Duncan Williamson: Feedback to Joe

Please don't copy the style of this e-mail

Joe wrote to me out of the blue: what follows is exactly what I got

Date: 1 November 2001
Subject: [no subject]

How could i define the difference between the following?

Expense
Income
Liability
Asset

Please help?

I wrote back as follows:

Date: 2 November 2001
Subject: Re: [no subject]

Well, Joe, normally, a bit more of an introduction would help; but since I am a very kind and generous person, I'll forgive you this time and try to help.

An expense can be defined as being the amount of money paid in exchange for goods and services: for example, we have the electricity expense, transportation expense, wages expense.

Expenses are found in the profit and loss account and can be found under such headings as

administration
marketing
distribution
finance
and so on

Income refers to the money that a business receives in exchange for the goods and/or services that it produces or trades in. Sales, revenue and turnover can all be synonyms for income. However, the word income is used in the United States to mean profit: gross profit = gross income; net profit = net income.

A liability is a debt owing to a third party: this means that if I have a business and someone has sold me some raw materials but has allowed me, say, 30 days to pay for them, I have a liability for the value of the raw materials I have bought. If I have borrowed some money from the bank or a friend, the amount I have borrowed is a liability, too.

A liability can be a long term liability if I have more than a year to pay it back: a two year or five year or 10 year loan is a long term liability; a mortgage will probably be a long term liability.Alternatively, the liability can be a current or non long term liability: something that the business will pay back within one year from now.

An asset is very simply defined as being a thing of value owned. Notice, it has to have a value and I must OWN it. The things that I borrow from someone are NOT my assets: if I hire a machine, or lease a car they are not mine and they are not my assets.

Like liabilities, assets can be current: stocks (inventories), debtors, cash at the bank and cash in hand; and they can be fixed (long term): land, buildings, fixtures and fittings, vehicles and so on.

There you are, I've done this for free, and I'd appreciate it if you'd let me know a bit about yourself and what you're going to do with this information.

Best wishes

Duncan Williamson
Kind person

Joe then replied

Date: 3 November 2001
Subject: Re: [no subject]

Thank you very much for the information. I needed the information for a test. I am a first year University student, studying BA Business Accounting. I have a test in two weeks time on this subject. Your resources have helped me a lot, as im now more confident in this area of the syllabus. I apologise for not providing my details in the previous Email. I may need your help again in the near future..Thank You very much indeed.

Joe

OK, no more Mr Nice Guy. To guarantee a reply to your questions, you can ask what you like; but let me know who you are, why you want the information ... just the basic courtesies is all I ask.

Duncan Williamson
4 November 2001



		Feedback in response to an unusual e-mail Please don't copy the style of this e-mail Joe wrote to me out of the blue: what follows is exactly what I got Date: 1 November 2001 Subject: [no subject] How could i define the difference between the following? Expense Income Liability Asset Please help? I wrote back as follows: Date: 2 November 2001 Subject: Re: [no subject] Well, Joe, normally, a bit more of an introduction would help; but since I am a very kind and generous person, I'll forgive you this time and try to help. An expense can be defined as being the amount of money paid in exchange for goods and services: for example, we have the electricity expense, transportation expense, wages expense. Expenses are found in the profit and loss account and can be found under such headings as administration marketing distribution finance and so on Income refers to the money that a business receives in exchange for the goods and/or services that it produces or trades in. Sales, revenue and turnover can all be synonyms for income. However, the word income is used in the United States to mean profit: gross profit = gross income; net profit = net income. A liability is a debt owing to a third party: this means that if I have a business and someone has sold me some raw materials but has allowed me, say, 30 days to pay for them, I have a liability for the value of the raw materials I have bought. If I have borrowed some money from the bank or a friend, the amount I have borrowed is a liability, too. A liability can be a long term liability if I have more than a year to pay it back: a two year or five year or 10 year loan is a long term liability; a mortgage will probably be a long term liability.Alternatively, the liability can be a current or non long term liability: something that the business will pay back within one year from now. An asset is very simply defined as being a thing of value owned. Notice, it has to have a value and I must OWN it. The things that I borrow from someone are NOT my assets: if I hire a machine, or lease a car they are not mine and they are not my assets. Like liabilities, assets can be current: stocks (inventories), debtors, cash at the bank and cash in hand; and they can be fixed (long term): land, buildings, fixtures and fittings, vehicles and so on. There you are, I've done this for free, and I'd appreciate it if you'd let me know a bit about yourself and what you're going to do with this information. Best wishes Duncan Williamson Kind person Joe then replied Date: 3 November 2001 Subject: Re: [no subject] Thank you very much for the information. I needed the information for a test. I am a first year University student, studying BA Business Accounting. I have a test in two weeks time on this subject. Your resources have helped me a lot, as im now more confident in this area of the syllabus. I apologise for not providing my details in the previous Email. I may need your help again in the near future..Thank You very much indeed. Joe OK, no more Mr Nice Guy. To guarantee a reply to your questions, you can ask what you like; but let me know who you are, why you want the information ... just the basic courtesies is all I ask. Duncan Williamson 4 November 2001
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