Robert Kiyosaki - Cashflow Management Secrets


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do you know these terms of accounting?

Profit & Loss Statement - This is also referred to as the Income

Statement. It shows the income, expenses, and tells you how much profit (or

loss). It is usually created for each month. Some businesses have 13 four

week accounting periods instead of the traditional 12 months.

Balance Sheet - The balance sheet indicates the value of the business. It

has a list of the assets and liabilities. It is similar to the financial statement

you create when you go to the bank for a personal loan.

Current - On a balance sheet, current indicates anything that can be

expected to be changed to cash within the next 12 months if it is an asset.

And if it is a liability, it is anything that is scheduled to be paid in the next 12

months.

Long Term - The opposite of the definition for current, these are assets and

liabilities that are not expected to change in the next 12 months. With regard

to a loan that you would owe, while there is a part of the loan that would

change from long term to current each and every month, most accountants

move items from long term to current only once each year.

Cash Basis - Most people think they are on a cash basis accounting system.

This means that with the completion of each accounting period (usually a

month), all of the bills have been paid and all of the outstanding balances

have been collected. Technically, a business uses either a cash or an accrual

based accounting system. Actually, many businesses do have accounts

payable and accounts receivable that exist from month to month yet retain

the identity of a cash basis accounting system for all other areas.

Accrual Basis - Again, we have an item that is the opposite of the previous

definition. With cash basis, there are incomes and expenses that have

occurred over several months, but are posted in only one month (i.e.

income tax, property tax, business forms) With accrual basis, these and other

incomes and expenses are posted over several months to provide a more

accurate picture of what occurred in your business in the past month.

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