Category: Home Business

Home Business refers to doing business from one’s home. Similar to “work at home”, home business entails doing a job in your home in a satisfactory manner. but unlike work at home, your home business may be registered with the local municipality.

About Business Investing and Financing


An important portion of the statement of cash flow reports the investments your company made during the reporting year. New investments are signs of growing or upgrading the production and distribution facilities and capacity of the business. Disposing of long-term assets or divesting itself of a major part of its business can be good or bad news, depending on what’s driving those activities.

A business generally disposes of some of its fixed assets every year because they reached the end of their useful lives and will not be used any longer. These fixed assets are disposed of, sold or traded in on new fixed assets. The value of a fixed asset at the end of its useful life is called its salvage value. The proceeds from selling fixed assets are reported as a source of cash in the investing activities section of the statement of cash flows.

Usually these are very small amounts, but like individuals, companies at times have to finance its acquisitions when its internal cash flow isn’t enough to finance business growth. financing refers to a business raising capital from debt and equity sources, by borrowing money from banks and other sources willing to loan money to the business and by its owners putting additional money in the business.

The term also includes the other side, making payments on debt and returning capital to owners. It includes cash distributions by the business from profit to its owners. Most businesses borrow money for both short terms and long terms. Most cash flow statements report only the net increase or decrease in short-term debt, not the total amounts borrowed and total payments on the debt.

When reporting long-term debt, however, both the total amounts and the repayments on long-term debt during a year are generally reported in the statement of cash flows. These are reported as gross figures, rather than net; but, putting aside the fact that every business needs to make investments and secure financing in order to maintain a healthy economic life, one thing that must be understood is the cash flow of a business should be fluid.

 

Depreciation as an Expense


Depreciation is a term we hear about frequently, but don’t really understand. It’s an essential component of accounting however. Depreciation is an expense that is recorded at the same time and in the same period as other accounts. Long-term operating assets that are not held for sale in the course of business are called fixed assets.

Fixed assets include buildings, machinery, office equipment, vehicles, computers and other equipment. They can also include items such as shelves and cabinets. Depreciation refers to spreading out the cost of a fixed asset over the years of its useful life to a business, instead of charging the entire cost to expense in the year the asset was purchased.

According to this method of dealing with Depreciation, each year that the equipment or asset is used bears a share of the total cost. As an example, cars and trucks are typically depreciated over five years. The idea is to charge a fraction of the total cost to depreciation expense during each of the five years, rather than just the first year.

Depreciation applies only to fixed assets that you actually buy, not those you rent or lease. Depreciation is a real expense, but not necessarily a cash outlay expense in the year it’s recorded. The cash outlay does actually occur when the fixed asset is acquired, but is recorded over a period of time.

Depreciation is different from other expenses. It is deducted from sales revenue to determine profit, but the depreciation expense recorded in a reporting period doesn’t require any true cash outlay during that period. Depreciation expense is that portion of the total cost of a business’s fixed assets that is allocated to the period to record the cost of using the assets during period. The higher the total cost of a business’s fixed assets, then the higher its depreciation expense.