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Category Archives: Basic Accounting

How to Read an Income Statement

By | Accounting, Basic Accounting, Business By The Book, Finance, Financial Reporting, Valuing a Small Business | No Comments

Q: What expenses comprise the differences between the terms “total revenue”, “operating income”, and “net income”? A: The easiest way to explain that is to walk through an Income Statement with you. Let’s use a really simple fictitious statement as the one shown below. Even though accounting is far more science than art, there are many terms for the same items and it can be confusing. For several of the main categories, I’ve shown in brackets and italics some alternate terms.   Explanations: Revenue – While the most common term to describe the amount of sales a company recognizes in the given period…

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Why Do I Keep Losing Money in My Business?

By | Basic Accounting, Business By The Book, Cash Flow Management, Finance, Financial Reporting | No Comments

Q: I have a small owner/operator business where I offer five different services to my customer base: retail, rental, repair, onsite service work and storage. It is very difficult to manage my business month-to-month because it seems like its feast or famine with more “famine” months than “feast” months. I also feel unfocused and I am not sure what I should do to improve the bottom line. All of this has led to a lot of difficulty in our personal finances and home life as we struggle with bills and have had to declare bankruptcy a few years ago. Now we…

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