How to Read a Balance Sheet – The Simple Format

Reading a balance sheet is instrumental in understanding the business’s financial position. This particular financial report is a snapshot of a moment in time but it reflects a lifetime to date status.  The balance sheet can change dramatically in a minute therefore understanding the perspective of the report and its respective sections will help you to be better informed.

The Different Types of Bank Loans

Types of Bank Loans

There are many different types of bank loans, each having their own respective purpose.  All bank loans are categorized into two distinct groupings; secured and unsecured loans.  Within in each category of loans there are several different sub-types of bank notes used to make a loan.  Both categories require the owner of the small business to provide a personal guarantee to ensure the loan is paid back. 

What is Accrual Accounting?

Accrual Accounting

Accrual accounting is the preferred method of accounting for all business operations.  Any publicly traded company must comply with the principles of accrual accounting.  Small business operations can choose between cash and accrual accounting for their records.  Although cash accounting is the easiest to work with as a small business operation, accrual accounting will provide a more accurate picture of the financial status and affairs of any business operation.

Completed Contract Method of Accounting in the Construction Industry

Completed Contract Method

The completed contract method of accounting recognizes revenue and the associated costs once the project is complete.  This is one of the two popular accounting methods used in the construction industry.  For residential contractors, the completed contract method may have a slight tax advantage by deferring revenue recognition but is generally not considered the best method of accounting in the construction industry. 

How to Read a Balance Sheet – Equity Section (Simple Format)

Stock

The equity section of the balance sheet equals assets minus liabilities.  Traditionally the equity section is referred to as the net worth of the company.  If you were to dispose of all the assets through a sale and pay off liabilities, the money left over would be available for distribution to the shareholders.  The shareholders basically own the equity section of the balance sheet. 

Small Business Model Series Entry #4 – Basic Research

I spent a lot of time on the internet researching the industry as a whole.  There are about 220,000 machines in the US that are owned by non-banking companies and individuals.  So my first thought is that this is about 1 machine per 1,000 individuals (there’s about 220 million adults in the US/220 thousand machines and you get 1,000 adults per machine).

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