Questions answered by tax and business professionals.

Monthly review works well for many small businesses. Compare current results with prior periods and budget, then investigate unusual balances or trends.

Negative equity means reported liabilities exceed assets at that date. It deserves investigation, but alone does not explain cash availability or business viability.

Reconciliation compares the books with bank records to catch missing transactions, duplicate entries, timing differences, and possible unauthorized activity.

An adjusting entry updates account balances at period end, such as for accrued expenses, prepaid costs, or depreciation. It should have clear supporting documentation.

Gross profit is revenue less cost of goods sold or direct service costs, depending on the reporting format. It does not include every operating expense.

Cost of goods sold generally represents the direct cost of products sold during a period. Proper inventory and cost tracking help measure gross profit.