Small Business Accounting 101
An essential part of your business plan is being able to calculate your net income by identifying your business's revenue and expenses. These may include revenues, expenses, gains, losses, and net income.
Revenues
This is income generated from normal business activities over a period of time. This is typically calculated as the amount of goods/services sold multiplied by the price it was sold for.
Expenses
The costs associated with normal business activities that are subtracted from revenue. Some examples include rent, wages, and utilities expenses.
Gains
An increase in net income that is generated from non-business activities. An example includes the monetary gain from selling a piece of equipment at a price higher than what it was bought for.
Losses
A decrease in net income that is generated from non-business activities. An example included selling a piece of equipment at a price lower than what it was bought for.
Net Income
For a business, net income is the amount of revenue left after subtracting all expenses, taxes, and losses. Net income is the measure of profitability of a business.
To understand your breakeven point, fixed costs, and variable costs, and to determine the best selling prices for your business, check out our Breakeven Analysis Overview video below.
If you'd like a more comprehensive lesson, click here.
Arizona Microcredit Initiative (AMI) has consulting and microloan support for yourself and your business. If you have any more questions, you can schedule an appointment today through https://www.azmicrocredit.org/schedule-a-consultation-1 or reach out to us at info@azmicrocredit.org.
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