Objectives: Session 6 – Basic Numbers, Part 1

In this session you will learn:

  • The difference between ‘startup’ and ‘ongoing’ expenses
  • How expenses vs. assets are treated for tax purposes
  • The difference between profits and cash

OVERVIEW

Start-up expenses happen before the business is running. If expenses come after the start of the plan, they are ongoing expenses. Ongoing expenses belong in the profit and loss table.

DEFINITION

Expenses: Items or services paid for that a business can deduct from income for tax purposes. Common expenses are rent, salaries, advertising and travel.

Assets: Property that a business owns, such as cash and inventory, office equipment, buildings, accounts receivable, and investments.  Assets cannot be deducted from income for tax purposes.

Costs of Goods Sold (COGS): The costs of materials which are used to make the goods a business sells. These costs vary in direct proportion to the amount of goods sold.

Sales Forecast: The planned sales a business expects to make in the future; this may be shown by months and/or years.

Liabilities: Debts; money owed that must be paid. Short-term (current) are generally debts to be paid in less than five years; long-term debts are generally for longer than five years.

Capital Input: New money invested in ownership in the business, not as loans or payment of loans.