The final sum of money that you get to take home (meaning the business’ actual profit). It subtracts all un-controllable charges such as Bank Charges, Interest Payments, Taxes. It is the true profit that your business has earned. Also referred to as Net Earning and Net Income. You may choose to divide this amount into […]
When you pay Operational Expenses from your Gross Profit such as Electricity, Rent, Logistics the amount you have left now is the Operating Profit. You can not take this money home (count as true business profit) as Taxes are yet to be paid at this stage. Operating Profit accounts for costs that your business can […]
Gross Profit is the money you have left after paying for the cost of the products you sold. This cost may cover raw materials, or just lum sum amount of how much you bought the product for if you’re a middleman. This cost is commonly called “COGS (Cost Of Goods Sold)”. The formula for Gross […]
A receivable is the amount of money someone owes you. Usually unpaid or partially paid invoices. This is also called AR. If you sell some goods to a customer on credit, and later on, you invoice them. That amount becomes your Receivable from that person. Vice versa, that amount also becomes the Customer’s Payable towards […]
A payable is an amount of money you owe to someone or an organisation. It usually is for a Bill, like an Electricity Bill, Phone Bill, maybe some Raw Materials for your clothing brand. If you haven’t paid those bills yet, then you still the organisation/person that amount, which is called a Payable or AP. […]
A Ledger, also called a General Ledger is a complete transaction history of an Account. When a business executes any financial transactions, an Account is either debited (+) or credited (-). The Debit entry is added to the Ledger of the debited Account, and the Credit entry is added to the Credited Account Ledger. Each […]
Profit is the money you have earned in the end, after paying for all costs and expenses. The 3 types of profit are; gross profit, operating profit and net profit. Gross Profit Gross profit is the amount of money you have left after paying for Cost Of Goods & Services Sold (COGS). This is usually […]
When you have some data regarding your business transactions, you record that data somewhere, usually in a software, or maybe even on raw paper. This is called Bookkeeping, recording of business transactions data such as invoices, payment receipts, payroll and more. After you’ve been entering data for a month or perhaps a quarter (lear about […]
An accounting period is a time frame used for financial reporting. All expenses, income, profits that occur in the accounting period’s given date range are part of that accounting period. When generating financial reports, such transactions are linked to an accounting period based on the Start & End Date. The 3 most common types of […]
When doing Accrual Accounting, you are tracking the current liquid amount you have, and also the cash that soon to come in or go out. The transactions that are upcoming and haven’t actually happened are called Accruals. Like that 100 USD income that a Customer owes you but hasn’t paid you yet. Transactions that haven’t […]
When counting your business amounts & balances, if you are also including incoming payments and expenses, then you’re doing Accrual Accounting. To foresee, cash flow in a longer term, perhaps a week or month, is Accrual Accounting. For example, your office rent expense can be booked as an Accrual at the start of the month, […]
