Cash Expenditures

Spent Cash in your Business Needs To Be account for if you want to record all Business Expense Given in a year. At Least There Are Two Ways to do this: write yourself reimbursable checks or keep a record petty cash.

If you choose to pay yourself back with a check, Simply keep track of all cash receipts and total Them weekly, biweekly or monthly, Depending on your volume of Expenses. Keep a log of Each category of expense, for Tax Purposes and write yourself a check for the total. Write cash reimbursable in your check register to Differentiate this from taxable income. Alternatively, you CAN keep a petty cash record by writing a check to petty cash and Keeping a log of Each expense Paid out of petty cash.

Inventory Records

Keeping on top of your inventory records will enable you to Prevent pilferage, keep inventory holdings to a minimum, and track trends BUYING, Among Other Things.

If you sell a large number of small-ticket items – for example, as in a stationary store – you Might want to use a computer system to track inventory or tie your computer system Into your sales by Having a POS (point of sale ) inventory system. If you sell larger ticket items You May Be Able to do it yourself on paper.

The crucial inventory information you Need to capture is: date Purchased, Purchased stock number of item, purchase price, date sold, and sale price.

Inventory is usually the largest current asset of a business that sells products. If the inventory account is greater at the end of the period than at the start of the reporting period, the amount the business actually paid in cash for that inventory is more than what the business recorded as its cost of good sold expense. When that occurs, the accountant deducts the inventory increase from net income for determining cash flow from profit.

the prepaid expenses asset account works in much the same way as the change in inventory and accounts receivable accounts. However, changes in prepaid expenses are usually much smaller than changes in those other two asset accounts.

The beginning balance of prepaid expenses is charged to expense in the current year, but the cash was actually paid out last year. this period, the business pays cash for next period’s prepaid expenses, which affects this period’s cash flow, but doesn’t affect net income until the next period. Simple, right?

As a business grows, it needs to increase its prepaid expenses for such things as fire insurance premiums, which have to be paid in advance of the insurance coverage, and its stocks of office supplies. Increases in accounts receivable, inventory and prepaid expenses are the cash flow price a business has to pay for growth. Rarely do you find a business that can increase its sales revenue without increasing these assets.

The lagging behind effect of cash flow is the price of business growth. Managers and investors need to understand that increasing sales without increasing accounts receivable isn’t a realistic scenario for growth. In the real business world, you generally can’t enjoy growth in revenue without incurring additional expenses.