Information Technology and Business Value

By Raul Bernardino

Introduction:

Nowadays, the computer professional does not only concentrate in the technological science. But is today’s business, it is most important for computer professionals to know additional knowledge in which is the business sector of the Information and Technology operation’s toward to the existing of the companies, institutions, and or firms.

The computer professional whereas willing to deploy any new technologies and or investment in the technology must be in line with the company, firms, and institutions business needs.  The investments have to have a positive impact in long running of the company, firm, and institution operation.

Therefore, it is a mandatory for the computer professionals to have to know several financial terms and it is statements of the financial reporting system including at least have to know a basic understanding of information technology and the business.

Terms and definition:

Asset or Assets:  In the accounting system and finance system, asset is a resource of the economic. Assets are resource of value that can be concerted in any time into the cash value and whereas cash is also seen as an asset value.

Fixed assets:  The fixed assets are namely a property that are owns by company, institution, and firms and they are use for producing other income, output, or services. It is not intending to consume and or it is not intending to be converted into the cash more quickly or in less than one year. There are two types of properties. First is a tangible asset. The tangible assets for instant land, office equipment and its own furniture’s photocopy machine, building, real state, and residence. Second is an intangible asset. In “general, the intangible long-term assets such as trademarks and patents are not categorized as fixed assets but are more specifically referred to as "fixed intangible assets".

The current Assets: The current assets are namely represents resource value that own by company, institution, and firms in which the asset will be converting into the cash among the 12 months. The current asset is usually use for funding the business operation in the daily basis. This resource is including cash itself, inventory, account receivable, market-able securities, other asset that ready for liquid into cash and prepaid-expenses. For example in the individual finance is the asset that can be liquid to pay the bills without has to sell the fixed asset.  In the United-Kingdom (UK), the “current assets are known as current accounts".

The Balance sheet: the balance sheet is namely a table summary that is shown the company, institution, and firm’s the financial statement. It is including fixed asset and current asset and liability and shareholder equities. Why is it call balance sheet? It is because the balance sheet has two sides of the total equal of the balance.

These are the three segments of the balance sheet in which are usually giving an investor’s an ideas, of what the company, firm, and institution have been invested, what are things that firm, company, and institution have been owned and what are the debts on the company, firms, and institution. For example cash, inventory, account receivable, temporary investment, prepaid expense, long term investment such as land and building, and other properties are in the assets side of the balance sheet. While account payable, tax payable, long term loan or Mortgage, interest payable, and accrued payroll are in the liabilities side of the balance sheet.

There are no exact accounts on the balance sheet that will be same from one company to another company or from one industry to the others industries. These are the huge differences of the balance sheet accounts from companies, firms, and institutions. In other word “there is no one set template on the balance sheet that is accurately accommodates for the all differences between different types of running businesses.”

The formula for balance sheet is very simple as follows:

“Assets = Liabilities + Shareholders' Equity”

Question of problem and solution in the balance sheet:

We have known that, the “company has a stock of the 500 user manuals for version 1 of the package (inventory=$25 by 500 manual version 1in which it is equal $12,500) including version 2 which is coming soon. The company paid $5,000 (Prepaid expense and cash) to owns 1,000 manuals printed and it has been selling them at $25 per copy (account receivable= $25 by 1000 manuals version 2 in which it is equal to $25,000)”. 

We also have informed that “the company has a file server costing $15,000 that is used by the software development teams” (long term investment ‘Server and fixes’)” and no depreciation is calculated. From these explanation above, we can now able to elaborate the balance sheet in excel sheet format in which is easily to interpret by investors.

	Balance Sheet
		February 14,2011
	ASSETS				LIABILITIES
	Current Assets				Current Liabilities
	Cash		$5,000.00		Accounts payable		$5,000.00
	Accounts receivable (1000 manuals)		$25,000.00		Short-term notes
		(less doubtful accounts)			Current portion of long-term notes
	Inventory (500 manuals in stock)		$12,500.00		Interest payable
	Temporary investment				Taxes payable
	Prepaid expenses		$5,000.00		Accrued payroll
		Total Current Assets	$47,500.00			Total Current Liabilities	$5,000.00
	Fixed Assets				Long-term Liabilities
	Long-term investments				Mortgage
	Land				Other long-term liabilities		$15,000.00
	Buildings					Total Long-Term Liabilities	$15,000.00
		(less accumulated depreciation)
	Plant and equipment
		(less accumulated depreciation)			Shareholders' Equity
	Server and Fixes		$15,000.00		Capital stock
		(less accumulated depreciation)			Retained earnings		$42,500.00
		Total Net Fixed Assets	$15,000.00			Total Shareholders' Equity	$42,500.00
	TOTAL ASSETS		$62,500.00		TOTAL LIABILITIES & EQUITY		$62,500.00

Conclusion:

According to the balance sheet above, the company, firms, and institution have good investment and have good profit. This can be seen on shareholders equity column of the balance sheet table. Therefore the investor will be most likely to invest in this company or firms. The industry or company will be making a lot profit from increasing the products. 

References List:

·         Chris G., Pak A. Deborah D. (2002), The Key element of introductory accounting, John Wiley & Sons Australia, Ltd. Mod. 1, P. 7-15

·         Assets   [Online] Available from:  
http://en.wikipedia.org/wiki/Asset  (accessed date: February 15,2011)

·         What does Fixed Assets Means?  [Online] Available from: http://www.investopedia.com/terms/f/fixedasset.asp  (accessed date: February 15,2011)

·         What does Current Assets Means?  [Online] Available from: http://www.investopedia.com/terms/c/currentassets.asp (accessed date: February 15,2011)

·         Balance sheet introduction for Fixed Assets  [Online] Available from: http://tutor2u.net/business/accounts/assets_fixedassets_intro.asp (accessed date: February 15,2011)

·         What does Balance sheet Means? [Online] Available from: http://www.investopedia.com/terms/b/balancesheet.asp  (accessed date: February 15,2011)