Monitoring your business income and expenditure should be one of the primary concerns within a business. As such it is always useful to have some basic bookkeeping knowledge. Whilst bookkeeping and accounting are more complex than they may first appear, having some knowledge of what your accountant is talking about will aid your business practices.
First and foremost you will want to know how much your revenue income is before taxes. Your revenue is not your actual income, since it does not account for the costs of running your business. It is simply the money you have coming in. Whether this is in the form of cash, cheques, cards payments, or invoices to your clients. All these sources of income make up your total revenue.
The Costs of Running Your Business
Any costs associated with the running of your business are called the expenses. These are the costs that are directly associated with running the business. Items such as your payroll expenses, rents, leasing of equipment, advertising and so-forth are included in running costs.
Expenses that are directly associated with the sale of your product or service are known as direct expenses. These could range from the wholesale cost of a product or its manufacturing cost, commissions on selling the product, and any maintenance and repairs needed on a product before it is sold
Once you subtract the direct expenses from your revenue, then you are left with your Gross Income. This means your income before your indirect expenses. This is a simple guide to bookkeeping. Professional advice should always be sought from a professional accountant or bookkeeper.