IdeaWazaWiki - User contributions [en]

Transculturation

2009-12-01T05:48:00Z

24.13.206.83: /* Concepts */

{{Essay-like|date=December 2007}}
{{Refimprove|date=May 2008}}

'''Transculturation''' is a term coined by Cuban anthropologist [[Fernando Ortiz]] in 1947 to describe the phenomenon of merging and converging cultures.

ansition from one culture to another because this does not consist merely in acquiring another culture, which is what the English word ''acculturation'' really implies, but the process also necessarily involves the loss or uprooting of a previous culture, which could be defined as a deculturation. In addition it carries the idea of the consequent creation of new cultural phenomena, which could be called neoculturation.<ref>{{Harvnb|Ortiz|1995|p=102-103}}</ref></blockquote> Ortiz also referred to the devastating impact of Spanish colonialism on Cuba's indigenous peoples as a "failed transculturation."

In simple terms, transculturation reflects the natural tendency of people (in general) to resolve conflicts over time, rather than exacerbating them. In the modern context, both conflicts and resolutions are amplified by communication and transportation technology —the ancient tendency of cultures drifting or remaining apart has been replaced by stronger forces for bringing societies together. Where transculturation impacts ethnicity and ethnic issues the term "ethnoconvergence" is sometimes used.

In one general sense, transculturation covers [[war]], [[ethnic conflict]], [[racism]], [[multiculturalism]], [[cross-culturalism]], [[interracial marriage]], and any other of a number of contexts that deal with more than one culture. In the other general sense, transculturation is one aspect of global phenomena and human events.

The general processes of transculturation are extremely complex—steered by powerful forces at the macrosocial level, yet ultimately resolved at the interpersonal level. The driving force for conflict is simple [[proximity]] -- boundaries, once separating people (providing for a measure of isolation) become the issue of a conflict when societies encroach upon one another territorially. If a means to co-exist cannot be immediately found, then conflicts can be hostile, leading to a process by which contact between individuals leads to some resolution. Often, history shows us, the processes of co-existence begins with hostilities, and with the natural passing of polarist individuals, comes the passing of their polarist sentiments, and soon some resolution is achieved. Degrees of hostile conflict vary from outright genocidal conquest, to lukewarm infighting between differing political views within the same ethnic community.{{Citation needed|date=May 2008}}

=
These changes often represent differences between homeland pons, and their [[diasporic]] communities abroad. Nevertheless, obstacles to '''ethnoconvergence''' are not great. The primary issue; [[language]], (''hence, communication and education'') can, be overcome within a single generation - as is evident in the easy acclimation of children of foreign parents. English, for example, is spoken by more non-Anglo-American people than Anglo-Americans, making it the current [[lingua-franca]], the worldwide de facto standard international language.

===Homogenization versus ethnoconvergence===
It has been observed that even in monolingual, industrial societies like urban North America, some individuals do cling to a "modernized" primordial identity, apart from others. Some intellectuals, such as [[Michael Ignatieff]], argue that convergence of a general culture does not directly entail a similar convergence in [[ethnic]] identities. This can become evident in social situations, where people divide into separate groups, despite being of an identical ''"super-ethnicity"'', such as [[nationality]].

Within each smaller ethnicity, individuals may tend to see it perfectly justified to assimilate with other cultures, and some others view assimilation as wrong and incorrect for their culture. This common theme, representing dualist opinions of ethnoconvergence itself, within a single ethnic group is often manifested in issues of [[sexual partners and matrimony]], employment preferences, etc. These varied opinions of ethnoconvergence represent themselves in a spectrum; [[cultural assimilation|assimilation]], [[wikt:homogeneous|homogenization]], [[acculturation]], and [[cultural compromise]] are commonly used terms for ethnoconvegence which flavor the issues to a bias.

Often it's in a secular, multi-ethnic environment that cultural concerns are both minimalised and exaccerbated; Ethnic prides are boasted, hierarchy is created ("center" culture versus "periphery") but on the other hand, they will still share a common "culture", and common language and behaviours. Often the elderly, more conservative-in-association of a clan, tend to reject cross-cultural associations, and participate in ethnically similar community-oriented activities. [[Xenophobia|Xenophobes]] tend to think of cross-cultural contact as a component of [[cultural assimilation|assimilation]], and see this as harmful.

