Basic Accounting: Short Term vs. Long Term Expenses

Greg Novak novak at ucolick.org
Wed Oct 5 21:24:21 EDT 2005


Beth Leonard writes:
 > On Tue, Sep 27, 2005 at 03:13:28PM -0700, Greg Novak wrote:
 > > Yes, of course I have an account set up for the credit card.  The problem 
 > > here is that I want there to be, at some point, a _single_ number that I 
 > > can look at and say "I'm $150 ahead for the month."
 > 
 > The problem is fundamentally that you want to know what your
 > credit card transactions for the month are before you receive
 > your bill.  

Not true... I meticulously enter the transactions as I make them.  All
the information is in the program, it's just a matter of getting it to
spit the right thing out.  

The fundamnetal issue is finding a generic method of separating
"day-to-day" expenses from large, infrequent, perhaps unexpected
expenses.  I had thought that there would be some "general" method of
dealing with this sort of thing that was obvious to people who knew
something about accounting (unlike me).  Sort of like the mentioned
technique for prepaid expenses like auto insurance, where you transfer
the money out of checking and then make monthly transfers into
expenses.

When I started looking into this, however, I didn't feel so bad about
having trouble with it.  It seems that many of the sudden plunges of
stock prices (Krispy Kreme was one example) that you see are the
result of companies showing large paper profits while their cash
reserves are going down.  Eventually it becomes clear that the
"profits" are only on paper--the company has booked routine operating
expenses as either capital investments or as "one-time" large outlays,
thereby being overly optimistic about profits.  This is pretty much
exactly the same problem that I'm struggling with; if large
corporations sometimes mess it up, I guess it's not so bad that I have
trouble too.

Thanks for the input,
Greg




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