01.01 Balance Sheet / Statement of Financial Position Flashcards
Publicly held companies are required to submit their FS to the SEC prepared in accordance with what 2 frameworks?
Generally accepted accounting principles (GAAP)
International financial reporting standards (IFRS)
True or false: nonpublic entities may choose to follow a general purpose framework or a special purpose framework?
True
What basis of accounting does GAAP employ?
Accrual basis of accounting
Under the accrual basis of accounting, when are revenue and expenses recognized?
Revenue is recognized in the period earned (regardless of when collected).
Expenses are recognized in the period incurred (regardless of when paid).
What is another name for Balance Sheet?
The Statement of Financial Position
What are the three basic elements of financial statements?
Assets, liabilities, equity.
What order are assets presented on the balance sheet?
In order of decreasing liquidity. The most liquid assets are shown first.
What order are liabilities presented on the balance sheet?
In order of maturity. Current liabilities are shown first.
What order is equity presented on the balance sheet?
In order of permanence.
What measurement basis is used for receivables?
Net realizable value
What measurement basis is used for inventory?
Lower of cost or market, or lower of cost or net realizable value
What measurement basis is used for investments in marketable securities?
Market value
What measurement basis is used for property, plant & equipment?
Historical cost and depreciated/amortized historical cost.
What measurement basis is used for liabilities?
Present value
What measurement basis is used for equity?
Historical value of cash inflows and residual valuation.
