LinkedIn Pizza Principles


Still having challenges understanding some basic accounting and business principles? Well, let LinkedIn Local Caribbean simplify them using the example of a pizza-making entity. Here we go:


Account: The formal documentation where all similar items are listed by name (and quantity) e.g. a utilities account, a sales account, et cetera


Accounts payable: What I have (hopefully) documented as monies owed to the persons whose services or products would have contributed to the preparation of the pizzas.


Accrued liabilities: What I have to pay my service and product suppliers for (prepared) pizzas, but, for which I have not yet received a formal notice of monies owed to them


Accounts receivable: What monies are owed to my business by my pizza-loving customers, e.g. when they use a credit or debit card


Assets: A tangible or intangible resource, that is of economic benefit to me i.e. what remains in my pocket every week (or month); or, what I currently have e.g. cash at hand and personal savings; stocks


Balance sheet: A formal document that shows what I have spent against what I have earned (can be done on a weekly, fortnightly or monthly basis).


Billing: A periodic document that my suppliers issue to me for the goods or services they have provided; Likewise, I can also generate same for my customers


Break-even: When what remains after all my overhead costs and expenses are deducted, is equal to what I would have spent in the first place


Business registration: The formal process of registering my pizza company, whether as a sole entrepreneurship, partnership, Limited Liability Company, or, Non-Profit/Non-Governmental enterprise with the applicable Government ministry of department of my country


Cash flow: How much money my business earns e.g. weekly, monthly, yearly.


Financial statement: What my business looks like at the end of the financial year on paper, to an accountant and/or auditor


Liabilities: A tangible or intangible resource that is of economic loss to me i.e. what comes out of my pocket every week or month, including any money I would have spent to prepare the pizzas from start to finish


Loss: When what remains after my entire expenses are deducted from what was earned in selling the pizzas, does not cover the full sum of all that was spent


Name approval: When the business name I have selected is formally approved by the applicable Government ministry or department of my country


Overhead costs: What I have to regularly spend to ensure that my pizza operations are successful. They can be monthly or not e.g. business leasing or rental fees, electricity, water and cooking gas. If I operate online, or, even if I want to create a more customer-friendly environment, Internet/WiFi access would be another overhead cost consideration.


Profit: What remains after I have deducted the full sum of my expenses from all that was earned from selling the pizzas


So now, you know a bit more! Stay empowered!


Keywords: LinkedIn Local Caribbean, accounting, administrative, business, principles


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