Accounting: Lesson 2
Senior business specialist, Theresa Sylvia, discusses financial statements.
Test Your Knowledge
To receive credit for taking this course through TSBDC, watch the video and take the quiz that will appear below to demonstrate your knowledge.
Video Lesson Topics
- Cash Basis or Accrual Basis
Before you begin your financial statement, you should determine what basis of accounting the business will use. The major difference between the two is that with cash basis, it is an expense when you spend cash. When you receive cash, it is a revenue. However, with accrual basis, you recognize revenue when it is earned, not when it is received. For example, if you are a contractor and bill based on percentage of completion, or a forty-five to sixty day payment, you will accrue your revenue when it is earned, not when it is received.
- Profit and Loss Statement
The profit and loss statement is also known as the income statement or the trial balance. This statement should include the following:
- Gross Sales- The sales of your services or products
- Cost of Goods Sold- Direct costs of what it took your business to sell those products or services (raw materials, labor, packaging, shipping)
- Net Sales- Deduct your expenses from your net sales (mortgage, rent, insurance, repairs, utilities, etc.). Once you have deducted your expenses, you are left with your net income or net loss.
- Balance Sheet
The balance sheet contains your assets, liabilities, and retained earnings.
- Assets- There are both current and liquid assets. Liquid assets would be cash. Hard assets are vehicles, inventory, machinery, and equipment.
- Liabilities- There are long-term and short-term liabilities. Any liability that is twelve months or less is short-term; anything over twelve months is long-term.
- Retained Earnings- Liabilities subtracted from assets gives you retained earnings. Retained earnings are earnings by the business that the owner has not taken from the business.
- Cash Flow Statement
The cash flow statement shows all of your business’ cash. You create one so each month you know exactly where your cash went.
Topics & Lessons
Each Below Topic Contains a Video Lesson and Helpful Downloadable Information
Common Accounting Questions and Errors
Accountants, CPAs, and Bookkeepers
Accounting Systems and Software
Taxes (Links to Taxes/IRS Videos)
Why it Matters
Types of Tax Obligations
Franchise & Excise Taxes
IRS and State Tax Resources and Due Dates
Selecting a Business Tax Professional
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