===Obstacles to ethnoconvergence===
The obstacle to ethnoconvergence is [[ethnocentrism]], which is the view that one's culture is of greater importance than another's.' Ethnocentrism often takes different forms, as it is a highly personal bias, and manifests itself in countless aspects of culture. [[Religion]], or belief, is the prime ethnocentric divider. Second is [[convention (norm)|custom]], which may overlap religion. With the adherence to each distinct component, comes the repulsion of the other. In most regions, ethnic divides are binary, meaning only two distinct cultures are present, each seeing the other as foreign. Many, however make the point that the binary example is the exception, and the norm is far more dynamic.

We can divide ethnicity into two distinct areas, as they relate to ethnoconvergence: Utilitarian traits, and traditional customs.

Religion, on the other hand, is a highly personal and attached part of culture. However, religion does not neatly correspond with ethnic identity. In many [[Multicultural|cosmopolitan]] societies, religion is everything - social, utilitarian, intellectual, political; from the point of view of people of immersed cultures; The very concept of ethnicity and its distinctions is incongruous to their immersed concepts.

In many societies, such as in those in Europe, languages are considered a significant component of ethnic values. This does not mean that most Europeans reject learning other languages. Quite the contrary, Europeans are often polyglots, and may label other individuals by their ethnicities; practical means of distinguishing cultures may resemble tendencies similar to ethnocentrism.

However, the political and cultural significance of regional or national languages are retained due to the fact that these polyglots conform to the linguistic norms of the place they visit - doing "as the Romans do". Thus, conforming to the "ethnic integrity" of the region.

It has even become a cliché that "to learn a new language is to adopt a new soul". There are many other examples of the essential significance of language. In pre-[[Russia]]n [[Siberia]], [[Tatar-Mongol]] colonists in the [[Taiga]] often recognized indigenous speakers of [[Turkic languages]] as their "own people" and non-Turkic groups as "foreigners", despite these indigenous groups having a similar level of material culture, and sharing much of a primitive culture with tribes foreign to the Muslim-Buddhist Tatar-Mongols.

==See also==

* [[Acculturation]]
* [[Enculturation]]
* [[Cross-cultural]]
* [[Intercultural relations]]
* [[Intercultural competence]]
* [[Multiculturalism]]
* [[Ángel Rama]]

==Notes==
{{reflist}}

==References==
*{{citation| last=Allatson| first=Paul |year=2007 |title=Key Terms in Latino/a Cultural And Literary Studies |place=Oxford and Malden, MA |publisher=Blackwell |isbn=1405102500}}.

*Duno-Gottberg, Luis. (2003). ''Solventando las diferencias: La ideología del mestizaje en Cuba'', Iberoamericana – Frankfurt am Main, Vervuert, Madrid.

*{{citation|last=Ortiz| first=Fernando | author-link=Fernando Ortiz|title=Cuban Counterpoint: Tobacco and Sugar| place=Durham, NC | publisher=Duke University Press |year=1995 |isbn=0-8223-1616-1}}. Trans. Harriet de Onís.

[[Category:Culture terms]]
[[Category:Human migration]]
[[Category:Cultural geography]]
[[Category:Multiculturalism]]
[[Category:Cultural studies]]

[[de:Transkulturation]]
[[es:Transculturación]]
[[fr:Transculturation]]
[[pl:Transkulturacja]]
[[pt:Transculturação]]
[[ta:பிறபண்பாட்டுமயமாதல்]]

Transculturation

2009-12-01T05:47:41Z

24.13.206.83: /* Definition */

{{Essay-like|date=December 2007}}
{{Refimprove|date=May 2008}}

'''Transculturation''' is a term coined by Cuban anthropologist [[Fernando Ortiz]] in 1947 to describe the phenomenon of merging and converging cultures.

ansition from one culture to another because this does not consist merely in acquiring another culture, which is what the English word ''acculturation'' really implies, but the process also necessarily involves the loss or uprooting of a previous culture, which could be defined as a deculturation. In addition it carries the idea of the consequent creation of new cultural phenomena, which could be called neoculturation.<ref>{{Harvnb|Ortiz|1995|p=102-103}}</ref></blockquote> Ortiz also referred to the devastating impact of Spanish colonialism on Cuba's indigenous peoples as a "failed transculturation."

