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Unformatted text preview: have “Other Expenses” sections in their normal accounting statements. You know who you are, and if this isn’t you, it doesn’t affect you. 4. There is a row for spending related to sales tax and value-added tax (VAT), which is money a
company holds because it collects it for the government, but which must, in turn, be repaid.
Normal cash ﬂow tracks these tax-related amounts as they enter and leave the company. 5. The next three rows,“Principal Repayment of Current Borrowing,” “Other Liabilities Principal
Repayment,” and “Long-term Liabilities Principal Repayment” are for principal repayments of
debt. When you pay off your loans, you lose cash. In the example, there is a regular payoff of
$3,000 long-term debt, and a single pay off of $90,000 of the current (short-term) debt. 6. In the third row from the bottom, you record the purchase of new Other Current Assets. You’ll
have to know how much you purchase in new assets in order to estimate your Balance Sheet.
While in real life these might also be recorded as Accounts Payable and paid a few weeks later,
we make them explicit here as if they were paid immediately in cash. That makes for better cash
planning. 7. Logically, this next row is one for purchases of new Long-term Assets. These also reduce
cash. 8. The last row in spending tracks dividends. Dividends are the distribution of proﬁts to owners
and investors. They reduce cash but don’t appear anywhere else. CHAPTER 16: CASH IS KING 16.7 Planning for Inventory
Inventory is the accounting term for goods or materials a company holds temporarily and then sells
to its customers. For example, inventory in a bookstore is the value of the books the store owns
and intends to sell to its customers. Inventory in a car dealership is unsold cars. Inventory in a steel
manufacturing plant includes iron ore and coal to be made into steel.
Inventory goes into the ﬁnancials as an asset when it’s purchased. It leaves the company as cost
of goods sold when it...
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This note was uploaded on 01/26/2014 for the course BUINESS 102 taught by Professor Unknown during the Winter '09 term at University of Phoenix.
- Winter '09