Accounts Payable |
Amounts you owe/bills you need to pay. |
Accounts Receivable |
Money owed to your business. |
Assets |
Value of everything owned by the business. Including inventory, equipment, furniture, accounts receivable, cash, land and property. |
Balance Sheet |
The financial statement that shows the financial position of the business at a certain specified date. It shows the business assets (what the business owns), business liabilities (what the business owes) and the owner’s equity (owner’s personal investment plus profits). |
Beginning Cash |
Total cash in the business checking account, savings and petty cash at the beginning of any accounting period. |
Break-Even Analysis |
Calculation of level of sales (e.g.-- money from parents) necessary to pay all costs and reach profit goals. |
Budget |
Plan that includes a list of proposed expenditures and expected revenues for a specified period of time. |
Capital Expenditure |
Money spent for any asset or improvement that will be used in the business for more than one year. |
Cash Flow |
Pattern of money coming into and going out of the business, indicating how much and when cash will be needed for operation of the business. |
Collateral |
Assets pledged to secure a loan or other debt. |
Current Assets |
Cash or other assets you expect to use within one year. |
Current Liabilities |
Debt or accumulated expenses expected to be paid within one year. |
Debt Financing |
Borrowing money to start your business. |
Debt Service |
Money spent to repay debt, including both principal and interest. |
Deductions |
Business operation expenses that may be used to reduce business gross profits for tax purposes. |
Deficit |
A shortage of funds. When expenses are great than income for a given period. Called “in the red”. |
Depreciation |
Accounting allowance reducing the value of land, equipment, buildings or furniture (fixed assets) according to IRS schedule. Generally based on use or passage of time. |
Depreciation Schedule |
Table showing the amount per year and number of years over which an asset
is depreciated. |
Direct Cost Percentage |
Percentage of a child care provider’s income that goes into business expenses directly related to caring for children. |
Direct Costs |
Expenses that vary with the number of children served. Also known as
variable costs. |
Ending Cash |
Total cash in checking, savings and the petty cash fund at the end of any
accounting period. |
Equity |
Portion of total value of business that is equal to the owner’s investment plus profit. Also called Capital. |
Equity Financing |
Using your own money to start your business. |
Equity Injection |
Value of money or items contributed by owner for use by the business. |
Expenses |
Cost of producing revenue through the sale of your service or goods. |
Financial Statements |
Written record of the financial status of the business. Includes the balance sheet, income statement and cash flow statement. |
Fiscal Year |
Any 12 month accounting period used by the business. |
Fixed Assets |
Physical assets such as buildings, equipment, or property that are not expected to be converted to cash in the next year. |
Gross Profit |
Total revenue minus direct costs. Also known as gross profit margin. |
Income Statement |
Document showing the sources and amount of income; costs and expenses of providing service and the amount of profit or loss during a specific period of time. Also called a profit and loss statement. |
Income Tax Expense |
Annual or quarterly federal, state, and local taxes. |
Indirect Costs |
Expenses that do not vary with number of children served. May include utilities, telephone, printing, occupancy. Also known as fixed costs, operating costs or overhead. |
Interest Expense |
Money paid on business loan or any other payable. |
Inventory |
Dollar value of consumable supplies and material on hand. |
Liabilities |
Value of everything owed by the business including accounts payable, income taxes, and loan payments. A current liability is a debt that will be paid within the current year; a long-term liability is a debt that will be carried for longer than the current year. |
Ledger |
A record-keeping format that records business income and expenses by category. |
Line of Credit |
A bank’s promise to lend a borrower up to a pre-agreed amount during a specific time frame. Usually reviewed annually and subject to cancellation without notice. |
Liquid Assets |
Current assets that can be quickly turned into cash. |
Liquidity |
Having enough current assets to cover current obligations. |
Major Equipment Expense |
Money spent for the purchase of equipment typically valued over $100 and used in the business for more than one year. These items can generally be depreciated. |
Negative Cash Flow |
Occurs when the immediate demand for cash is greater than the cash currently
on hand. |
Net Assets |
Difference between the amount of your current assets and your current liabilities. |
Net Income |
Total income remaining after all expenses are paid. |
Net Profit |
Total revenue minus direct costs and operating costs. Also called net profit margin. |
Net Worth |
Excess of assets over debt. |
Operating Costs |
See Indirect Costs |
Owner Draw |
Money taken from profits of the business for the personal use of the owner. |
Owner’s Equity |
Financial interest of the owner of the business. The total of all owner equity is equal to the business’s assets minus its liabilities. |
Profitability |
Ability of a business to make a profit, break even or lose profit. |
Profit Goal |
Amount of profit the owner expects the business to produce in a given period
of time. |
Projection |
Calculation of future income and expenses. |
Profit and Loss Statement |
See Income Statement. For non-profits called the Statement of Activities and Changes in Net Assets. |
Receipt |
Written statement acknowledging payment. |
Revenue |
Income received by the business. |
Unearned Income |
Revenue that has been received but not yet technically earned such as prepaid tuition for upcoming weeks. |
Working Capital |
Basic measure of a businesses ability to pay its current obligations. Current assets minus current liabilities. |