In simple terms, transculturation reflects the natural tendency of people (in general) to resolve conflicts over time, rather than exacerbating them. In the modern context, both conflicts and resolutions are amplified by communication and transportation technology —the ancient tendency of cultures drifting or remaining apart has been replaced by stronger forces for bringing societies together. Where transculturation impacts ethnicity and ethnic issues the term "ethnoconvergence" is sometimes used.

In one general sense, transculturation covers [[war]], [[ethnic conflict]], [[racism]], [[multiculturalism]], [[cross-culturalism]], [[interracial marriage]], and any other of a number of contexts that deal with more than one culture. In the other general sense, transculturation is one aspect of global phenomena and human events.

The general processes of transculturation are extremely complex—steered by powerful forces at the macrosocial level, yet ultimately resolved at the interpersonal level. The driving force for conflict is simple [[proximity]] -- boundaries, once separating people (providing for a measure of isolation) become the issue of a conflict when societies encroach upon one another territorially. If a means to co-exist cannot be immediately found, then conflicts can be hostile, leading to a process by which contact between individuals leads to some resolution. Often, history shows us, the processes of co-existence begins with hostilities, and with the natural passing of polarist individuals, comes the passing of their polarist sentiments, and soon some resolution is achieved. Degrees of hostile conflict vary from outright genocidal conquest, to lukewarm infighting between differing political views within the same ethnic community.{{Citation needed|date=May 2008}}

==Concepts==
Where attempts are made to keep a cultural identity "pure," the realities of social change, via natural and artificial means, dictate that cultures do not remain "pure" and never were "pure" in the first place, but are destined to change. It is the perception of individuals within cultures that their cultures do not in fact change fundamentally over time.

Human [[death|mortality]] and [[reproduction]] provides for social regeneration as well, and by this process of regeneration, which naturally includes sexual union, other cultures are often integrated. The inability of societies to maintain divisions over generations, despite attempts to engrain divisive elements, is reflective of this. As parents die, their children have the opportunity to reflect upon the nature and validity of established non-convergent precepts, and change them if they like.

These changes often represent differences between homeland pons, and their [[diasporic]] communities abroad. Nevertheless, obstacles to '''ethnoconvergence''' are not great. The primary issue; [[language]], (''hence, communication and education'') can, be overcome within a single generation - as is evident in the easy acclimation of children of foreign parents. English, for example, is spoken by more non-Anglo-American people than Anglo-Americans, making it the current [[lingua-franca]], the worldwide de facto standard international language.

===Homogenization versus ethnoconvergence===
It has been observed that even in monolingual, industrial societies like urban North America, some individuals do cling to a "modernized" primordial identity, apart from others. Some intellectuals, such as [[Michael Ignatieff]], argue that convergence of a general culture does not directly entail a similar convergence in [[ethnic]] identities. This can become evident in social situations, where people divide into separate groups, despite being of an identical ''"super-ethnicity"'', such as [[nationality]].

Within each smaller ethnicity, individuals may tend to see it perfectly justified to assimilate with other cultures, and some others view assimilation as wrong and incorrect for their culture. This common theme, representing dualist opinions of ethnoconvergence itself, within a single ethnic group is often manifested in issues of [[sexual partners and matrimony]], employment preferences, etc. These varied opinions of ethnoconvergence represent themselves in a spectrum; [[cultural assimilation|assimilation]], [[wikt:homogeneous|homogenization]], [[acculturation]], and [[cultural compromise]] are commonly used terms for ethnoconvegence which flavor the issues to a bias.

Often it's in a secular, multi-ethnic environment that cultural concerns are both minimalised and exaccerbated; Ethnic prides are boasted, hierarchy is created ("center" culture versus "periphery") but on the other hand, they will still share a common "culture", and common language and behaviours. Often the elderly, more conservative-in-association of a clan, tend to reject cross-cultural associations, and participate in ethnically similar community-oriented activities. [[Xenophobia|Xenophobes]] tend to think of cross-cultural contact as a component of [[cultural assimilation|assimilation]], and see this as harmful.

