Page 164 - 6484

Intangible assets (net) may also be shown on a balance sheet. These may be
goodwill, trademarks, patents, licenses, copyrights, formulas, and franchises. In this
instance, net means the value of intangible assets minus amortization.
Liabilities

Current liabilities are those coming due in the short term, usually the coming
year. These are accounts payable; employment, income and sales taxes; salaries
payable; federal and state unemployment insurance; and the current year’s portion of
multiyear debt. A comparison of the company’s current assets and its current
liabilities reveals its working capital. Many managers use an accounts receivable
aging report and a current inventory listing as tools to help them in management of
the current asset structure.
Long-term debt, or liabilities, may be bank notes or loans made to purchase the
business’s fixed asset structure. Long-term debt/liabilities come due in a period of
more than one year. The portion of a bank note that is not payable in the coming year
is long-term debt/liability.
For example, Success-R-Us’s owner may take out a bank note to buy land and
a building. If the land is valued at $50,000 and the building is valued at $50,000, the
business’s total fixed assets are $100,000. If $20,000 is made as a down payment and
$80,000 is financed with a bank note for 15 years, the $80,000 is the long-term debt.
Owner’s Equity
Owner’s equity refers to the amount of money the owner has invested in the
firm. This amount is determined by subtracting current liabilities and long-term debt
from total assets. The remaining capital/owner’s equity is what the owner would have
left in the event of liquidation, or the dollar amount of the total assets that the owner
can claim after all creditors are paid.”
The Income Profit and Loss Statement (P&L)
The profit and loss statement (P&L) shows the relation of income and expenses
for a specific time interval. The income/P&L statement is expressed in a one-month
format, January 1 through January 31, or a quarterly year-to-date format, January 1
through March 31. This financial statement is cumulative for a 12-month fiscal
period, at which time it is closed out. A new cumulative record is started at the
beginning of the new 12-month fiscal period.
The P&L statement is divided into five major categories: (1) sales or revenue,
(2) cost of goods sold/cost of sales, (3) gross profit, (4) operating expenses, and (5)
net income. Let’s look at each category in turn.
Sample Income Statement
Success-R-Us Income Statement
For the year ended December 31, 2009

Sales/Revenues (all on credit) $500,000
Cost of Goods Sold 380,000

Gross Profit 120,000

Operating Expenses

164