Gopal Sharma’s Reviews > Accounting for Small Business Owners > Status Update

Gross Margin: p28
Gross margin is also called operating profit
Gross margin tells you, in a general sense, whether you made money from your products or service.



Expenses p28
Expenses, also called operating expenses, are your general costs of doing business.

Revenue: p27
Revenue is also referred to as sales
Any money coming into your business is either income or a loan.

Cost of Goods Sold (COGS) or Cost of Sales (COS) p27
COGS is the term used for manufacturers
COS is used for retailers or service providers

Equity:

Equity is sometimes called capital or net worth.
For a sole proprietor, equity is the amount of owner contributions less owner withdrawals, plus profit (or minus loss). p21

THE BALANCE SHEET - 19


The balance sheet lists your assets (what you own), your liabilities (what you owe), and
your equity (what’s left).

The “what’s left” part is the health of your business—it’s what
your investment in the business is worth (as shown in the equity section).


how much your customers owe you (accounts receivable), and
how much you owe your vendors (accounts payable). p19

Don’t pay personal bills out of the business checking account. If you do, it will have to be posted as an owner
withdrawal. p13

If you buy any assets—equipment, vehicles, investments, furniture—keep all receipts in a separate file. You will
need to report them to your accountant for depreciation.

Keep track of any money or equipment that you personally contribute to the business. You need a record to help
you verify the cost of that contribution.

Keep track of all cash received from sales or incidentals for your business, and hold on to invoices.

Keep track of all cash spent for business use, and store receipts for everything.

Designate a file drawer or box for your business files, and use it to keep all legal agreements and documents well organized and accessible.