When does accounting information have “predictive value?”

In accounting, information has predictive value when you can use it to form expectations about the future. Using the future to predict the past How should investors make decisions about loaning money to a company, or investing in its stock? High quality accounting information helps investors to make these decisions. When you think about it, investors really want […]
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What is the economic entity assumption?

The economic entity assumption is one of four assumptions underlying financial statements. It says that you can identify economic activity with a particular unit of accountability. Put another way, the economic entity assumptions says that certain transactions are “inside” a business, while other transactions are “outside” of the business. Suppose that you run a candy […]
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A simple accounting spreadsheet for Microsoft Excel

Click here to download the spreadsheet Click here for YouTube video explaining how to use the spreadsheet. Check out my new e-course, Accounting for Startup Businesses for 50% Off. Learn to do accounting using open-source software. I designed the spreadsheet for a simple business that does 355 transactions a year or less. If you do more […]
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Why you need to know accounting: Tools for businesses

Many people think that they should just leave accounting to the accountants. After all, you can always hire an accountant. In fact, every person in business should know and understand accounting because it is the very language of business. Doing business without understanding accounting is like trying to fix your car without tools,  going to […]
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How to measure progress

What’s your goal? How can you measure progress towards meeting your goal? These are practical questions – not only does every business person need goals, but they also need to measure progress. I’ll give you a simple example. I’m blogging. My current goal is to get people to read my blog. I measure my performance […]
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Dividends explained

Dividends are distributions of profits to stockholders.  Corporations pay dividends; dividends paid by partnerships and sole proprietorships are called “withdrawals” or “drawings.” “Dividends” generally refer to cash dividends, cash payments to stockholders as a distribution of their profits.  After all, profits belong to the stockholders. “Stock dividends” actually refer to distributions of stock, when companies […]
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