Units-of-Production Depreciation, Explained: How to Turn Lifetime Output Into a Per-Unit Write-Off
Divide cost minus salvage by lifetime output for a per-unit rate, then multiply by actual production — ideal for equipment with uneven usage.
#accounting-basics
Accounting Basics
Foundational accounting concepts, terminology, and principles for small business owners
Accruals vs. Deferrals Explained: How Accrued Expenses, Accrued Revenue, Prepaid Expenses, and Unearned Revenue Each Hit Your Books
Accruals book revenue and expenses before cash moves; deferrals hold cash on the balance sheet until earned or used.
Amortization vs. Depreciation: What Each Method Expenses, and the Loan Schedule That Confuses Everyone
Depreciation expenses tangibles minus salvage value; amortization writes off intangibles with none — and the IRS stretches acquired intangibles over 15 years.
What Is a Classified Balance Sheet? Current vs. Non-Current Sections, What Each Subtotal Tells a Lender, and How to Build One From Your Trial Balance
A classified balance sheet sorts assets and liabilities into current and non-current sections — the subtotals behind working capital and the current ratio.
What Is a Normal Balance in Accounting? Which Side of the Ledger Each Account Type Increases On
Assets, expenses, and dividends grow with debits; liabilities, equity, and revenue with credits — which side of the ledger each account increases on.
Opportunity Cost, Explained: The Hidden Price Tag on Every Business Decision
Opportunity cost is the value of your next-best forgone alternative — price DIY bookkeeping against a $400 hire before your hours subsidize it.
What Is a Post-Closing Trial Balance? How Closing Entries Zero Out Temporary Accounts and Leave Only Permanent Balances for the New Period
After closing entries, only assets, liabilities, and equity carry balances forward — the post-closing trial balance proves the close worked.
2/10 Net 30, Explained: What Trade-Credit Terms Mean, Why Skipping the Discount Costs 36 Percent APR, and How to Book It
Paying a 2/10 net 30 invoice on day 30 instead of day 10 costs 2% for 20 days of float — about a 36% annualized rate. Take the discount.
Historical Cost vs. Fair Value: Why Your Balance Sheet Records What You Paid, Not What It's Worth
GAAP books assets at what you paid, not what they are worth — except securities, write-downs, and crypto, which follow fair value.
Margin of Safety, Explained: How Far Your Sales Can Fall Before You Hit Break-Even
Your margin of safety is sales minus break-even sales — how far revenue can fall before losses start. Compute it in dollars, units, and percent.
Sales Mix, Explained: How the Proportion of What You Sell Moves Break-Even and Profit Even When Total Revenue Holds Still
Sales mix is your products' sales share — a tilt toward low-margin items cuts profit while revenue holds still. Track your weighted-average margin monthly.
Special Journals, Explained: How High-Volume Transactions Stay Out of Your General Journal
Sales, purchases, cash receipts, and cash disbursements journals group repeating transactions so you post monthly totals, not hundreds of entries.