Chapter 3

Special Accounting Problems

In This Chapter

  • Sorting out accounts receivable and accounts payable
  • Keeping track of inventory
  • Figuring out fixed assets
  • Finding out about asset write-downs
  • Recognizing liability
  • Handling revenue and expense account closings

Even if you understand the principles of accounting (which I describe in Book I, Chapter 1) and the basics of double-entry bookkeeping (which I describe in Book I, Chapter 2), you still may not have all the information that you need to keep good records. For example, tracking the amounts that customers owe you and the amounts that you owe vendors can be a bit tricky. Inventory can also present challenging record-keeping problems, a fact that’s not surprising to you as a retailer. And things like fixed assets — oh, don’t even get me started.

For these reasons, this chapter describes the most common complexities that business owners confront. You don’t need to be an accountant or an experienced bookkeeper to understand the material in this chapter. However, you do need to proceed carefully, take your time, and think a bit about how the material I describe here applies to your specific business situation.

Working with Accounts Receivable

If you read Book I, Chapter 1, you already know that accounting principles state that sales revenue needs to be recognized when a sale is made and that the sale is made when a business provides goods or services to a customer.

In other words — and this point is really important — ...

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