(a) Give reasons for including outstanding liabilities in the Balance Sheet (b) How do you record an income generating activity of a bar in a not-for-profit...
(a) Give reasons for including outstanding liabilities in the Balance Sheet
(b) How do you record an income generating activity of a bar in a not-for-profit-making organization:
(a) Outstanding liabilities are included in the balance sheet because they represent debts that a company owes to others and are expected to be paid in the future. Including these debts in the balance sheet provides an overall picture of the company's financial position, including its assets and obligations. Outstanding liabilities also serve as a basis for calculating a company's net worth, which is the difference between its total assets and total liabilities.
(b) To record an income generating activity of a bar in a not-for-profit-making organization, you would first record the revenue generated from the sale of drinks and food. This would be recorded in the revenue account. Then, you would subtract the expenses incurred from operating the bar, such as the cost of goods sold, salaries, rent, utilities, and other operating expenses. These expenses would be recorded in the appropriate expense accounts. The net income from the bar operation would then be recorded as part of the organization's overall net income, which would be reflected in the statement of activities or the income statement. It is important to note that in a not-for-profit organization, the purpose of generating income from activities like the bar is not to make a profit, but rather to support the organization's mission and programs.
(a) Outstanding liabilities are included in the balance sheet because they represent debts that a company owes to others and are expected to be paid in the future. Including these debts in the balance sheet provides an overall picture of the company's financial position, including its assets and obligations. Outstanding liabilities also serve as a basis for calculating a company's net worth, which is the difference between its total assets and total liabilities.
(b) To record an income generating activity of a bar in a not-for-profit-making organization, you would first record the revenue generated from the sale of drinks and food. This would be recorded in the revenue account. Then, you would subtract the expenses incurred from operating the bar, such as the cost of goods sold, salaries, rent, utilities, and other operating expenses. These expenses would be recorded in the appropriate expense accounts. The net income from the bar operation would then be recorded as part of the organization's overall net income, which would be reflected in the statement of activities or the income statement. It is important to note that in a not-for-profit organization, the purpose of generating income from activities like the bar is not to make a profit, but rather to support the organization's mission and programs.