Accounting All-in-One For Dummies

Book VIII

Handling Cash and Making Purchase Decisions

Don't overlook opportunity costs — the cost of missed opportunities when you allocate money to certain business ventures. To find out more about opportunity costs and how to account for them, visit www.dummies.com/extras/accountingaio.

In this book…

• Tell the difference between costs and expenses, figure out which costs you can depreciate, and know when to recognize revenue.
• Take a look at how inventory calculations impact cash flow and other financial statements. Inventory is often your largest asset account balance, so understanding these issues is crucial.
• Determine when something you're thinking of purchasing is likely to pay for itself. Consider the cash inflows that the new purchase helps you generate and calculate your break-even point.
• Grasp the pros and cons of taking on debt to leverage equity. Weigh the cost of interest on a loan with a potential dividend that you would pay a shareholder.