The Definitive Guide to Business Finance: What smart managers do with the numbers, Second Edition

Accounting for the future

The previous chapter looked at forecasting sales. Now it is time to look at the cost side of the equation. Start by considering capital spending. Compared to other spending, capital outlays:

• often involve larger sums of money;

• are usually subject to a unique approvals process;

• generally do not immediately produce substantial income relative to their costs;

• are expected to produce future benefits; and

• receive special treatment in financial statements.

For these reasons, it is useful to discuss them separately from other costs. We will look at how you account for them in general, and then discuss a whole range of related management issues. The main focus here is on the bean counting, which embraces financial accounting, tax ...