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What Does it Mean to be "In the Black"?

Persons or companies who are earning more money than they owe are considered to be "in the black.".
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 10 October 2014
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The phrase "in the black" is often used to refer to personal or corporate finances that are in a positive state. Essentially, it means that the individual, corporation, or non-profit organization currently has more assets than liabilities. A number of factors go into determining if the current financial status is in the black, or if circumstances dictate actions that will help to lead to that condition.

In many instances, people or companies always want to be in the black. When a business has more debt than money to pay it, it is said to be "in the red." This dates back to the old accounting process of recording credits in black ink, while debits were recorded in red ink. At the end of the day, the balance sheet was expected to show a final tally that was written in black ink, indicating a profit or at least a state of breaking even.

When there is a steady source of revenue or income and the entity is not in debt, it's often relatively easy to reach "the black" and stay there. Unfortunately, just about every home and business budget carries some degree of debt, although there are ways to control the situation. Making a profit, growing additional revenue sources, and keeping the level of indebtedness within reasonable limits are all basic tools in helping to keep the budget from going into the red.

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For people and businesses that find themselves struggling to operate in the black, immediate actions must be taken in order to reverse the situation and restore profitability. This will often involve cutting expenses, which helps to free up funds that can be applied to existing debt, as well as limiting the creation of new debt. Often, the measures required call for sacrifices, but these are often temporary and once the budget is balanced once again, it is possible to loosen restrictions on spending slightly. Care should be taken to avoid future financial periods where revenue does not exceed expenses, or staying out of debt will often prove difficult.

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Mykol
Post 6

I see making a budget and cutting out unnecessary expenses as kind of going hand in hand. Neither of these is really a fun thing to do, but is necessary if you are going to have control of your finances.

I have friends who never really knew how much money they had in their account. Their bank balance might currently show they were "in the black", but it didn't take into account things that had not cleared yet. This got them into a lot of financial trouble and they are still trying to work their way out of the hole they dug.

honeybees
Post 5

@sunshined-- Have you ever tried following a budget? I know this sounds very boring and time consuming to a lot of people, but it helped save me from a lot of financial stress.

There are many ways to go about doing this and most people find a way that fits best into their lifestyle. Basically you are making sure that you are not spending more than what you have allotted for yourself to spend.

It does take some discipline and work, but the results for me have been very rewarding. Before I made myself a budget I really had no idea where all of my money was going. I realized that I was blowing a lot of money on things that weren't necessary.

A budget doesn't have to mean you can't ever treat yourself to something fun, but when you do, you know you have the money to do it. Keeping my finances "in the black" has made my whole life less stressful.

sunshined
Post 4

When I balance my checkbook I get really nervous if things are not balanced and I am "in the red". I am fervently going back through everything to make sure I have not spent more than I have in my account. I am always hoping this is just an accounting error, but that has not always been the case.

Everything flows much smoother if my balance is always "in the black" and I don't have to stress about it. Keeping my finances in a positive financial state is something that I have to work at because I don't keep track of my expenses like I should.

julies
Post 3

@Sunny27-- You can count me among one of the people who contribute to the successful 4th quarter of many retailers starting on "Black Friday." This is probably my favorite shopping day of the year, and I don't think I am the only one who feels that way.

If I had my own business I think it would be hard to be "in the red" all year long until the last part of the year. Even if I knew the last quarter would probably be profitable it would be hard for me to operate a business throughout most of the year that wasn't "in the black."

Sunny27
Post 2

VogueKnit17- I agree that most new businesses do not become profitable for the first few years.

I wanted to add that the term “Black Friday” refers to staying in the black. It is termed Black Friday on the Friday after Thanksgiving because it is the first time that retailers are in the black for the year.

Usually the fourth quarter retail season can represents up to 70% of the retailers yearly sales revenue which is why there is such a push on sales and hiring additional people.

If retailers don’t get in the black during this season they will surely have a bad year because it would be really difficult to overcome a bad shopping season.

vogueknit17
Post 1

When people start their own businesses, it can often be hard at first to stay in the black. It can help to have some money set aside for those added expenses people often have starting out, though it can still be difficult even with money saved.

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