PROFIT FIRST ACCOUNTING FOR YOUR STARTUP BUSINESS

Nevermind the GAAP: Take Profits

Generally accepted accounting principles are for Internal Revenue Service auditors, not for entrepreneurs, Mike Michalowicz writes. GAAP teaches you to start with revenue, subtract expenses and then pay yourself out of whatever happens to be left. Instead of working your way down to profit, Michalowicz suggests putting it at the top of your income statement, just under revenue. By putting expenses in last place, you're forced to do more with less. "Since your revenue will first go toward profit and then your salary, there will be less to spend on expenses," he writes.

I propose a new type of accounting: Profit First Accounting (PFA). The difference between GAAP and PFA is simple: Deduct profit first, from the top down. On a PFA income statement, the first line item is revenue, followed by a profit deduction, then your salary, followed by cost of goods and all other expenses...

The Wall Street Journal(12/6)
http://mobile2.wsj.com/device/article.php?CALL_URL=http://online.wsj.com/article/SB10001424052748703989004575653102675023416.html?

Victor Lloyd Smith
vsmith@mlgcap.com
917-653-4406

Build Your Legacy
www.LegacyCapitalBook.com

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