Cash-basis accounting and barter
If you don't track the accrued costs involved, then it means that the valuation of the deal will be somewhat arbitrary, but it still can be made by looking at the value of equivalent or similar goods or services. It's rather similar to accounting treatment of (noncash) gifts, for example. You make up a valuation, and as there are obvious tax reasons to make it as low as possible, the valuation should be justifiable or you risk the wrath of IRS. If you sell the same goods or services for cash, then the value of the barter deal is obvious. If this barter is the only time you're handling this particular type of goods, a wholesale price of similar items (either of your items, or the items that you're receiving in barter) could work.
This should not be taken to be financial advice or guidance. My opinions are my own and do not represent professional advice or consultation on my part or that my employer. Now that we have that clear... Your idea is a very good one.  I'm not sure about the benefits of a EBITDA for personal financial planning (or for financial analysis, for that matter, but we will that matter to the side). If you have a moderate (>$40,000) income, then taxes should be one the largest, if not the largest chunk of your paycheck out the door.  I personally track my cash flow on a day-by-day basis. That is to say, I break out the actual cash payments (paychecks) that I receive and break them apart into the 14 day increments (paycheck/14). I then take my expenses and do the same. If you organize your expenses into categories, you will receive some meaningful numbers about your daily liquidity (i.e: cash flow before taxes, after taxes, cash flow after house expenses, ect) This serves two purposes. One, you will understand how much you can actually spend on a day-to-day basis. Second, once you realize your flexibility on a day-to-day basis, it is easy to plan and forecast your expenses. As with most things accounting/tax related it depends. In general though yes. As an example, if the client were to buy equipment on credit before fiscal year end, in lets say December, but did not pay until the next year started in January, then under cash basis they would not have the purchase accounted for until they made payment. That means they could not claim any deductions from the purchase. Under accrual, the purchase would have been put on the books in December, when the equipment was installed, and they would have been able to claim any deductions. "Yes, U.S. currency of any denomination is ""legal tender FOR ALL DEBTS, public and private."" But when you go into a store you (normally) don't owe them anything. In that case, it's more like a barter transaction: Your currency for their soda. Meaning that they can refuse to take ""your currency."" Open an account at the store, and run up a debt. Then you can pay in any denomination." "Keep in mind that all of the information below assumes: That being said, here are some examples of national tax laws relating to barter transactions. Obviously this isn't an exhaustive list, but based on my grossly non-representative sample, I think it's fairly safe to assume that barter transactions are more likely taxable than not.  You're referring to a barter system; in the United States, the IRS is very specific about this (see the section titled Bartering).  Bartering is an exchange of property or services. The fair market   value of goods and services exchanged is fully taxable and must be   included on Form 1040 in the income of both parties. The IRS also provides more details: Bartering occurs when you exchange goods or services without   exchanging money. An example of bartering is a plumber doing repair   work for a dentist in exchange for dental services. You must include   in gross income in the year of receipt the fair market value of goods   and services received in exchange for goods or services you provide or   may provide under the bartering arrangement. Generally, you report this income on Form 1040, Schedule C (PDF),   Profit or Loss from Business or Form 1040, Schedule C-EZ (PDF), Net   Profit from Business. If you failed to report this income, correct   your return by filing a Form 1040X (PDF). Refer to Topic 308 for   amended return information. So yes, the net value of bartered goods or services is most likely taxable. According to the Australian Tax Office: Barter transactions are assessable and deductible for income tax   purposes to the same extent as other cash or credit transactions. Her Majesty's Revenue and Customs states that: If you supply services or goods (new or second-hand) and receive other   goods or services in payment, there are two separate supplies: You must account for VAT, and so must your customer if they're   VAT-registered. The VAT treatment is the same as for part-exchanges.   You must both account for VAT on the amounts you would each have paid   for the goods or services if there had been no barter and they had   been paid for with money. Searching the website of the Federal Tax Service for the Russian/Cryllic word for barter (бартер) doesn't yield any results, but that might be because even between Google Translate and the rest of the internet, I don't speak Russian. That being said, I did manage to find this (translated from the first full paragraph of the Russian, beginning with ""Налог на доходы..."": The tax on personal income is paid by citizens of the Russian   Federation with all types of income received by them in the calendar   year, either in cash or in kind. Since bartering would probably qualify as an in kind transaction, it would likely be taxable.  The South African Revenue Service includes barter transactions in the supply of goods taxed under the VAT.  The term “supply” is defined very broadly and includes all forms of   supply and any derivative of the term, irrespective of where the   supply is effected. The term includes performance in terms of a sale,   rental agreement, instalment credit agreement or barter transaction. Look for section 3.6, Supply and Taxable Supply, found on p17 of the current version of the linked document." I admit, in the long term there are a good number of kinks to work out, but in the end I want to see some system where people in general can seize the means to their own well being without stepping on one another.  