A quick and dirty way to think of it:
Future obligations == liabilities
Future benefits == assets
Difference between the two ("leftovers") at a given time == equity (or
sometimes called "net assets")
Balance sheet items accumulate, Income Statement items "reset" every
accounting period (a quarter, a year, etc.) under examination.
In procedural programming terms, think of a for loop. (I'll use perl
$IS_counterpart = 0;
$month = 0;
# First year - everything starts at zero
for ( $BS_item = 0; $date < 12; $month++ ) {
$IS_counterpart++;
$BS_item++;
}
# Second year - Income Statement resets to zero, Balance Sheet does not
for ( $IS_counterpart = $month = 0; $month < 12; $month++ ) {
$IS_counterpart++;
$BS_item++;
}
End of the first year, the Balance Sheet item and its Income Statement
counterpart are equal, because you are only looking at one year of data.
Reset the month counter and Income Statement counter part, and at the
end of the first year, they are different.
Or, in non-programming terms, think of the tripmeter on your car's
odometer. You drive around some, and at the end of the week (which
happens to fall on 12/31) your trip meter (and odometer) reads 200
miles. You have, at this point, driven 200 miles for the year, in total,
and your car also has, in total 200 miles on it. You reset the trip
meter, and go enjoy New Year's Eve. Party's over, and it's now New
Year's Day. You were the designated driver, so you drive home, which is
20 miles away, and take the rest of the week as vacation, driving 500
miles round trip to see the relatives.
If you freeze that moment in time and look at "financial statements" of
your car, the odometer (accumulator of mileage over all time) reads 720
miles (the first 200, plus 20 home plus 500 to see relatives). The trip
meter reads 520 (you reset it before the NYE party, at 12/31, remember?)
If you had looked at the car's financials before the party, it would
have been 200 miles accumulated, and 200 for the year.
The driving before 12/31 is one for loop, the driving after is another
for loop. That BS item accumulates the results of ALL for loops (all
years/accounting periods) and the IS item has a scope limited to just
the for loop (just that year/accounting period).
Anyhow.
Enough repeated exposure, and it'll make perfect sense. It's a very
logical way of looking at how to arrange economic data and its changes
-Holly, former-IT
