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Start Your Own Small Business: Lesson 8 (printer-friendly version) Your Instructor: Kris Solie-Johnson INSTRUCTIONS: To print this page, wait for the page to fully load. Once the document is ready to print, simply click your browser's File menu and choose Print . To save this page, click your browser's File menu and choose Save As . Select a disk drive and folder to receive the file, and change the name of the file to less08.htm . To view the file while you are offline, just go to the drive and folder you selected when you saved the file and double-click the file named less08.htm . Your browser will start and you will have access to the file. Chapter 1 Introduction Depending on whom you ask, the subject of accounting and financial statements is likely to produce one of three responses: Great!, Huh?, or Yuck! Too many entrepreneurs are less than enthusiastic about accounting. They view it as a necessary evil—one required only to satisfy tax-reporting requirements. Why do you think so many people view accounting negatively? In most cases, it's probably because they haven't recognized the full value of knowing where they are and where they've been financially. You see, good accounting is a little like good navigation of ships and airplanes—financial fixes are just as important to the entrepreneur as good navigational fixes are to the ship captain or the aircraft commander. Accounting is nothing more than a process of organizing and recording financial activities in a disciplined manner. I emphasize disciplined to stress the need for a thoughtful, deliberate approach. If you know where you've been financially and where you are now, you have a much better chance of arriving at your chosen destination. This lesson will focus on ideas to help you establish financial fixes as you navigate to economic security. When we're finished, you may not be qualified to hang out your public accountant's shingle, but you will have a reasonable understanding of the fundamentals of accounting and an appreciation of its value. Today we'll begin by learning a couple of essential accounting equations. Then we'll jump into a case study that will illustrate the various accounting journals and reports you'll need to compile to get the complete picture of how your business is doing financially. So much for the preamble—let's get to the meat of your financial fundamentals! We'll start off with some of the more obvious items so we can build a foundation. Chapter 2
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Keeping Track of Sales What happens all too frequently with new businesses is that some owners (perhaps you've known one or two) overlook the little details of keeping good business records. In fact, they might have made a better income if they had merely put their start-up funds in a passbook savings account! Others may be operating at a loss and don't even know it, much less what to do about correcting the situation. The function of
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