Why do employes show up on the financial statemens as Expense instead of Assets?

Question

It seems that people are more closely associated with liabilities rather than resources to help keep the business become more productive. How odd is that? Patents, trademarks and goodwill could have a dollar value and it could even be amortized. Yet nobody bothered to figure out a system for doing the same thing with employees.

I understand that the company doesn't own the employees. However, that shouldn't stop management from attempting to quantify the value of the workforce and keep track of it on the balance sheet.

Think about your FICO score. Somehow, a three-digit number could mean the difference between paying a lot in interest or not.

I'm going to invent something like FICO but instead of valuing credit-worthiness, it's going to value the workforce.

Answer 1

because they cost money, assets are valued holdings.

Answer 2

An employee is considered an expense because the money in wages that are paid out are an expense the company must pay. Therefore regardless of the benefit to the company it is still considered an expense to pay an employees wages. Thus qualifying as a liability on the books as opposed to an asset.

Answer 3

Although employees don't show up on the balance sheet (because, I think, you can't put a dollar value on people), when someone purchases the business, a good workforce definitely increases the price of the business. Business valuation (the selling price of a business) is usually based on annual sales, net income, or something of that sort. The better the workforce, the better the profitability, the higher the selling price.

Answer 4

Unfortunately, we're expenses. As a rule, employees are usually more than 1/2 the total expenses of a company. That makes us a liability on the balance sheet.

Answer 5

Companies do not own employees; the employees are free to leave if someone else offers them better jobs. Also, many companies are required to pay for employees' (and retirees') healthcare; pensions to retired employees are not uncommon, either.

When a company falls on hard times, assets can be sold; employees, in contrast, have to be given severance pay.

Answer 6

I guess it's because you have to pay employees but don't own them. Maybe somehow it would show up in goodwill - the value of a business over and above the value of the assets - if you had an unusually valuable workforce or program. I dunno.

Answer 7

Employees are paid salaries - and the salaries are an expense to the company. They are paid out of the gross income. Employees are just like equipment, except copy machines don't have to have dental, medical, and 401Ks.

Answer 8

Because the financial statements are using the Accounting term "assets" not the generic. In accounting terms, assets are owned and depreciated or expensed.

Answer 9

That's because employees can't be classified as corporate "property", thus they are relegated to the category of unrecoverable spend, an extremely shortsighted stance on the part of business that's one of the prime driving forces behind the erosion of worker's rights and benefits programs.

Answer 10

Employees cost resources and must be paid with a salary, insurance, and retirement benefits. We use furniture, lighting, supplies, etc. that could all be allocated somewhere else.

Answer 11

because a employee is not owned by the company, and their pay is a expense.