Accounting Made Simple 02

Question 1

1. ASSETS and LIABILITIES on a Balance Sheet will be broken down into:

Answer 1

Current Assets (or Liabilities) and Long Term Assets (or LIabilities).

Question 2

CURRENT ASSETS are:

Answer 2

Those assets that are expected to be converted into cash within 12 months or less. Examples are ACCOUNTS RECEIVABLE, CASH, and INVENTORY.

Question 3

3. LONG TERM ASSETS are:

Answer 3

Everything that is not a CURRENT ASSET.

Question 4

4. CURRENT LIABILITIES are:

Answer 4

Those that will need to be paid within 12 months or less. The most common example is ACCOUNTS PAYABLE.

Question 5

5. NOTES PAYABLE that are paid off over a long period of time (i.e., mortgage) are:

Answer 5

split up on the Balance Sheet so that the next 12 month’s payments are shown as a CURRENT LIABILITY, while the remainder is shown as a LONG TERM LIABILITY.