While day to day costs are charged to the profit and loss account as expenses, purchases of equipment which will be used over many years are not. Even after purchase, something like a new kitchen has value and remains an asset for the business. Accordingly, it sits on the balance sheet as a fixed asset. However, over time it will lose value and over enough years will lose all value and itself need to be replaced. To recognise this, each year a proportion of the cost of the asset is charged to the profit and loss (P&L) account, this is called depreciation.
To a class of trainee accountants, nothing quite generates an adolescent giggle like your introduction to double-entry. but behind the mirth, double-entry bookkeeping is a somewhat beautiful thing. Double-entry reflects that every transaction in a business generates not one accounting outcome but two.
Financial statements convey the financial health of your company to interested parties who might be investors, customers, creditors or the public at large. The most important components of these are called the 'primary financial statements' comprising the profit and loss account, balance sheet and cash flow. The statement of shareholders' equity might also be considered a fourth.
This article looks at four basic business structures - sole trader, partnership, limited liability partnership and limited company. In 90 seconds or less.
One of the origins of this project was the realisation that in the current climate of crazy rents, young chefs need financial sponsors to make their restaurant dreams come true. But sitting over the table from a money-man or banker can not only be an intimidating experience, but can be packed with jargon that at best puts you on the back foot, and at worst can lead you into signing contracts that might seriously run against your own best interest.