My generally-genteel wife, feet tucked demurely under an evening TV blanket, sipped her tea and then barked…
Nonprofit! N has to be for Nonprofit so you can tell those f@*$#@ing morons that nonprofit does not mean you can’t make a profit! Those idiots will even argue that it’s f@*$#@ing illegal to make a profit…
…so violently that the La-Z-Boy footrest nearly collapsed.
It’s been 25 years since she worked as the CFO at her second nonprofit entity, but I guess old wounds never heal. She says it was the thing about working for nonprofits that bugged her the most. People never understand what they are.
Why do people always make liabilities sound so complicated?
For example, *ahem* the semiannual interest payment for a five-year, $1,000 par-value bond with an annual 8% coupon is $40: ($1,000 x 0.08) / 2 = $80 / 2 = $40… or… if the bond was issued at a premium of $200, the semiannual amortization using the straight-line method is simply $20: ($200 / 5) / 2 = $40 / 2 = $20. Therefore, debit interest expense by $20 ($40 – $20), credit cash by $40 and debit premium on bonds payable by $20.
See? Nothin’ to it.
Easy for you to say.
Liabilities are complicated because people are forward-thinking. Humans do not live on cash flow alone. There must be accrual. And accruals are the stuff of science fiction because they suggest the future.