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Variable costs are costs that change with sales volume.  The greater your sales, the greater your variable costs. I’ll continue using the example of a candy store from my fixed cost post.  I previously explained that fixed costs are do not change with sales volume, such as rent or utilities.  In that same candy store, […]
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 A fixed cost is any cost that will remain the same, regardless of changes in your sales volume. For example, suppose you own a candy store.  Your fixed costs would include: rent utilities (electric and gas) employee salaries maintenance because each of these costs would remain the same regardless of how much (or how little) […]
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I’ve seen one or two deals that offer systems to get rich quick.  Too many of these are on the web.  It sounds enticing.  Work two hours a week from home, and soon you’ll earn a few thousand dollars a month until you can quit your day job. I’m all for getting rich quick.  I’m […]
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Your business is built on the accounting equation: Assets = Liabilities + Owners’ Equity Assets are what your business owns.  Liabilities are what your business owes.  The difference between these what you – the owner – actually own: owner’s equity. Suppose your business has $100,000 in assets and $30,000 in liabilities.  Then $70,000 of your […]
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It’s everyone’s worst nightmare, you open the mail and there is an audit notice from the Internal Revenue Service. Audits can be rough and agents are quite thorough. They will require seeing any bit of information. If you didn’t hire a CPA to do your taxes before, it’s not too late to get one. Just […]
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Accrued expenses are expenses which you have incurred, or used, but have not yet paid for.  They are a liability on your balance sheet. For example, suppose that you have not yet received or paid your cell phone bill for last month.  As of the end of last month, that bill would be an accrued […]
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People generally think of accounting in terms of cash flows.  Money comes in and money goes out.  However, this is not how accountants measure revenues, expenses or net income.  They use a system called accrual accounting. Accrual accounting records revenues when they are earned and expenses when they are incurred. Revenues are earned when the […]
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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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