Glossary and Definitions
Accrual vs. Cash | |
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Definition: | Accrual: Expenses counted when they occur, may not yet have been paid. Income counted when earned, may not yet have been paid. Cash: Expenses counted when actually paid. Income counted when cash is received. |
Assets | |
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Definition: | What you own, tangible or intangible, that has material value |
Budget | |
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Definition: | A system to estimate what you will make and what you will spend during a specific period of time. |
What it tells you: |
How to guide your business and manage your cash flow |
Cash Flow | |
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Definition: | The movement of cash in and out of a business |
What it tells you: |
If you can pay your bills or not |
COGS (Cost of Goods Sold) | |
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Definition: | The costs of labor and materials to make your product or service. |
AKA: | None |
Examples: |
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Expenses | |
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Definition: | All of the operating costs to run your business, not including the cost to make the product/service. |
AKA: | Costs, operating expenses, overhead |
Examples: |
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Gross Profit | |
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Definition: | The total income from sales, minus the costs to make the product/service. |
Formula: | Income – COGS= Gross Profit |
What it tells you: |
If it is costing you more to make the product than you sell it for. |
AKA: | Gross Margin |
Income | |
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Definition: | The amount of money that you receive (or will) for the product or service |
AKA: | Sales, Revenue, Gross Proceeds |
Net Profit | |
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Definition: | The total income from sales, minus all the costs to make the product/service and expenses to operate the company. |
Formula: | Gross profit – expenses = Net Profit |
What it tells you: |
If you have made, or lost, money. If you have gross profit, but not net profit, your expenses are too high. |
AKA: | Profit, Net Income, Net Margin |
Payables | |
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Definition: | Money you owe to others for products/services |
AKA: | Accounts payable |
Profit | |
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Definition: | The total income from sales, minus all the costs to make the product/service and expenses to operate the company. |
Formula: | Income – expense = profit |
What it tells you: |
If you have made, or lost, money |
AKA: | Net Profit, Net Income |
P&L (Profit and Loss Statement) | |
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Definition: | A financial statement that shows the operating results of the company during a specific period of time |
What it tells you: |
A summary of the money you made and how you spent it |
AKA: | Income Statement, Earnings Statement, Operating Statement, Statement of Operations |
Receivables | |
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Definition: | Money owed to you for the sale of your product/service |
AKA: | Accounts receivable |