===Obstacles to ethnoconvergence===
The obstacle to ethnoconvergence is [[ethnocentrism]], which is the view that one's culture is of greater importance than another's.' Ethnocentrism often takes different forms, as it is a highly personal bias, and manifests itself in countless aspects of culture. [[Religion]], or belief, is the prime ethnocentric divider. Second is [[convention (norm)|custom]], which may overlap religion. With the adherence to each distinct component, comes the repulsion of the other. In most regions, ethnic divides are binary, meaning only two distinct cultures are present, each seeing the other as foreign. Many, however make the point that the binary example is the exception, and the norm is far more dynamic.

We can divide ethnicity into two distinct areas, as they relate to ethnoconvergence: Utilitarian traits, and traditional customs.

Religion, on the other hand, is a highly personal and attached part of culture. However, religion does not neatly correspond with ethnic identity. In many [[Multicultural|cosmopolitan]] societies, religion is everything - social, utilitarian, intellectual, political; from the point of view of people of immersed cultures; The very concept of ethnicity and its distinctions is incongruous to their immersed concepts.

In many societies, such as in those in Europe, languages are considered a significant component of ethnic values. This does not mean that most Europeans reject learning other languages. Quite the contrary, Europeans are often polyglots, and may label other individuals by their ethnicities; practical means of distinguishing cultures may resemble tendencies similar to ethnocentrism.

However, the political and cultural significance of regional or national languages are retained due to the fact that these polyglots conform to the linguistic norms of the place they visit - doing "as the Romans do". Thus, conforming to the "ethnic integrity" of the region.

It has even become a cliché that "to learn a new language is to adopt a new soul". There are many other examples of the essential significance of language. In pre-[[Russia]]n [[Siberia]], [[Tatar-Mongol]] colonists in the [[Taiga]] often recognized indigenous speakers of [[Turkic languages]] as their "own people" and non-Turkic groups as "foreigners", despite these indigenous groups having a similar level of material culture, and sharing much of a primitive culture with tribes foreign to the Muslim-Buddhist Tatar-Mongols.

==See also==

* [[Acculturation]]
* [[Enculturation]]
* [[Cross-cultural]]
* [[Intercultural relations]]
* [[Intercultural competence]]
* [[Multiculturalism]]
* [[Ángel Rama]]

==Notes==
{{reflist}}

==References==
*{{citation| last=Allatson| first=Paul |year=2007 |title=Key Terms in Latino/a Cultural And Literary Studies |place=Oxford and Malden, MA |publisher=Blackwell |isbn=1405102500}}.

*Duno-Gottberg, Luis. (2003). ''Solventando las diferencias: La ideología del mestizaje en Cuba'', Iberoamericana – Frankfurt am Main, Vervuert, Madrid.

*{{citation|last=Ortiz| first=Fernando | author-link=Fernando Ortiz|title=Cuban Counterpoint: Tobacco and Sugar| place=Durham, NC | publisher=Duke University Press |year=1995 |isbn=0-8223-1616-1}}. Trans. Harriet de Onís.

[[Category:Culture terms]]
[[Category:Human migration]]
[[Category:Cultural geography]]
[[Category:Multiculturalism]]
[[Category:Cultural studies]]

[[de:Transkulturation]]
[[es:Transculturación]]
[[fr:Transculturation]]
[[pl:Transkulturacja]]
[[pt:Transculturação]]
[[ta:பிறபண்பாட்டுமயமாதல்]]

Archive:Business finance

2008-10-07T04:35:01Z

24.13.43.213:

{{Cleanup|Wikifying}}
If you are going to start a business you need to keep track of your finances. MONEY is the life blood of the economy and BUSINESS is the way in which people and capital are organized within the economy to create money and productivity. In essence, business is like the '''heart''' of the economy while money is the '''blood'''.

The point it is that business and capitalism are arguably a great part of what has made America such a successful country. Over the years a variety of laws [http://www.sec.gov/about/laws.shtml] have been introduced to regulate financial aspects of business. Keeping track of finances in business helps to reduce fraud and waste. Keeping track of finances also allows for maximum efficiency to be attained. It is also the law.

This course is intended to help give you an idea of how business finances work. This is a wiki, so you are encouraged to add and edit the course. This course will probably not lead you towards earning a degree in business, finance, accounting, or business finance; however, it will hopefully give you a better idea of how business finance works, and maybe, just maybe, if you wanted to start your own business and use sound financal practices, you could.

