Watch Rebecca Frimmer of Kitchen Table Consultants talk about the importance of an accounting system and learn about business analysis tools. You can find the presentation referenced during the video below.
Let's unpack this story! Using this sample of a Profit & Loss from a small farm, make comparisons year-to-year about this business. What years were labor not being managed? Can you follow how they computed their COGS?
Exercise: Build a Chart of Accounts Profit & Loss Sheet
Using the 7 profit & loss accounts/parent categories you've learned about, take a look at your expenses and plug in a couple subcategories that could go in each. The goal of a P & L is to figure out profit.
The goal of a Balance Sheet is to understand how the net worth of your business is increasing over time. This is the place to track liabilities, equity, and assets.
This is an example of a poorly maintained Balance Sheet. What are some things that stand out to you? Notice the undeposited funds and uncategorized assets. Both those amounts should smartly be allotted to their respective categories.
