The income and expense notebook

Salima bakes bread at home and sells it to neighbours and to the local neighbourhood shop. After a month she asked herself: "Money is coming in, but where is it? Am I making a profit or not?" She could not find the answer, because she had not written anything down.

So she took an ordinary notebook.

What is an income and expense notebook?

Just an ordinary notebook. Two things are written in it every day: income (money came in) and expense (money went out).

You can set the notebook up by ruling four columns on the page: date, what happened, income, expense. It is even handier if you write the balance in a fifth column.

Salima's week

The balance at the start of the week was zero. The figures are hypothetical:

On each line the balance is found like this: previous balance + income − expense. For example, after Monday it was 240 000, and on Tuesday 380 000 came in: 240 000 + 380 000 = 620 000.

The weekly total

At the end of the week Salima added up the columns:

• Total income: 420 000 + 380 000 + 450 000 + 500 000 = 1 750 000 soum.
• Total expense: 180 000 + 60 000 + 150 000 + 90 000 = 480 000 soum.
• Difference: 1 750 000 − 480 000 = 1 270 000 soum.

The difference matched the balance on the last line, so the arithmetic is right.

How can you catch a mistake?

If the difference does not match the last balance, you have slipped up somewhere. Go line by line and recalculate every balance. Usually the mistake turns up in one place: a figure copied wrongly, or an expense that was never written down.

Another way is to compare the balance in the notebook with the real money. On Friday Salima counted the cash in her box and it matched the notebook. If it does not match, that day is the day to hunt for the mistake.

What is the notebook good for?

Looking at the notebook, Salima can see which day sales are good, how much goes on flour and gas, and how much money is left each week. The income and expenses from lesson 5 she now sees with her own figures.

Income and expenses are trustworthy when they rest on a document: a receipt, an invoice, a bank statement. That is why in lesson 12 we learned to write everything down. Money that went through the bank can also be written in this notebook, or you can keep a separate bank notebook.

For an entrepreneur the income and expense notebook is the first set of accounts. Large companies keep the very same thing in software, only with many more entries.

The Basics are done, what next?

The words money, market, price, profit, bank and tax are no longer strangers to you: that is the main result of the 15 lessons. The next step is the "From 0 to 100" courses, which teach each subject from the very beginning. To start with accounting, open the Accounting section from the site's "Sections" menu. If tax or banking interests you, go to that section.