Your credit card is a source of interest-free loan. But, this will work, if and only if you think of your credit card as a tool for personal cash flow management –rather than additional cash in your wallet.
It often happens that a purchase has to be made before your expected cash has become available. If you know that your cash will come in before the bill from the credit card falls due, make the purchase with your credit card –but pay off the whole purchase when your cash comes in and save yourself the interest cost. …read more

Any company that is not conservative in the reporting of its revenues and expenses is engaging in “accounting noise.”

Proper financial statements should be able to provide the following information about the business:
Feedback. The information from the Financial Statements should be able to explain past events, confirm or adjust expectations / predictions, show the results of past decisions and form a rational basis for decisions for the future.
Predictive value. The Financial Statements should be able to show where the business is headed or where personal finances are going. We will go into the nitty-gritty of how to read and appreciate this …read more

The earnings of a business (corporation and small business) or of an individual or household (personal finance) are the difference between the revenues and expenses during an accounting period.
The difference between cash receipts and cash disbursements cannot be considered as earnings.
The revenues should include not only the cash received during the period, but also the income earned but not yet received (as in sales on credit). In the same manner, expenses during a period include not only the cash paid out, but also the expenses already incurred although not yet paid for (as in supplies bought on credit).

Most small businesses, usually because there is no accountant and the proprietor himself does the accounting, stop at the Income Statement. Because most or all of the transactions are in Cash, the Income Statement is also made to serve the purposes of a Cash Flow Statement. However, you cannot really tell the true worth of a business without a Balance Sheet.

An Income Statement may show high Sales figures (but you wouldn’t know how much of it is in Cash) and a Cash Flow Statement may show a generous Ending Cash (but you wouldn’t know how much of …read more

In an Income Statement, if you are selling on credit, the Sales figure will not be all Cash (i.e., some in Accounts Receivable). You may not have paid all your Expenses yet (i.e., some in Accounts Payable). The Cash Flow Statement will show you what you have actually received and paid out in Cash.

CASH INFLOWS. This will show receipts from Cash Sales and collections of previous periods’ Sales (i.e., products sold on credit). If you borrowed additional working capital during the period, the proceeds of the loan should appear in Cash Inflows.
CASH OUTFLOWS. This will …read more

Consider the case of an individual or household with no financial or physical Earning Assets, whose only Earning Assets are Manhours, where the Salaries or Professional Fees have related Direct Costs which do not leave sufficient Cash to meet Expenses:

In the previous post, we started by first looking at the possibilities of maximizing Manhours or the value of the Manhours.
As Direct Costs (expenses incurred in earning the Salary or Professional Fee from Manhours) directly impact on the adequacy of Cash to meet Expenses (i.e., the Outflows), we should look at the efficiency of our Direct Costs.
A major item of Direct …read more

Considering the case of an individual or household with no financial or physical Earning Assets, whose only Earning Assets are Manhours, where the Salaries or Professional Fees have related Direct Costs which do not leave sufficient Cash to meet Expenses:

What are the possible options for solving the financial problem?
The options start with your Manhours, your only Earning Asset.
1 If you are an individual, you can increase your Manhours: either by doing paid overtime (if your job allows it) or by taking on a second job. In a household, the increase in Manhours can be from …read more

A personal or household Budget is useful in ensuring that you or your family do not live beyond your means. However, a Budget is not adequate in clarifying the financial issues confronting an individual or household. Personal Financial Statements will make clearer where the financial problems lie and how best to solve them, how to avoid financial problems, how to plan for growth in the personal or household Net Worth (i.e., what you are really worth).

Your personal Income Statement and Cash Flow Statement, taken together, can tell you if are earning enough or why you are always …read more

The Personal Cash Flow Statement of an individual or a household with no financial or physical Earning Assets (whose only assets are Manhours) will look as follows:

Inflows will come from Salaries &/or Professional Fees. If he takes out a Loan to cover Direct Costs & Expenses that cannot be covered by Salaries or Professional Fees, the loan proceeds will form part of Inflows for the period.
Outflows will consist mainly in Direct Costs (i.e., what was spent in earning the Revenues) and personal Expenses.
Total of Inflows minus total of Outflows will be the Net Inflow. Added to Cash at …read more

A complete set of Financial Statements for a corporation or a small business consists in the Balance Sheet, the Income Statement and the Cash Flow Statement.

The same holds true for Personal Financial Statements. However, the Cash Flow Format of a corporation or a small business, as provided by the International Financial Reporting Standards, will be unwieldy for a Personal Cash Flow Statement. The alternative format presented in post 30 (Understanding Accounting Talk 30: An Alternative Cash Flow Statement) would be more appropriate: