1.21 Statement of Financial Position (Balance Sheet) Flashcards
Name 2 sources of Equity Financing or Capital
- Stockholders’ Equity
- Paid-In Capital
Can the Statement of Financial position help you in assessing profitability?
No. Ddetermining profitability and assessing past performance can not be done via the balance sheet. It is a point in time and not a period of time.
Name three categories for Long-term or noncurrent assets
- PPE - Property, Plant, Equipment
○ Tangible physical assets- Intangible Assets
○ Patent - Certain Investments
- Intangible Assets
When can unearned revenue be earned?
- Unearned Revenue
○ We owe the delivery or performance
○ Received money in advance
What value is used for Paid-In captial?
Par Value
What is included capital structure?
The capital structure consists of the amounts contributed by creditors (liabilities) and investors (stockholders’ equity).
Assets = Liabilities + Stockholders’ Equity
What is the Fund Theory?
- The basic equation can be derived to form the proprietary theory:
Assets – Liabilities = Stockholders’ Equity
1. According to this theory, equity in an enterprise is what remains after the economic obligations of the enterprise are deducted from its economic resources.
Is this a long-term or short-term liability?
“Deferred revenue”
Long Term
How is an intraperiod Tax Allocation displayed on the Income Statement?
Intraperiod tax allocation is an accounting method that allocates a company’s total income tax expense for a particular period to different parts of the income statement. The objective of intraperiod tax allocation is to associate tax effects with the specific items that directly affect them.
□ Continuing Operations
® Income Tax Expense
□ Discontinued Operations
® Income Tax Expense
□ Extraordinary items
® Income Tax Expense
□ Other Comprehensive Income
® Income Tax Expense
Is Treasury Stock on the balance sheet a contra account or a primary account in the owners’ equity section?
Contra Account
Common Stock
Treasury Stock (contra)
What value does PP&E, net represent on the balance sheet?
Historical Purchase Value - Depreciation and does not reflect current market value.
Name 4 limitation to the balance sheet usefulness.
*Time
*Value
*Single Point in time
*Long-term assets are recorded at historical value - depreciation
*Represents estimates and management judgment
* Items that can not be estimated and recorded on the books but can have a financial impact