Tutor profile: Karen P.
Subject: Personal Finance
How do I create a budget for my personal spending?
The first step to creating a budget for your personal spending is to identify your needs: food, rent/mortgage, utilities etc. What are the items that you have to have? Doing this first will create structure for how to spend your money. Once these have been identified you'll need to review your bank statements to set-up budget parameters. Some costs like rent may not change from month to month, but utilities may increase or decrease depending on the season. Next you'll go through the miscellaneous other expenses you have such as dining out or entertainment. At this point in time you'll have to align your overall goals to what you want to achieve. Setting a goal will better help you align how to spend on unnecessary items.
What is accrual based accounting?
Accrual based accounting is the accounting method accepted under Generally Accepted Accounting Principles in the U.S. It's a method of ensuring that you're recognizing revenues and expenses in the month they occurred within. For example if a ABC Company incurs a cost for pest control services on April 29th, but doesn't receive the invoice until May 15th, ABC company would record an accrual entry in April for the cost or the estimated cost of those pest control services from April 29th in the general ledger for April.
What is the matching principle of accounting and how is it applied?
The matching principle is matching up revenues and expenses in the timeframes in which they occurred. For example, if you were a business consultant and you billed your client for 10 hours of work at $50 an hour in April, you'd recognize $500 as revenue. However, you also had mileage on your vehicle to go to a client meeting and fuel necessary to create that revenue. Under that matching principle you'd record the revenue and the expenses it took to generate that revenue in the month of April.
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