Accounting Concepts
How is profit different from revenue on financial statements?
Profit reflects earnings after expenses; revenue is total sales.
What role does a ledger play in financial reporting?
Central in compiling data for financial statements.
What is the purpose of a tax return?
Reports income and expenses; determines tax liability.
Why are fixed expenses important for budgeting?
Helps predict monthly financial commitments and cash reserves.
How do accounts receivable affect cash flow?
Delayed payments can restrict liquidity.
How do tax deductions benefit a business?
Lowers taxable income, reducing overall tax burden.
What impacts net income besides expenses?
Taxes, interest, and depreciation.
Why must the balance sheet equation always balance?
Ensures accuracy of financial position; checks for errors.
Difference between tax deductions and tax credits?
Deductions reduce taxable income; credits reduce tax owed directly.