The Time Value of Money

== Balance sheet structure ==

The following balance sheet structure is just an example. It does not show all possible kinds of assets, equity and liabilities, but it shows the most usual ones. Because it shows [[Goodwill]] it could be a [[Consolidated account|consolidated]] balance sheet. Monetary values are not shown, summary (total) rows are missing as well.

'''Balance Sheet of XYZ, Ltd. as on 31 December 2005'''

'''ASSETS'''

'''Current Assets'''
Cash and cash equivalents
Marketable Securities
[[Accounts receivable]]
[[Inventory|Inventories]]
Prepaid Expenses
Investments held for trading
Other current assets

'''Non-Current Assets (Fixed Assets)'''
Property, plant and equipment
Less : Accumulated Depreciation
[[Goodwill]]
[[Intangible asset|Other intangible fixed assets]]
[[Associate company|Investments in associates]]
[[Deferred tax]] assets

'''LIABILITIES and EQUITY'''

'''Current liabilities'''
[[Accounts payable]]
Current income tax liabilities
Current portion of bank loans payable
Short-term [[Provision (Accounting)|provisions]]
Other current liabilities

'''Long term Liabilities (Fixed Liabilities)'''
[[Loan|Bank loans]]
[[Security (finance)|Issued debt securities]]
[[Deferred tax]] liability
[[Provision (Accounting)|Provisions]]
[[Minority interest]]

'''Capital and reserves'''
[[Share capital]]
Capital [[Reserve (Accounting)|reserves]]
Revaluation [[Reserve (Accounting)|reserve]]
Translation [[Reserve (Accounting)|reserve]]
[[Retained earnings]]

'''Analogy'''

Knowing is not the same as understanding, so it is helpful to present an analogy.

* Think of an investment as a water reservoir. The value of the investment is the volume of water in it. The shareholder equity
(net equity) on the balance sheet measures this value.
* Streams empty into the reservoir, adding more water. These inflows are measured by Revenues on the Income statement.
* Streams run out of the reservoir, depleting it. These outflow are measured by Expenses on the Income statement.
o The difference between these inflows and outflows is the net income, also shown in the Income statement.

* When a neighbor joins in the investment as a partner, he digs a canal from his own reservoir so it drains into the reservoir.
This additional water is measured by an increase in the share capital.
* If you ask a neighbor to add to the reservoir, it is considered as liability, thus reducing net equity but increasing assets.
These are both shown on the Balance Sheet.

While measuring the volume of water in the reservoir at a point in time (balance sheet) is relatively easy, keeping track of the streams' volumes at every second of the year is difficult. Accountants may choose to ignore some streams: they may not know some streams exist: water may be evaporating, and unmeasurable. As a result the income statement is easily wrong. Regardless, the net sum of inflows less outflows should equal the difference in the reservoir (beginning vs. ending). The statement of changes in shareholder equity attempts this reconciliation.

None of the financial statements measures your own personal share of the reservoir when you have partners. It is up to the individual investor to measure, not the business totals, but his share. The methods to use 'equity per share' is shown at shareholders' equity.

==Users of Financial Statements==

Financial statements are used by a diverse group of parties, both inside and outside a business. Generally, these users are:

'''1. Internal Users:''' are owners, managers, employees and other parties who are directly connected with a company.

* '''Owners and managers''' require financial statements to make important business decisions
that affect its continued operations. Financial analyses are then performed on these
statements to provide management with a more detailed understanding of the figures.
These statements are also used as part of management's report to its stockholders,
as it form part of its Annual Report.

* '''Employees''' also need these reports in making collective bargaining agreements (CBA) with
the management, in the case of labor unions or for individuals in discussing their
compensation, promotion and rankings.

'''2. External Users:''' are potential investors, banks, government agencies and other parties who are outside the business but need financial information about the business for a diverse number of reasons.

* '''Prospective investors''' make use of financial statements to assess the viability of
investing in a business. Financial analysis is often used by investors and is prepared
by professionals (Financial Analysts), thus providing them with the basis in making
investment decisions.

* '''Financial institutions''' (banks and other lending companies) use them to decide whether to
grant a company with fresh working capital or extend debt securities (such as a long-term
bank loan or debentures) to finance expansion and other significant expenditures.

