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manager to make the necessary changes and adjustments before major problems
develop.
Years ago, Success-R-Us experienced problems because its management style
was insufficiently proactive. A reactive manager waits to react to problems and then

solves them by crisis management. This type of manager goes from crisis to crisis
with little time in between to notice opportunities that may become available. The
reactive manager’s business is seldom prepared to take advantage of new
opportunities quickly. Businesses that are managed proactively are more likely to be
successful, and this is the result that Success-R-Us is experiencing since it instituted a
company-wide initiative to promote proactive controls.
Like most organizations, Success-R-Us uses computer software programs to do
record keeping and develop financials. These programs provide a chart of accounts
that can be individualized to the business and the templates for each account ledger,
the general ledgers, and the financial reports. These programs are menu driven and
user-friendly, but knowing how to input the data correctly is not enough. A manager
must also know where to input each piece of data and how to analyze the reports
compiled from the data. Widely accepted accounting guidelines dictate that if you
have not learned a manual record-keeping system, you need to do this before
attempting to use a computerized system.
The Balance Sheet
The balance sheet is a snapshot of the business’s financial position at a certain
point in time. This can be any day of the year, but balance sheets are usually done at
the end of each month. With a budget in hand, you project forward and develop pro
forma statements to monitor actual progress against expectations.
As shown in the following table, this financial statement is a listing of total
assets (what the business owns—items of value) and total liabilities (what the
business owes). The total assets are broken down into subcategories of current assets,
fixed assets, and other assets. The total liabilities are broken down into subcategories
of current liabilities, long-term liabilities/debt, and owner’s equity.
Assets
Current assets are those assets that are cash or can be readily converted to cash
in the short term, such as accounts receivable or inventory. In the balance sheet
shown for Success-R-Us, the current assets are cash, petty cash, accounts receivable,
inventory, and supplies.
Sample Balance Sheet
Success-R-Us Balance Sheet
December 31, 2009

Assets Liabilities
Current Assets Current Liabilities

Cash $12,300 Notes Payable $5,000

Petty Cash 100 Accounts Payable 35,900

Wages Payable 14,600

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