Hoi Les or manker

**JPaul** · 12-11-2006, 10:05 PM

I'm taking that as a no.

**Biggles** · 12-11-2006, 10:12 PM

Originally Posted by JPaul

I'm taking that as a no.

Oops sorry

Yes that is a no.

The loan cannot be treated as an asset.

The money borrowed obviously can used to buy an asset and that asset and will go in the top half of the Balance Sheet but the original loan must be shown as a liability.

**clocker** · 12-11-2006, 10:26 PM

You had me at "Oops".

**JPaul** · 12-11-2006, 10:41 PM

Originally Posted by Biggles

Originally Posted by JPaul

I'm taking that as a no.

Oops sorry

Yes that is a no.

The loan cannot be treated as an asset.

The money borrowed obviously can used to buy an asset and that asset and will go in the top half of the Balance Sheet but the original loan must be shown as a liability.

Sorry, my bad, I'm not talking about a loan.

I'm talking about a debt as in, we've supplied you with goods and you are due to pay us, type debt. Would that be an asset.

Sorry if that's too technical.

**Biggles** · 12-11-2006, 10:57 PM

Originally Posted by JPaul

Originally Posted by Biggles

Oops sorry

Yes that is a no.

The loan cannot be treated as an asset.

The money borrowed obviously can used to buy an asset and that asset and will go in the top half of the Balance Sheet but the original loan must be shown as a liability.

Sorry, my bad, I'm not talking about a loan.

I'm talking about a debt as in, we've supplied you with goods and you are due to pay us, type debt. Would that be an asset.

Sorry if that's too technical.

That is a current liability. Such debts are normally paid at invoice value within a reasonable time (can incur penalties if you go over a set period such as 60 days or perhaps gain a discount if you pay within an agreed time - say under 30 days)

Someone who owes you is an asset (assuming they will pay)
Stock is an asset (assuming you are not sitting on last year's fad)
Current cash is an asset
Trade debts are a liability

On the Balance Sheet you would have

Fixed Assets
Investments
(Perhaps some fancy stuff like Brand Names known as Intangible Assets)

Below that you would net off current assets and current liabilities

This would give you the top half of your Balance Sheet - Your Assets

So a trade debt is in that equation but it will reduce the value of your assets not increase it.

The bottom half of your Balance Sheet is how you funded the business - Equity, Long Term Debts, Retained Profits

The two should balance but as a rule in the exams they never did

**JPaul** · 12-11-2006, 11:14 PM

No, my bad again. I don't think it's a liability. I supplied the goods to someone else and they owe me the money. (Obviously I didn't, it's to do with a thing).

Is the fact that they owe me payment an asset.

Sorry for continually wording the question poorly.

**clocker** · 12-11-2006, 11:22 PM

Originally Posted by JPaul

No, my bad again. I don't think it's a liability. I supplied the goods to someone else and they owe me the money.

You're a drug dealer, aren't you?
Is "kneecapping" considered a business expense then?

**Biggles** · 12-11-2006, 11:27 PM

Originally Posted by JPaul

No, my bad again. I don't think it's a liability. I supplied the goods to someone else and they owe me the money. (Obviously I didn't, it's to do with a thing).

Is the fact that they owe me payment an asset.

Sorry for continually wording the question poorly.

Ah!

Yes money owed in from a sale is an asset (working on the assumption that they are good for the money). This is shown under current assets as discussed above.

I think I have however ably demonstrated why this is possibly one of the most tedious subjects on the planet.

You can if your inclination takes you that way work out your working capital cycle by calculating your creditor days debtors days and stock holding days to monitor your liquidity - how quickly you turn these things into real money. The quicker you pay your debts and the slower the stock turns over and the money owed you comes in = bad. The slower you pay and the quicker they pay = good. More businesses fail due to poor cash turnover than anything else.