BUSINESS ALOA’s 2020 Financial Audit – Statement of Financial Position This new roof would be capitalized and depreciated over the 20-year period (or whatever time frame the IRS prescribed), whereas the cost of replacing a few missing roof shingles af- ter a storm would just be expensed. Furniture and Equipment category is somewhat self-ex- planatory and includes office furniture and devices, computers, printers, servers, tools, etc. used in the business. Sub-total (no line title) are the numbers immediately be- low the Furniture and equipment category line. It’s just a sum of what’s called the company’s “hard assets” and includes the Land, Building and Improvements, plus Furniture and Equip- ment categories. This sum is for us to readily see the total of all the hard assets and comes in handy when we move to the next category, which is Accumulated Depreciation. “Less Accumulated Depreciation” is the line where we keep track of all past depreciation, and this is a cumulative number that usually increases annually. Each time we acquire new hard assets or invest in capitalized improvements, we increase our assets. But we also depreciate and write off a portion of the use- ful life of all depreciable assets monthly/annually unless and until they are completely depreciated. Then they are said to have no “book” value. Companies enjoy being able to depreciate buildings because such non-cash expenses can help to reduce tax liabilities associated with profits. Moreover, buildings are a popular investment for business owners because real estate usually appreciates over time but such appreciation is not tax- able, nor will the market value be reflected on the company’s books. Remember, real property remains on the books at origi- nal acquisition cost. Of course, just because a hard asset has been completely written off (fully depreciated on the company’s books), this does not mean that it is without tangible value in the real world. This issue introduces the accounting concept of a “gain or loss on the sale of an asset,” but that’s beyond the scope of our discussion. Remember, unlike typical business expenses, nobody ever writes a check to cover a depreciation expense since it’s a paper cost of doing business (a legiti- mate tax-deductible business expense). We are consuming a portion of the useful life of our hard assets, which will ul- timately need to be replaced. Think of a delivery vehicle or piece of equipment. Property and Equipment, Net is the mathematical result of subtracting our Accumulated depreciation from our Sub-total of hard assets. This net number can fluctuate annually depend- ing on how much hard asset value we add to the business, com- pared to how much we depreciate. Total Assets, as one might expect, is just the sum of all assets. 14 KEYNOTES OCTOBER 2021 A Look at Liabilities Now that we’ve examined the Assets side (top), let’s move on to look at the Liabilities side, which can be found in the lower half of the Statement of Financial Position. We’ll cover Net as- sets later on. ALOA - Statement of Financial Position Year ended December 31, 2020 LIABILITIES and Net Assets: - (in dollars) F/Y 2020 Current liabilities: Accounts payable Accrued expenses Deferred dues Deferred exhibit fees Total current liabilities 16,878 19,566 708,167 229,824 ________ 974,435 Paycheck protection program loan 162,500 ________ 1,136,935 Total liabilities Net assets: Without donor restrictions: Undesignated Board designated-legislative fund Total net assets Total liabilities and net assets F/Y 2019 62,458 70,135 702,537 270,050 __________ 1,105,180 890,569 20,653 _________ 911,222 2,048,157 1,151,449 20,653 _________ 1,172,102 2,277,282 Let’s examine some of the primary categories in the Liabili- ties section and provide explanations and insights. Accounts Payable (A/P) is comprised of trade payables as- sociated with monies owed by ALOA and already invoiced by suppliers. This category decreased significantly YOY but does not represent a very large amount or portion of current liabili- ties in F/Y 2020. Accrued Expenses include things like payroll or employ- ment benefits that have been earned but not yet been paid out or taken. Payroll already earned between payroll cycles and accumulated, untaken vacation or paid time off (PTO) days are examples. Deferred Dues include dues collected this year, which are WWW.ALOA.ORG