* '''Government entities (Tax Authorities)''' need financial statements to ascertain the
propriety and accuracy of taxes and other duties declared and paid by a company.

* '''Media and the general public''' are also interested in financial statements for a variety
of reasons.
[[User:86.10.58.95|86.10.58.95]] 21:23, 13 March 2007 (UTC)

==Government financial statements==

The rules for the recording, measurement and presentation of government financial statements may be different from those required for business and even for non-profit organizations. They may use either accrual accounting, or cash accounting, or a combination of the two. A complete set of Chart of Accounts is also used that is substantially different from the Chart of a profit-oriented business.

===Audit and Legal Implications===

Although the legal statutes may differ from country to country, an audit of financial statements is required. These are usually performed by independent accountants or auditing firms. Results of the audit are summarized in an audit report that either provide an unqualified opinion on the financial statements or qualifications as to its fairness and accuracy. The audit opinion on the financial statements is usually included in the Annual Report.

There has been much legal debate over who an auditor is liable to. Since audit reports tend to be addressed to the current shareholders, it is commonly thought that they owe a legal duty of care to them. But this may not be the case as determined by common law precedent. In Canada, auditors are liable only to investors using a prospectus to buy shares in the primary market. In the UK, they have been held liable to potential investors when the auditor was aware of the potential investor and how they would use the information in the financial statements. Nowadays auditors tend to include in their report liability restricting language, discouraging anyone other than the addressees of their report from relying on it. Liability is an important issue: in the UK, for example, auditors have unlimited liability.

In the United States, especially in the post-Enron era there has been substantial concern about the accuracy of financial statements. Corporate officers (the CEO and CFO) are personally liable for attesting that financial statements "do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by th[e] report". Making or certifiing misleading financial statements exposes the people involved to substantial civil and criminal liability. For example Bernie Ebbers (former CEO of WorldCom) was sentenced to 25 years in federal prison for allowing WorldCom's revenues to be overstated by $11 billion over five years.

===Standards and Regulations===

Different countries have developed their own accounting principles over time, making international comparisons of companies difficult. To ensure uniformity and comparability between financial statements prepared by different companies, a set of guidelines and rules are used. Commonly referred to as Generally Accepted Accounting Principles (GAAP), these set of guidelines provide the basis in the preparation of financial statements.

Recently there has been a push towards standardizing accounting rules made by the International Accounting Standards Board ("IASB"). IASB develops International Financial Reporting Standards that have been adopted by Australia, Canada and the European Union (for publicly quoted companies only), are under consideration in South Africa and other countries. The United States Federal Accounting Standards Board has made a commitment to converge the US GAAP and IFRS over time.

===Inclusion in Annual Reports===

To entice new investors, most public companies assemble their financial statements on fine paper with pleasing graphics and photos in an annual report to shareholders, attempting to capture the excitement and culture of the organization in a "marketing brochure" of sorts. Usually the company's chief executive officer will write a letter to shareholders, describing management's performance and the company's financial highlights.

In the United States, prior to the advent of the internet, the annual report is considered the most effective way for corporations to communicate with individual shareholders. Blue chip companies went to great expense to produce and mail out attractive annual reports to every shareholder. The annual report was often prepared in the style of a coffee table book

In formal bookkeeping and accounting, a balance sheet is a statement of the book value of a business or other organization or person at a particular date, at the end of a period such as a "fiscal year," as distinct from an income statement, also known as a profit and loss account (P&L), which records revenue and expenses over a specified period of time.

A balance sheet is often described as a "snapshot" of the company's financial condition on a given date. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time, instead of a period of time.

A simple business operating entirely in cash could measure its profits by simply withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, real businesses are not paid immediately; they build up inventories of goods to sell and they acquire buildings and equipment. In other words: businesses have assets and so they could not, even if they wanted to, immediately turn these into cash at the end of each period. Real businesses also owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.

A modern balance sheet usually has three parts: assets, liabilities and shareholders' equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as the 'net assets' or the 'net worth' of the company.

The net assets shown by the balance sheet equals the third part of the balance sheet, which is known as the shareholders' equity. This balance is not a coincidence. Records of the values of each account in the balance sheet are maintained using a system of accounting known as double-entry bookkeeping.

