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A broad based term used in various industries. In business it has several definitions. The primary definition is associated with the equity section of the balance sheet. It refers to the financial position of the owners of a business.

Debt or Equity in Small Business – Fundamentals


Small business books and manuals explain the formula used to determine whether additional debt increases the return for investors commonly known as return on investment (ROI).   I find this laughable in our modern economic times given the low cost [...]

Bookkeeping – Various Terms (Lesson 26)


In the previous 25 lessons I covered a lot of different terms and this lesson is merely a summary of the various terms a bookkeeper encounters. (Lesson 1) Account types – There are six major sets of accounts; three (assets, liabilities, [...]

Bookkeeping – The Accounting Equation (Lesson 24)


The accounting equation is a simple formula used frequently in business.   The formula is: Assets = Liabilities plus Equity OR Equity = Assets minus Liabilities The owner is interested in increasing the equity position as this is his wealth in the [...]

Treasury Stock


Those corporations doing well and flush with cash sometimes buy back stock from their investors. Once purchased back by the company the stock is called treasury stock. In large corporations the buy back often involves a small percentage of [...]

Penny Stocks- Introduction


Those small publicly traded businesses with share prices of less than $5 and capitalization of less than $50 million are referred to as penny stocks. Penny stocks may trade on any of the major stock exchanges. For investors the risk is generally [...]

Financial Statements for the Small Business


Financial statements serve the purpose of presenting economic activity and status related to a particular date and over a particular time frame.  Accountants record monetary transactions and via financial reports present the information in an easy [...]

Negative Basis in Business – Tax Shelters


Almost one third of all the small businesses I’ve seen in my career had negative basis.  Most of the owners, actually almost every one of them did not understand what I meant by negative basis.  In private, I would lower my head and shake it in [...]

Retained Earnings – How it Works


In the equity section of the balance sheet there is an account that tallies the lifetime earnings net of dividends for the company.  The value identifies the total amount retained by the company for operational purposes.  This account is referred [...]
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