Monthly Financial Report for November 2006

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Sudane Erato
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Monthly Financial Report for November 2006

Post by Sudane Erato »

I have now posted the November Balance Sheets (both USD$ and LD$) on my site and well as the November Income Statements. They are available through the Services/Finance page on the NFS website as well as here:

Neufreistadt Balance Sheet in Lindens
http://www.tospitimou.com/Neualtenburg/ ... heetLD.pdf

Neufreistadt Balance Sheet in US Dollars
http://www.tospitimou.com/Neualtenburg/BalanceSheet.pdf

Neufreistadt Income/Expense Report in Lindens
http://www.tospitimou.com/Neualtenburg/ ... enseLD.pdf

Neufreistadt Income/Expense Report in US Dollars
http://www.tospitimou.com/Neualtenburg/ ... xpense.pdf

This month I am happily returning to my custom of commenting upon these monthly documents. I apologize for the occasional omission, such as in October, when an avalanche of commitments got the better of me.

As is customary, I comment on the USD$ version of these reports, and I start with the "Income and Expense Report".

You will note under Revenue, near the top of this report, that I have created two new sim-specific accounts: Land Tier Revenues NFS/CN and Land Sales Revenues NFS/CN. The only one with actual revenues is Land Tier Revenues NFS, which is a bit low owing to both prior month pre-payments and current month laggards (you know who you are ... notices will be going out). There are no Land Tier Revenues for CN since I customarily begin collecting such revenues only in the month following one's purchase of land. (The system is complex enough... I cannot be bothered calculating partial month tier amounts.)

The Land Sales Revenues accounts are a bit more complex, and interface closely with the corresponding Balance Sheet accounts. I'll deal with the emptiness of these accounts in that part of the discussion.

So, total revenue was a somewhat low US$182.04 (using 281 as the November currency exchange rate).

Expenses were obviously primarily the sim fees paid to the Lindens of US$380 for our two sims. There was also the customary Paypal charges, and a small expenditure for CN opening promotion.

So, the total expenses were US$423.63, leaving a loss for the month of US$241.59.

Moving to the Balance Sheet, that loss translates into a lower "Net Worth" of the "company", called on this report "Equity", near the bottom of the page. This amount is now US$1038.80. There's noting wrong with having a lower Net Worth than the previous month, so long as the reductions don't carry on so long as to move this number negative. Having losses for a few months in any organization's history is a necessary burden of taking risks, without which we could not grow.

Back at the top of the Balance Sheet, the Assets (what we "own") and the Liabilities (what we "owe") show where the dollar value is which results in that current "Equity/Net Worth". Here's what they say.

Current Assets, for us, is money in the bank. Specifically, the "Treasurer Avatar L$ Account" are the Lindens that Rudeen holds, and the "Paypal Avatar Dollar Account" is self explanatory. People have asked how much money we have in the bank (in view of our ability to repay our current short term loans). This is the answer.

The important component of Fixed Assets is land. There are five accounts making up the Land section. Understanding these is important to understanding how we express the value of our land. It makes important assumptions about this, assumptions which might very well be altered, but which conservatively serve their purpose for now.

The first two accounts are basically static, and will only receive further entries should we sell a sim. "Land Purchased from 3rd Party" is the purchase of Colonia Nova. "Land Purchased from Lindens" is the purchase of Neufreistadt (in 2005).

The next two accounts are entries of land sold by the CDS, separately in L$ and in US$. In a sense, funds entered into these accounts are *reimbursements* by citizens to the CDS of funds advanced by the government to acquire the sims in the first place, so that the citizens could buy them. In an oversimplified sense, the government would buy the sims, and would then be reimbursed by the citizens for those purchases as the citizens bought up the various parcels. When the government was fully reimbursed, the citizens would own all the land, and there would be no further payments to the government for land.

But that is an oversimplification. In actual fact, receipts for land sale do continue to flow into the Treasury even when that Treasury has been fully "repaid" for its outlays for the sims. With Neufreistadt, this occured within about 5 months after the purchase of the sim.

At that point, the "Total Land Asset" became less than zero, because the "land sold" subtracts from the "land bought", ultimately becoming more. Since the "Total Land Asset" is not in fact less that zero (we still have the sims), that amount received becomes "revenue", or Income.

I know this is a bit confusing. Reimbursements are NOT income, they are simply one entity paying another entity back for something. Buying land in itself is not an Expense, because although you gave away money, you now own land... equally valuable. But, if you sell that land for more than you paid for it, the *difference* is income (at least in the way I am assuming it here. There are many ways to do this).

So, whenever that "Total Land Asset" has slipped below zero, I convert the amount below zero into Income, which is on the Balance Sheet shown as the fifth account "Realized Gain on Land Sales". The other half of that particular transaction (all transactions in bookkeeping have 2 halves) is to show "Land Sales Revenues" on the Income and Expense report.

And, finally, this is why on the Income/Expense Report Land Sales Revenues for both NFS and CN are zero. Since the second sim was bought, Total Land Assets is now once again above zero. All land sales in both sims (using my simplifying assumption) go towards reimbursing the government for the purchase of Colonia Nova, until Total Land Assets again gets to zero. Then, once again, we will have revenues for Land Sales.

Again, my apologies for the "complex" system. Balance Sheet bookkeeping is always somewhat abstruse, and this is made even more complicated by showing land on it. I have made a number of assumptions in structuring the Balance Sheet in the way, which are not the only assumptions that could be made. I go thru all this esotericsm with the hope that some might understand my assumptions and contribute helpfully to the improvement in the way we represent ourselves financially.

Finally, Liabilities, the money we "owe". This falls into two parts. The Short Term Loans are specifically those solicited for starting the CN project. Each lender is listed with the amount of their loan. At least 50% of these loans will be paid back on April 1, 2007 with 6% annual interest. The remainder will be paid back by October 1.

And the Long Term Liabilities are amounts held in escrow by the CDS on behalf of the various listed organizations. These have been previously discussed.

Comments and questions are welcomed in the post in general Discussion which announced this post.


Sudane.....
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