====Some Future Value Definitions====

• '''Future Value (FV):''' The amount an investment is worth after one or more periods.

• '''Simple Interest:''' Interest earned only on the original principal amount invested.

• '''Compound Interest:''' Interest earned on
both the initial principal and the interest
reinvested from prior periods.

• '''Compounding:''' The process of
accumulating interest on an investment
over time to earn more interest.

==Financial Statements==
Financial statements (or financial reports) are formal records of a business' financial activities. These statements provide an overview of a business' profitability and financial condition in both short and long term. There are four basic financial statements:

'''1. Balance Sheet:''' also referred to as statement of financial condition, reports on a company's assets, liabilities and net equity as of a given point in time.

'''2. Income Statement:''' also referred to as Profit or loss statement, reports on a company's results of operations over a period of time.

'''3. Cash Flow Statement:''' reports on a company's cash flow activities, particularly its operating, investing and financing activities.

'''4. Statement of changes in shareholder equity:''' reconciles the difference between net equity at two different points in time.

Because these statements are often complex, an extensive set of Notes to the Financial Statements and management discussion and analysis is usually included. The notes will typically describe each item on the Balance sheet, Income statement and Cash flow statement in further details. Notes to Financial Statements are considered as an integral part of the Financial Statements.

==Constructing a Balance Sheet==
'''Case Study'''

'''1.1''' 
A new business starts up as a limited company called Sunrise Ltd by raising $10,000 from the owners i.e. share holders. The money is put in to a new bank account. What would the assets, liabilities and equity be?
'''Assets:'''
Bank Balance 10,000

'''Equity & Liabilities:'''
Share Capital 10,000

'''1.2''' 
They then use 6,000 of its bank account to buy a delivery van. Assets and liabilities after this transaction:
'''Assets:'''
Bank Balance 4,000
Delivery Van 6,000

'''Equity & Liabilities:'''
Share Capital 10,000

'''1.3''' 
Sunrise Ltd then buys some inventory at 3,000 on credit. Assets and liabilities after this transaction:
'''Assets:'''
Bank Balance 4,000
Delivery Van 6,000
Inventory 3,000

'''Liabilities:'''
Accounts Payable 3,000 (to be paid to creditors)

'''Equity:'''
Share Capital 10,000

Total assets must always equal total liabilities (and equity). It is inevitable as the liabilities (and equity) are providing the funds that we are spending on these assets.

'''1.4''' 
Shortly afterwards, after selling 1,000 of inventory for 2,500, payment of 2,600 of the accounts payable and the purchase of 2,200 of machinery financed by a 2,200 bank loan, the assets and liabilities change to the following:

'''Sunrise Ltd.'''
'''Balance Sheet'''
As of December 31, 2005
-----------------------------------

'''Fixed Assets'''
Delivery Van 6,000
Machinery 2,200
-----------------------------------
'''Total fixed assets 8,200'''

'''Current Assets'''
Bank Balance 1,400
Inventory 2,000
Accounts Receivable 2,500
-----------------------------------
Total 5,900

Accounts Payable 400
-----------------------------------
'''Net current assets 5,500'''
'''Total assets 13,700'''

'''Long-Term Liabilities'''
Loans Repayable 2,200
-----------------------------------
'''Total Long Term Liabilities 2,200'''
-----------------------------------
'''NET ASSETS 11,500'''
-----------------------------------

'''Shareholders' Equity'''
Share Capital 10,000
Retained profits 1,500
-----------------------------------
'''TOTAL SHAREHOLDERS' EQUITY 11,500'''
-----------------------------------

Points to note: 
* Must be headed with the name of the reporting entity (e.g. Sunrise Ltd) and the date.
* The van has not been depreciated and there are no other trading expenses
* The terms 'Current Liability' and 'Long-Term Liability' are the traditional names possibly used by sole traders or partnerships. Limited companies may use the phrases 'Liabilities: Amounts falling due within 1 year' and 'Liabilities: Amounts falling due after 1 year'.
* The Total Equity may also be called the 'Net Worth'.
* The Net Worth is in principle what the company is worth, it shows the monetary amount that would effectively be left, if all assets were sold and all liabilities paid off.

==See also==
*[[Topic:Finance]]
[[Category:Finance]]