Borrowing Trouble

Defining Moment

Accrual Accounting
A bookkeeping method that allocates a business's income and expenses to periods to which they apply, even though they haven't actually been received or paid. In this system, when you bill a customer, the amount is immediately reflected in your books as income, regardless of when the invoice is actually paid.

Accounts Payable/Receivable
Accounts payable represent money your business owes to suppliers and other creditors at a given point in time. Accounts receivable are funds owed to you by customers and other debtors.

Accounting Period
A period of time (month, quarter, year) for which a financial statement is produced.

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This article was originally published in the April 1999 print edition of Entrepreneur with the headline: Borrowing Trouble.

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