite. Meanwhile, a “debit” is something negative – a debit reduces our bank balance; it’s used to mean shortcoming or disadvantage.

In accounting, debit means one thing: left-hand side. Credit means one thing: right-hand side. When you receive cash – a “good” thing – you increase the Cash account by debiting it. When you use cash – a “bad” thing – you decrease Cash by crediting it. On the other hand, when you make a sale, which is nice, you credit the Sales account; when someone returns what you sold, which is not nice, you debit sales.

“Good” and “bad” have nothing to do with debit and credit.

Debit = Left; Credit = Right. That’s it. Period.

By Bob Schneider

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Jul 26

Income Statement  definition: A document generated monthly and/or annually that reports the earnings of a company by stating all relevant income and all expenses that have been incurred to generate that income. Also referred to as a profit and loss statement.

The income statement is a simple and straightforward report on a business’ cash-generating ability. It’s a scorecard on the financial performance of your business that reflects when sales are made and expenses are incurred. It draws information from the various financial models such as revenue, expenses, capital (in the form of depreciation) and cost of goods.

By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or a loss. It differs from a cash flow statement because the income statement doesn’t show when revenue is collected or when expenses are paid. It does, however, show the projected profitability of the business over the time frame covered by the plan. For a business plan, the income statement should be generated on a monthly basis during the first year, quarterly for the second and annually for the third.

Your income statement lists your financial projections in the following manner:

  • Income includes all the income generated by the business.
  • Cost of goods includes all the costs related to the sale of products in inventory.
  • Gross profit margin is the difference between revenue and cost of goods. Gross profit margin can be expressed in dollars, as a percentage, or both. As a percentage, the GP margin is always stated as a percentage of revenue.
  • Operating expenses include all overhead and labor expenses associated with the operations of the business.
  • Total expenses are the sum of cost of goods and operating expenses.
  • Net profit is the difference between gross profit margin and total expenses. The net income depicts the business’ debt and capital capabilities.
  • Depreciation reflects the decrease in value of capital assets used to generate income. It’s also used as the basis for a tax deduction and an indicator of the flow of money into new capital.
  • Earnings before interest and taxes shows the capacity of a business to repay its obligations.
  • Interest includes all interest payable for debts, both short-term and long-term.
  • Taxes includes all taxes on the business.
  • Net profit after taxes shows the company’s real bottom line.

Although the basics of an income statement are the same from business to business, there are notable differences between services, merchandisers, and manufacturers when it comes to the accounting of inventory.

For service businesses, inventory includes supplies or spare parts–nothing for manufacture or resale. Retailers and wholesalers, on the other hand, account for their resale inventory under cost of goods sold, also known as cost of sales. This refers to the total price paid for the products sold during the income statement’s accounting period. Freight and delivery charges are customarily included in this figure. Accountants segregate costs of goods on an operating statement because it provides a measure of gross profit margin when compared with sales, an important yardstick for measuring the firm’s profitability.

For a retailer or wholesaler, cost of goods sold is equal to total inventory at the beginning of the accounting period plus any merchandise purchased, including freight costs, minus the inventory present at the end of the accounting period. This is your total cost of goods sold.

Although manufacturers account for cost of goods sold in the same manner as merchandisers by reporting beginning and ending inventories, as well as any purchases made during the accounting period, their approaches are also different because they track inventory through three phases.

  1. Raw material is purchased to create a finished product.
  2. Work-in-progress is inventory that is partially assembled.
  3. Finished products are inventory fully assembled and available for sale.

Associated with this process are other costs, such as direct labor and factory overhead. To account for all these costs, manufacturers usually report them on a separate statement called the “cost of goods manufactured.” This statement is formed by first listing the work-in-progress inventory at the beginning of the accounting period. The next listed are raw material and direct labor. The total cost of materials available for use includes inventory at the beginning of the accounting period plus new purchases and freight charges. Subtract the raw material inventory present at the end of the reporting period from the cost of material available for use to determine the cost of materials used. Add direct labor and manufacturing overhead to this amount. This results in your total manufacturing costs. Add the work-in-progress beginning inventory present at the end of the accounting period. This supplies you with the cost of goods manufactured.

In the income statement for manufacturers, cost of goods manufactured is added to the finished goods inventory at the beginning of the inventory, resulting in total cost of goods available for sale. The finished goods inventory present at the end of the reporting period is subtracted from this amount to produce the cost of goods sold.

When comparing several income statements over time, you can chart trends in your operating performance. This helps you chart future goals and strategies for sales, inventory, and operating overhead.

 

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Pedro Marques
PHC-BR International
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Source: http://www.entrepreneur.com

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Jul 18

Definition of Financial Statements

Records that outline the financial activities of a business, an individual or any other entity. Financial statements are meant to present the financial information of the entity in question as clearly and concisely as possible for both the entity and for readers. Financial statements for businesses usually include: income statements, balance sheet, statements of retained earnings and cash flows, as well as other possible statements.

It is a standard practice for businesses to present financial statements that adhere to generally accepted accounting principles (GAAP), to maintain continuity of information and presentation across international borders. As well, financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing or investing purposes. Financial statements are integral to ensuring accurate and honest accounting for businesses and individuals alike.

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Pedro Marques
PHC-BR International
Skype: chagas-es

Click here to work with me personally.

Check our website: http://www.phcbrinternational.com
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"If something is going to affect your life, it's best to know as much as you can about it." - Donald J. Trump
 

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