Mileage.

Don't forget the mileage.

Is there a mileage charge?

No, you ain't deserving. No mileage.

Japan has mileage standards up here.

let's do it on an accrual basis.

let's do the accrual accounting income statement.

How much am I paid for mileage?

What is the fuel mileage of this car?

What mileage do you get with this car?

Of course, the mileage you get may vary.

If we have higher mileage cars, this much.

Your mileage may vary. Personally, I'm happy with Postgres.

It gets great gas mileage, it has leather seats.

To see the difference between cash accounting and accrual accounting

well, here is where China's auto mileage standards are now.

And what I'll do, I'll do the accrual accounting right here

You have two choices this beauty over here, it's cheap, but it has terrible gas mileage, or this sleek one over here, expensive, but great mileage.

But when you look at the Accrual basis it actually reflected what happened.

So at least for month 1, the cash basis and the accrual basis of accounting

It gets great gas mileage, it has leather seats, buy our car. But it's uninspiring.

And I won't go too complicated into cash and accrual accounting and all that right now.

And that's where we're getting a lot of our mileage from. Let's actually analyze this algorithm.

I loved this guy. I got a lot of mileage out of Theodoor van De Velde.

So let's se which of these two methods of accouting, the cash method and the accrual method

I don't spend a nickel if I can help it unless it somehow profits my mileage account.

Willie, look, when I get out of Juilliard, I'll put on some mileage but right now, I just...

So in the accrual basis of accounting, you would say that you earned 400 of revenue in this month.

But if you look at the accrual basis it better reflects that you actually did some catering that month.

This is the cash basis of accounting and this is the accrual, and let's just look at the income statement

So hopefully this gives you a idea of why accrual gives a better picture of what's happening in a buisness.

In the next video, I'll try to reconcile what the Accrual income statement is telling us and the actual cash.

So I'm gonna start of, we're gonna focus on month 2 and what I've done is I've rewritten some of this accrual income statement down here so it really looks like a statement so this right here is the income statement for month 2 on an accrual basis.

So in month two I think it's fair that the Accrual method is giving us a better indication of what's actually going on.

It's an 18hour trip which breaks down into six shifts of three hours each, or alternatively we could break it down by mileage.

You know, so either you buy one of these exceptional family cars, with above average gas mileage, or you leave me the hell alone.

Log n is often not that huge a number so your mileage may vary. so you can actually try the overhead, but boy it's hard to imagine having less overhead than this

As a small example, many of us have experienced the change in driving behavior that comes from having a real time display of mileage showing precisely how one's driving habits affect the vehicle's efficiency.

And the whole idea with accrual accounting, is to match your revenues and expenses to when you actually perform the service, so it actual captures a business activity, as opposed to just capturing when cash changes hands.

Now there's one thing that you're probably confused by right now well you know, how do we reconcile everything with the cash we know that over this period we got 200 in income on an accrual basis.

If your computer has a static Internet address, you must supply a network mask here. In almost all cases this netmask will be 255.255.255.0, but your mileage may vary. If unsure, contact your Internet Service Provider

So whether you do the cash basis or accrual basis you have the same exact amount of cash, what's more interesting is how the profit relates in each of the periods, and I'll talk about that in a little more depth in the next video.

In the last video, using the accrual basis for accounting we had 200 of income in month 2, but over that same month, we saw that we went from having 100 in cash, to having negative 100 in cash, so we actually lost 200 in cash.