Expenses a Pain In The ASSet
Many times, I have responded to business owners’ concerns over inconsistencies in their balance sheet and thus their profit and loss statement, or their income statement, as it’s often called, as well.
One reporting period their business will show a healthy profit and then suddenly POOF! the profit’s disappeared the next month, even though the actual reality of their finances doesn’t support this at all.
Inevitably the problem turns out to be their company bookkeeper’s lack of understanding as to when to report a corporate expenditure as an “expense” or an “asset” on the balance sheet.
You see certain expenditures, even though they obviously cost the company money, should not be considered an expense or a loss. For instance, the purchase of office furniture or new computers would actually be considered a company asset as it enhances the corporate holdings.
When it’s reported this way on the balance sheet, it accurately shows the healthy growth of the business.
It’s not an item like courier charges, for example, which are still necessary to run the business but they are a service that’s paid for and completed, as opposed to buying a postage weigh scale for the business which is tangible and stays around.
Once again, you see how essential it is to have a well-trained, knowledgeable bookkeeping partner maintaining your records especially when you go looking for loans or investors. When the figures are recorded correctly, your company financial’s portray on paper your business at its best!
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