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Accounts payable are bills due to suppliers for inventory items already purchased. To compete for your business, many suppliers will extend you credit and flexibility to pay for purchases 30 more days after you receive them.  You can use this interest-free credit to help fund your operations.  Most suppliers will offer their customers easy credit […]
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This video explains debits and credits.  It should help accounting students and especially anyone interested in learning bookkeeping.  Enjoy: [I’m especially proud of the closed-captioning.  Check it out.]
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[Image source: We Love Costa Rica, at: http://www.welovecostarica.com/watching/] Prepaid assets are expenses, such as rent or insurance, that you paid for in advance.  For example, suppose you paid three months’ rent in advance on January 1.  This would be an asset for the three months that you would be entitled to use the rented space, and would […]
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If you buy a long-lived asset, you will expense the cost of that asset over its useful life.  This is called depreciation. For example, suppose that Your Airline buys an Airbus A380 for $400 million dollars.  You do not need to record an expense for the cost of this aircraft in the year that you […]
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Long-lived assets are land, buildings, equipment, vehicles, and other property that you use to make money for your business.  These are purchased with the intention of owning them and using them for many years.  They are also referred to as Property, plant and equipment, or “PP&E.” Horse racing by Paolo Camera, on Flickr Business people […]
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Accounts receivable is money owed to you by your customers for merchandise purchased. It is a current asset reported on your balance sheet. Understanding accounts receivable Suppose you are a wholesaler who ships merchandise in truckloads to your customers.  You ship goods to customers’ loading docks, where workers can unload the trucks.  Here’s the problem: those […]
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As I near 100 posts, I’m preparing to enter Phase II of my business plan.  Phase II involves increasing site traffic and beginning to monetize the site.  Here’s what’s next. First of all, I am migrating the site to WordPress.  Many of the features offered by WordPress will improve website traffic, help more entrepreneurs, and […]
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I previously explained how to determine whether you qualify for the home office deduction.  Now I will explain how to compute your home office deduction. First, figure the business percentage.  This is the percentage of your home that you use for your business.  If all the rooms in your home are approximately the same size, then […]
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The NJ Turnpike Authority raised the toll on the Garden State Parkway to $1.50. Question: When driving to work, should I take the parkway and pay the toll, or should I take side streets in order to avoid the toll? Assumptions: Car gets 19 MPG city and 29 MPG highway.  Gas costs $3.75/gallon.  Ignore the […]
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