The management corruptions you talked about is another reason why I prefer Worker-Co-ops to be the optimum form of issuing business, because its not just a few people in charge, it's a whole social group acting in unison.    When you discuss the mom-and-pop store having no suppliers, it would be good to promote some way of each money supply to have a share of each industry within it.  There are always some people in every trade looking for their next job.  They just have to find a supply where there trade is in demand.  The process is self feeding.  Next off, or course the mechanism of the system would work in a way that firm's can't just pay themselves with their own debt, they have to issue it to their creditors first, and even then it's practically impossible to accept your own debt as payment.  You would have to take some from a competitor at best.    What I've been trying to do is find some system where no one institution or no one alliance holds the keys to the definition of value.  If you have five to eight dictators fighting at once as opposed to one financial dictator who can oversee all, like the fed scenario you just described, It's more possible for people who are freer relatively to survive freely between the borders of these spheres of influence, as they can play each dictator off the other.  at least from your dialogue I can see you're one of those who gets what I'm trying to aim for.    Here's another idea I've explored with it, that's similar but may make the environment slightly different, so let me know what you think  what I call the Revolving Tax Window, where the government accepts different bondnotes, both in quantity and specific assortments of notes, in intervals of every business quarter, so that the demand for specific notes changes four times a year.  From January until the end of March they could accept Taxes in notes from Firms A,F,H, and T, and for April into June it could be just B and S, and so on.  The options for note issuing could be set on a list of firms registered with the SEC or whoever.   The combination for the quarter could be picked at random by a randomizing algorithm, so no firm could make a plan to be a market dictator, and a sense of dynamism is maintained in the economy.    Obviously, the more firms are properly registered on this list, the more combinations of monetary combinations you have, and the more power is distributed from too much control by anybody.    What you can do is choose whether or not you want there to be less or more notes in the next quarter, because just like fiscal policy and conventional monetary policy, the extremes have trade offs, but different ones; to few currencies, the economy may be stimulated, but you get market dictators via monetary oligopoly, even if temporary.  Too many, you avoid market dictators who will be more focused on getting a real return by investing in competing ventures based on what will actually return investment, but the economy may not be as stimulated.  What do you think of this structural alternative?  (One of the focal sources I've been building my economic policy on has been *Debt: The First 5,000 Years* by David Graeber, if anyone's familiar.) "P/E is price to earnings, or the price of the company divided by annual earnings. Earnings, as reported, are reported on accrual basis. Accrual basis accounting is...without going too deep, like taking a timeline, chopping it up and throwing different bits and pieces of every year into different piles.  Costs from 2008 might show up in 2011, or the company might take costs in 2011 that aren't necessarily costs until 2012.  Examples would include one-time charges for specific investments, like new shipping centers, servers for their hosting services, etc.    Free cash flow is the amount of cash Amazon is generating from its operations. Free cash flow is almost always different from earnings because it's the amount of Earnings + adjustments for non-cash activities - capital expenditures (long-term investments.)  Earnings is one thing.  Cash generation is a completely different animal.  There are plenty of companies that ""earn"" billions, but only have a few hundred million in cash to show for it because their earnings have to be reinvested into new stuff to grow/maintain the business.  To have a free cash flow yield of 2.5% is to have a company valued at $40 for each $1 of free cash flow that the company generates each year.  $1/$40 = 2.5%.  SGA = Selling, General, &amp; Administrative expenses.  These are the costs of running the company - paying salaries, advertising, etc.  This cost is second only to COGS, which is Cost of Goods Sold.    Currently, Amazon pays $.774 for every $1 product it sells.  Its operations add another ~$.20 to that total.  After taxes, Amazon keeps about 2 cents of every dollar's worth of product it sells.  This 2 cents is Amazon's net margin of 2%.  Net margin is (net income)/(sales).  If Amazon earned $3 for every $100 in sales it would have a net margin of 3%.     Let me know if this makes no sense.  If there's anything in particular that is especially confusing, definitely reply and I'll better clarify on specific items.  Fire away with any questions, also.  I love to discuss finance and accounting." "One study found that, while people using gift certificates bought no more items than those who used cash, they tended to spend more per item. In ""Study 3"" the paper ""Monopoly money: The effect of payment coupling and form on spending behavior"", sets up a case where shoppers are given $50 in cash and $50 in gift certificates (the leftover of which can be exchanged for cash). They were asked to choose different brands and types of items to buy. They study found that There was no difference in the number of items purchased as a   function of payment form for scrip However means across all product categories show that   participants spent more per item when they were given [the gift certificate]" I wrote a small Excel-based bookkeeping system that handles three things: income, expenses, and tax (including VAT, which you Americans can rename GST).  Download it here.