Financial statement needs some refinement

Guest · Post by **Guest** » 17.02.2007, 17:24

The financial statement could use some work to better reflect real world accounting. Ideally, we would have all transaction broken out into 3 categories; Operating, Financing, and Investing.

At a minimum, breaking out financial transactions in to Operations and Capital Expenditures would be useful to get a better idea of how things are running.

Including transactions involving sale of coins should also be included. If coins are sold to another user by contract, that shows up under 'other income', but if coins are sold to the system, they don't show up anywhere. Since the money is then spent on something, it shows up as an expense, but since there was no corresponding income item it looks like we're running a huge deficit that we'll have no hope of recovering from.

Just an idea.

Tycoon · Post by **Tycoon** » 17.02.2007, 17:29

I did not know that they are not shown in the finances sheet. Passed it on to the admins of the game.

Guest · Post by **Guest** » 18.02.2007, 08:57

Buying plant assets isn't really an expense, yeah.

Cash is going away, sure, but, what's really going on is you're switching one asset for another. Your capital remains the same, even though it's now illiquid.

Expenses are things that decrease capital.

Tycoon · Post by **Tycoon** » 18.02.2007, 10:35

But capital consist of the liquid and illiquid ones... so I would not say that is wrong.

If you buy a house in RL, you loose money, but your assets do not really change... you have a house instead

Guest · Post by **Guest** » 18.02.2007, 15:34

Tycoon wrote:But capital consist of the liquid and illiquid ones... so I would not say that is wrong.

If you buy a house in RL, you loose money, but your assets do not really change... you have a house instead

If you're talking about a balance sheet, that is correct. But the financial statement in the game appears to be mostly an income statement, and Income Statements really should be differentiating Operating Expenses from Capital Expenditures like new buildings and expansions, and from Investing activities like buying/selling stock, taking out/repaying loans, selling coins for money, etc.

Guest · Post by **Guest** » 18.02.2007, 18:43

I have another suggestion for the financial staatement, but it may be a little more difficult to code. It seems to me that the value of your warehouse should be included somewhere in the total value of your company. It could simply be the amount times unit price of each item in the warehouse. This way, the money spent on production does not temporarily disappear until the items are sold. It just seems to make sense to me. I sometimes stockpile a lot of intermediate products while waiting to make a big batch of something that requires them. So my company value drops for a couple of days and then jumps again when I sell the final products.

Guest · Post by **Guest** » 18.02.2007, 20:55

That would be inventory, Tim.

Guest · Post by **Guest** » 19.02.2007, 03:30

Exactly, Klasanov. And while I admit I have no business background, it seems to me that the value of a company could include its inventory. Maybe I'm wrong, but it just makes sense to me. I'm not sure where it would go. It is a non-liquid asset, like a building, but it cannot make more money than it is worth (which buildings can, but cash cannot). So it seems that if both liquid assets and buildings are considered in a company net worth, then so should inventory.

Guest · Post by **Guest** » 19.02.2007, 05:47

Inventory goes into cost of merchandise sold.

It's sort of an expense, but also sort of a current asset (liquid within the year). It is considered in the company's net worth because it is something the company owns.

It's really a weird thing to explain. But you are correct, it doesn't just not show up anywhere since the amount of inventory in a company helps investors figure out the corporation's financial health (rising inventory levels can be a sign that things aren't selling, although the economy needs to be factored in as well)

Tycoon · Post by **Tycoon** » 19.02.2007, 09:40

As far as I know the financial statement won't be changed...

To take the stock into consideration would also mean to have contracts which you sent out but have not been accepted yet and contracts you received but have not signed to be stated in the financial statement. The financial sheet would be too complicated after a while but does not make the "core" of the game.

Guest · Post by **Guest** » 19.02.2007, 21:47

Contracts would simply fall into accounts receivable, most likely.

Or, as a work-around, goods on contract could still show up in inventory. It is still their goods until the sale is realized.

Not too complicated...

Contracts received won't have to show up in the financial statement, either. A business only records something AFTER it's happened.

Tycoon · Post by **Tycoon** » 20.02.2007, 09:36

And that's the problem: if you have 1,500 chemicals and sold 1,000 and the other user did not sign the contract; at the same time you want to produce 1,000 glass how can the system see that you just have 500 chemicals instead of 1,500? There would be lots of work connected with this and I doubt that this will be realized as the financial statement is just a minor part of the game.

Guest · Post by **Guest** » 22.02.2007, 18:13

Um, what?

Who said they would be usable?

Guest · Post by **Guest** » 22.02.2007, 18:17

The system would see that you have 500 chemicals because chemicals are taken from your warehouse when put on contract. Not sure what you're saying. Although the programming for contracts and all that might be difficult, yeah.

For calculating the cost of goods in the warehouse it should be pretty easy.

Guest · Post by **Guest** » 23.02.2007, 02:38

Tycoon wrote:And that's the problem: if you have 1,500 chemicals and sold 1,000 and the other user did not sign the contract; at the same time you want to produce 1,000 glass how can the system see that you just have 500 chemicals instead of 1,500? There would be lots of work connected with this and I doubt that this will be realized as the financial statement is just a minor part of the game.

well, itd be easy to seperate them from the warehouse section and the contracts section. but they can just be added in the financial statement of the warehoues inventory until they are sold. but i have the same problem - i find my fluxuating finances problematic until i sell things ... when i jump up ... then produce, when i take a dive.