Basics of Accounting 2: P & L

In this second of the four-part series on accounting, aimed at entrepreneurs who are starting their business, Fred discusses the P&L report, item by item. Of particular note is the description of accrual accounting, which is often avoided by novices. We like to record cash in and cash out. However, as Fred points out, you need to see the real cost of doing business each month. Accrual accounting lets you tracke the expenses related to revenue, in the right time frame. Revenue recognition is also covered in simple terms in this accessible article.