Coming Soon
Subscription Marketplace - Buy and sell subscription products and services
0 like 0 dislike
580 views
in Articles by
Making a profit in a business is derived from several different areas. It can get a little complicated because just as in our personal lives, business is run on credit as well. Many businesses sell their products to their customers on credit. Accountants use an asset account called accounts receivable to record the total amount owed to the business by its customers who haven't paid the balance in full yet. Much of the time, a business hasn't collected its receivables in full by the end of the fiscal year, especially for such credit sales that could be transacted near the end of the accounting period.

The accountant records the sales revenue and the cost of goods sold for these sales in the year in which the sales were made and the products delivered to the customer. This is called accrual based accounting, which records revenue when sales are made and records expenses when they're incurred as well. When sales are made on credit, the accounts receivable asset account is increased. When cash is received from the customer, then the cash account is increased and the accounts receivable account is decreased.

The cost of goods sold is one of the major expenses of businesses that sell goods, products or services. Even a service involves expenses. It means exactly what it says in that it's the cost that a business pays for the products it sells to customers. A business makes its profit by selling its products at prices high enough to cover the cost of producing them, the costs of running the business, the interest on any money they've borrowed and income taxes, with money left over for profit.

When the business acquires products, the cost of them goes into what's called an inventory asset account. The cost is deducted from the cash account, or added to the accounts payable liability account, depending on whether the business has paid with cash or credit.

Please log in or register to reply to this topic.

Related topics

0 like 0 dislike
0 replies 574 views
posted in Articles by VoyageHooper
0 like 0 dislike
0 replies 555 views
posted in Articles by Emufasa
0 like 0 dislike
0 replies 601 views
posted in Articles by PositiveVoid
0 like 0 dislike
0 replies 551 views
posted in Articles by OpinionOwl
0 like 0 dislike
0 replies 566 views
posted in Articles by GroundHurricane
0 like 0 dislike
0 replies 569 views
posted in Articles by HarshThunder
0 like 0 dislike
0 replies 428 views
posted in Articles by Scorpeon
0 like 0 dislike
0 replies 547 views
posted in Articles by Cybora
0 like 0 dislike
0 replies 468 views
posted in Articles by VirtualAssassin
0 like 0 dislike
0 replies 450 views
posted in Articles by Robottom
0 like 0 dislike
0 replies 451 views
posted in Articles by Catnip
0 like 0 dislike
0 replies 1,501 views
posted in Articles by Octopixy
0 like 0 dislike
0 replies 615 views
posted in Articles by HairyMagpie
0 like 0 dislike
0 replies 592 views
posted in Articles by ShowDolphin
0 like 0 dislike
0 replies 587 views
posted in Articles by GrizzlyFlash
0 like 0 dislike
0 replies 614 views
posted in Articles by BeautifulWolf
0 like 0 dislike
0 replies 601 views
posted in Articles by FrighteningTwinkles
0 like 0 dislike
0 replies 590 views
posted in Articles by Wallaby
0 like 0 dislike
0 replies 582 views
posted in Articles by Celestiger
0 like 0 dislike
0 replies 565 views
posted in Articles by TrustyKitty
0 like 0 dislike
0 replies 595 views
posted in Articles by SleepyFledgling
0 like 0 dislike
0 replies 567 views
posted in Articles by SwiftHeroine
0 like 0 dislike
0 replies 562 views
posted in Articles by Sumogre
0 like 0 dislike
0 replies 579 views
posted in Articles by Mosquiche
0 like 0 dislike
0 replies 537 views
posted in Articles by Tabooccaneer
0 like 0 dislike
0 replies 553 views
posted in Articles by Sassassin
0 like 0 dislike
0 replies 533 views
posted in Articles by GamerAlpaca
0 like 0 dislike
0 replies 630 views
posted in Articles by MysteryWasp
0 like 0 dislike
0 replies 525 views
posted in Articles by GreedySmile
0 like 0 dislike
0 replies 579 views
posted in Articles by BumblingBee
0 like 0 dislike
0 replies 511 views
posted in Articles by Herogue
0 like 0 dislike
0 replies 522 views
posted in Articles by Dingopher
0 like 0 dislike
0 replies 434 views
posted in Articles by Butcherry
0 like 0 dislike
0 replies 462 views
posted in Articles by PlaySeal
0 like 0 dislike
0 replies 440 views
posted in Articles by ForceSoldier
0 like 0 dislike
0 replies 438 views
posted in Articles by UncleRhino
0 like 0 dislike
0 replies 481 views
posted in Articles by HairySeahorse
0 like 0 dislike
0 replies 475 views
posted in Articles by MagicalCyborg
0 like 0 dislike
0 replies 540 views
posted in Articles by Knighthawk
0 like 0 dislike
0 replies 522 views
posted in Articles by Knighttime
0 like 0 dislike
0 replies 481 views
posted in Articles by Octopuppy
0 like 0 dislike
0 replies 455 views
posted in Articles by SilkPredator
0 like 0 dislike
0 replies 450 views
posted in Articles by nicejone
0 like 0 dislike
0 replies 489 views
posted in Articles by Finderpros
0 like 0 dislike
0 replies 585 views
posted in Articles by LovableStorm

55,458 topics

594 replies

3 comments

1,623,835 users

Connect with us:
...