The Symphonic Blog article titled “Basic Accounting Terms Every Music Entrepreneur Should Know” offers a concise guide to essential financial concepts tailored for musicians, artists, and independent labels.
Authored by Randi Zimmerman, the piece emphasizes the importance of financial literacy in the music industry, presenting key accounting terms with relatable examples to aid understanding.
Profit & Loss Statement (P&L)
A Profit and Loss Statement, also known as an income statement, provides a snapshot of a business’s financial performance over a specific period—be it a quarter, a year, or a tour cycle.
It details income sources (like streaming, touring, merchandise) against expenses (such as production, travel, promotion) to determine profitability.
Example: If an artist earns $15K from streaming, $10K from touring, and $5K from merchandise, but spends $18K on production, travel, and promotion, the P&L would reveal a $12K loss, highlighting the necessity of such statements for informed financial decisions.
Chart of Accounts
This is a categorized list of all income sources and expenses, akin to a tracklist in a Digital Audio Workstation (DAW). It helps in organizing financial data, making it easier to monitor and manage different revenue streams and expenditures.Common categories include:
Income: Streaming royalties, live performance fees, sync placements, merchandise sales.
Expenses: Studio time, equipment purchases, marketing, travel, payments to collaborators.
Maintaining a well-structured Chart of Accounts is beneficial for tasks like tax preparation or applying for grants and loans.
Recoupables vs. Non-Recoupables
Understanding the distinction between recoupable and non-recoupable expenses is crucial:
Recoupables: Expenses that a label expects to recover from an artist’s future earnings before the artist receives any royalties. For instance, a $25K advance for album recording is recoupable; the label will deduct this amount from future royalties.
Non-Recoupables: Costs covered by the label that the artist isn’t expected to repay, such as a $1K expense for press photos, provided it’s labeled as non-recoupable.
Awareness of these terms helps artists avoid unexpected deductions from their earnings.
Source: Basic Accounting Terms Every Music Entrepreneur Should Know
