A question that comes up for some readers is how to set up Profit First Accounts when you have a real revenue adjustment.
Not all companies require this, but if you do:
- Money goes into your income account
- Allocate money that is not recognized as real revenue that goes to materials and subs, and create/put it in a materials and subs account
- The residual money in your income account is now your real revenue
- Then you can complete the Profit First allocations based upon that
That’s the extra step that’s needed. Now go set up those accounts!
Thanks Mike for clarifying.
One question: If I want to spend some money on advertising/ marketing, do I directly debit the sales account and allocate in the account for Advertising or should I let the sales money flow through the real revenue account, allocate profits, let it settle in the Opex account and then spend for advertising from my Opex account (without opening a separate advertising account)?
Thanks!!!