Accounting: learn the essentials
Topics, terms and formulas in accounting, explained in plain English.
Financial Statements
Three statements tell the story: the balance sheet is a snapshot of assets, liabilities and equity; the income statement shows profit; the cash flow statement tracks real money.
Costs & Break-even
Fixed costs stay constant, variable costs move with output, and break-even is where revenue covers both. Direct costs tie to a product, overhead does not.
Profit & Margins
Profit has layers: revenue minus COGS is gross profit, minus operating costs is operating profit, and after interest and tax is net income. Margins show each as a percent of revenue.
Receivables & Audits
Receivables are what customers owe you; payables are what you owe suppliers. An audit independently checks the books, and a budget plans income and spending.
Bookkeeping Basics
Bookkeeping records every transaction in a ledger. Accrual accounting records revenue when earned and costs when incurred, not when cash moves.
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