Mon, November 18, 2019

Terms for Financial Sheets

Understanding basic terms help you understand what people are saying about business when they talk about any of their Finance Sheets. You will need a lot more than this, but this will get you started talking about money.

Expense, basically, it is how much your business pays out, like bills. If I have lawn mowing business my simple expenses would be gas for the mower, transportation and parts, not to mention actually paying for a mower.

Income is basically how much you make before expenses. If I mow 15 yards for $20 each, my income would be $300.

Profit is how much you make after taking expenses from your income. If I made $300, and my gas cost me $100, my profit would be $200.

“Being in the black” means making more money than you are spending.

“Being in the Red” means your expenses are larger than your profits. You will sometimes see it listed in red on a finance sheet, that is why they call it being in the red.

Credit means coming into an account. It means a positive increase. You have to be careful, because you have to know what kind of account or column it is. If it is an Income account, then it increases that column with a credit. If it is an Expense account, it decreases the value of that column with a credit.

Debit means going out of an account. It is the opposite of credit. If you debit (take from) an Income account, you decrease that columns value. If you debit (subtract) from and Expense column you increase its value since it is a negative based column.

I hope these help a little. I am sure I need to write a whole bunch more about reading financial sheets, but this will be a good start.

(article written by Tyloid)

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