Income and expenses: shown on a family and a shop
The fifth Basics lesson: where money comes from, where it goes and what is left at the end of the month. We put one family budget and the accounts of one bread shop side by side.
At the end of every month many families have the same conversation: "Where did the money go?" To find the answer, you only need to know two words: income and expenses. These two words work the same way for a family and for a small shop.
What is income?
Income is money that comes in to you. In a family it may be the parents' salaries. In a shop it is the money buyers paid for the things they bought.
Put simply: money you earned went into your purse, so that is income. But borrowed money is not income, because you have to pay it back.
What are expenses?
Expenses are money that goes out from you. In a family these are food, electricity and gas bills, and clothes. In a shop they are flour, rent and pay for the workers.
Money was spent, so that is an expense. But paying back a loan is not an expense: you only give the owner back the money you took earlier. If there is an extra charge for the loan (interest), only that extra part is an expense.
A family budget: one month as an example
For example (the figures are hypothetical), one month of the Karimov family:
| Income | Soum |
|---|---|
| father's salary | 6 000 000 |
| mother's salary | 4 000 000 |
| Total income | 10 000 000 |
| Expense | Soum |
|---|---|
| food | 4 000 000 |
| electricity, gas, water | 900 000 |
| transport and phone | 700 000 |
| clothes | 1 200 000 |
| school and clubs | 800 000 |
| Total expenses | 7 600 000 |
What is left at the end of the month: 10 000 000 − 7 600 000 = 2 400 000 soum. The family can save this money for a big purchase later.
It is just the same in a shop
Now let us take the baker's shop from the third lesson. In one month he sold 9 000 loaves at 4 000 soum each. His income: 9 000 × 4 000 = 36 000 000 soum.
His expenses (we multiply the share per loaf by 9 000):
- flour, yeast, salt: 18 000 000 soum;
- gas and electricity: 4 500 000 soum;
- wages for the apprentice: 6 300 000 soum;
- rent for the bakery: 2 700 000 soum.
Total expenses: 31 500 000 soum. What is left: 36 000 000 − 31 500 000 = 4 500 000 soum. This example is simplified: a real shop also has taxes and other payments.
What is the money that is left called?
If we take expenses away from income, what is left is called profit for the shop. The part left after corporate profit tax has also been paid is called net profit. If expenses become larger than income, this is a loss: the shop has spent more than it earned.
Keep this in mind: profit and the money in the cash box are not always the same. There can be profit in the accounts but no money in the cash box. You can read about this in our article "Profit but no cash". And writing down income and expenses in a notebook every day is the very first step of accounting.
In the next lesson
In the next Basics lesson we will talk about profit and loss in more detail.
Test yourself
5 questions on this topic: pick an option or reveal the answer.
"Chirchiq biznes-park" LLC took a bank loan specifically to build an office building (the building is a qualifying asset). Over the year, interest expense on the loan was 12 000 000 soum. The not yet spent part of the loan was temporarily placed on deposit and earned interest income of 1 500 000 soum. How much borrowing cost is capitalized into the cost of the building?
A furniture shop wants to record the expenses of delivering orders to customers. Under NAS No. 21, on which account are such expenses recorded?
"Texnopark Nur" LLC spent 18 000 000 soum in 2026 on a research project to find a new way of purifying water and recognized it as an expense of that year. In 2027 the technical feasibility and the market of the project became clear. Under NAS No. 11, can that 18 000 000 soum be moved back into an asset?
"Jomboy plast" LLC modernised its moulding machine by fitting an automatic control unit. The costs were accumulated in 0890 "Other capital investments" and came to 38,500,000 soums. How is the increase in the machine's initial cost recorded?
"Arnasoy baliq" LLC, which works seasonally, accrued wages in winter to workers who did preparatory work for the next season. Under its accounting policy this cost is included in deferred expenses. Which journal entry is made?
Answered: 0 / 50 of 5 correct
All tests →See also
Sources
- General economic concept · examples, names and figures compiled by the author, hypothetical