NOTES ON THE FINANCIAL STATEMENTS INCOME STATEMENT This shows cumulative totals for each revenue and expense account for the fiscal year to date. It also indicates the difference of revenue over expenses which is called "income"[*] and this amount appears on the Balance Sheet as Current Earnings. Revenue accounts indicate different sources of money coming in to Trent Radio. Expense accounts indicate money spent on things that maintain the activities of the organisation which are used up and therefore do not increase the value of the organisation. * Also this is sometimes refered to as Surplus or Deficit BALANCE SHEET The Balance Sheet shows Assets, Liabilities and Equity. Assets are things that are owned by the organisation which increase its value. Liabilities are amounts owed to other people which decrease the value of the organisation. Equity is what the organisation is worth. The Sacred Accounting formula is thus; ASSETS = LIABILITY + EQUITY Assets; Current Assets - for Trent Radio these accounts all involve money and are listed in decreasing liquidity; Cash in the Bank, Cash on hand, Petty Cash, Term deposits, Accounts Receivable, Prepaid Expenses. Cash in Bank - the current bank balance Cash on Hand - money awaiting deposit or being usined as a float Petty Cash - money advanced to staff or others for the purchase of sundries. Term Deposits - short term investments usually yielding a slightly better return than a savings account Accounts Receivable - when an amount is entered as receivable, the appropriate revenue account is credited so it shows up on the income statement. Once a receivable amount is received, the receivable account is decreased and the cash account is increased. Doubtful Accounts - if an amount is receivable but, for one reason or another, you don't think you'll get it the Doubtful Accounts account is credited and the Bad Debts expense account is debited. This more fully reflects how much money the organisation has. Prepaid Expenses - this is money paid in advance for an expense which has not yet been incurred. When the money is paid the cash account decreases and this account increases. Once the expense has actually happened this account is decreased and the relevant expense account is increased. A typical example of this would be that portion of an insurance premium not "used up" at the end of a fiscal year. Fixed Assets - These are actual things that the organisation owns, like equipment and property. Land - That portion of real estate attibutable to the cost of the land Building - That portion of real estate attibutable to the cost of the buildings and structures on the land. Office Equipment - Desks, chairs, tables, computes used for administration &c., shown at the purchase cost. Technical Equipment - Audio, broadcast and related equipment, &c, shown at the purchase cost. Technical Renovation - Materials and Labour associated with Upgrading Trent Radio's technical facilities. This would include installation costs, but not repairs. Depreciation - assets lose their value as they are used and so depreciation is calculated to reflect this. For Trent Radio the land owned does not depreciate at all. The building will be written off in 25 years and any equipment purchased will be written off in 7 years. Liabilities; Current Liabililities - these are amounts owed which are paid off over a short period of time, usually within the current fiscal year. Accounts Payable - when an amount is entered as payable the appropriate expense or asset account is increased and it is shown on the income statement. When this amount is paid the cash account is decreased and so is the payable account. Deferred Income - an amount received for which a service has not yet been rendered. For example; Sponsorship monies received prior to the completion of a Sponsorship season. Accrued Liability - simply, an amount owing for which an invoice has not been received. This would include Copyright fees. Long Term Liabilities - Trent Radio is paying off a bank loan and a mortgages for the house. Equity; Equity is the difference between assets and liabilites, what is owned and what is owed, and shows what the organisation is worth. A restatement and rearramgment of the Accounting Formula; if ASSETS = LIABILITY + EQUITY then ASSETS - LIABILITY = EQUITY Retained Earnings - This is the accumulated surplus from the last fiscal year and the amount doesn't change during the current fiscal year. Current Earnings - this amount comes from the income statement and is the excess of revenue over expenses (called Income on the statement). BUDGET AND CASHFLOW - not being prepared a this time. BUDGET AND CASHFLOW This shows money out and money in over a set period of time. Money goes out to acquire assets, reduce liabilities and pay expenses. Money comes in as revenue. For this particular cashflow the amounts shown from September to December 1986 are actual figures, while the amounts from January to August 1987 are predicted figures. The totals for each account over the period are given in the far right-hand column. The total revenue and expenditures for each month are given at the bottom. The excess of revenue over expenditures for each month are indicated in the row "Rev - Expenditures". The cumulative excess of revenue over expenditures is indicated in the row "Cumulative". This includes at the beginning the cash on hand at the beginning of the period ($9707) and shows the cash on hand at the end of each month as you go along the row. The far right-hand figure is the surplus for the period. If it is a minus figure then there is not enough money to cover all the costs indicated and something has to be done. Joanna Rogers, 6 January 1987