2 - Financial Statements Flashcards
Assets are the resources that a company ______ or _______ that will provide future economic benefits.
Assets are the resources that a company owns or controls that will provide future economic benefits.
- asset’s ability to generate cash flows for the company (direct or indirect)
Current assets are assets that are expected to be converted into cash or to be sold or used up within ____ ______ of the company’s financial statement date or its operating cycle, whichever is longer.
Current assets are assets that are expected to be converted into cash or to be sold or used up within one year of the company’s financial statement date or its operating cycle, whichever is longer.
Operating cycle of a company is the average period of time it takes for a business to pay cash to ______ products or services and then receive ______ from customers for these products or services.
operating cycle of a company is the average period of time it takes for a business to pay cash to obtain products or services and then receive cash from customers for these products or services.
7 Common types of current assets include:
C H A N/L I S P
7 Common types of current assets include:
- Cash
- Held for trading investments
- Accounts receivable
- Notes receivable, loans receivable
- Inventory
- Supplies
- Prepaid expenses
Held for trading investments are investments in debt securities such as _____ of another company, or equity securities such as _____ of another company, that are bought with the intention of reselling them after a short period of time in order to earn income from fluctuations in their price.
Held for trading investments are investments in debt securities such as bonds of another company, or equity securities such as shares of another company, that are bought with the intention of reselling them after a short period of time in order to earn income from fluctuations in their price.
Accounts receivable are amounts owed to the company by _______ who purchased ______ or ______ on credit (on account) and are normally supported with an ______.
Accounts receivable are amounts owed to the company by customers who purchased products or services on credit (on account) and are normally supported with an invoice.
Other types of receivables can arise from amounts owed to the company for interest, sales tax, rent, and like items.
- accrued revenues (not yet received in cash)
Notes receivable are amounts owed to the company by ________ or others that are supported by a ______ ______ to repay.
Notes receivable are amounts owed to the company by customers or others that are supported by a written promise to repay.
- loans receivable is a type
- normally have interest
________ is goods held for sale to customers.
Inventory is goods held for sale to customers.
Prepaid expenses represent the cost of expenses like _____ and ______ paid in advance of use.
Prepaid expenses represent the cost of expenses like rent and insurance paid in advance of use.
- Current assets because they reflect unused benefits such as office space and insurance coverage available for future use during the year.
Common types of non-current (long-term) assets include (4):
Common types of non-current (long-term) assets include:
- Long-term investments
- Property, plant, and equipment
- Intangible assets
- Other assets
Long-term investments (also known as investments) include
(1) multi-year investments in ______ securities that management intends to hold to earn ______;
(2) _____ securities of other companies that management plans to hold for many years to generate investment revenue or for strategic reasons.
Long-term investments (also known as investments – non current) include
(1) multi- year investments in debt securities (for example, loans, notes, bonds, or mortgages) that management intends to hold to earn interest; and
(2) equity securities (for example, shares) of other companies that management plans to hold for many years to generate investment revenue or for strategic reasons.
If the word “investments” is used without any modifier (______ or ________), it is assumed to be non-current.
If the word “investments” is used without any modifier (held for trading or long-term), it is assumed to be non-current.
Some companies may choose to record property, plant, and equipment at their ______ value instead. This is known as the ________ _______.
Some companies may choose to record property, plant, and equipment at their current value (or fair value) instead. This is known as the revaluation model.
Property, plant, and equipment, except land, have estimated useful lives over which they are expected to help generate revenues.
Because these assets benefit _______ periods, their cost is allocated (expensed) over their estimated useful lives through a process called _____________.
Property, plant, and equipment, except land, have estimated useful lives over which they are expected to help generate revenues.
Because these assets benefit future periods, their cost is allocated (expensed) over their estimated useful lives through a process called depreciation.
Only assets with ______ useful lives are depreciated.
Only assets with finite useful lives are depreciated.
Carrying amount is sometimes called _____ ______ value.
Carrying amount is sometimes called net book value.
The difference between _______ and _______ __________ is referred to as the carrying amount.
The difference between cost and accumulated depreciation is referred to as the carrying amount.
Intangible assets are __-_____ assets that do not have _____ substance and that represent a privilege or a right granted to, or held by, a company.
Intangible assets are non-current assets that do not have physical substance and that represent a privilege or a right granted to, or held by, a company.
1) those with finite useful lives
2) those with indefinite useful lives
Deferred income tax is also called _____ income tax.
Deferred income tax is also called future income tax.
Unearned revenue represents cash received from a customer in ______ of any revenue being earned (before any goods or services have been provided).
Unearned revenue represents cash received from a customer in advance of any revenue being earned (before any goods or services have been provided).
For example, airlines receive payments from passengers purchasing tickets in advance of any flights being provided.
The portion of the loan that is due within the next year is classified as ______ maturities of __-_____ debt.
The portion of the loan that is due within the next year is classified as current maturities of long-term debt. The remainder of the loan is classified as a non-current liability.
We recommend that you list liabilities in the general order of ______ unless instructed otherwise.
We recommend that you list liabilities in the general order of liquidity unless instructed otherwise.
Examples of non-current liabilities include (1-4):
Examples of non-current liabilities include:
- Notes payable, including bank loans payable, mortgages payable, and bonds payable
- Lease obligations
- Pension and benefit obligations
- Deferred income tax liabilities
