Balance Sheet Flashcards
What is a valuation account used for?
Used to increase or decrease the book value of an item to a measure of current value.
What is the operating cycle?
The period of time from the purchase of inventory, to payment of payable on inventory purchase, to the sale of goods, to the collection of receivable, and then to purchasing inventory all over again.
Define “measurement base.”
The attribute of an account being measured and reported.
How are current assets listed on the balance sheet?
Declining order of liquidity.
Define “current liability.”
A liability expected to be extinguished through the use of current assets or by the incurrence of other current liabilities.
Describe the formula for quick or acid test ratio.
(Cash + Short-term Investments + Accounts Receivable) / Current Liabilities
Define “net realizable value.”
The amount the firm expects to receive from the sale or collection of an item.
What is another name for the balance sheet?
The statement of financial position.
What is the overall objective of financial statements under IFRS?
To provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions.
What should financial statements do according to IFRS?
Fairly present the underlying financial position and financial performance of the entity by faithfully representing the underlying economic reality the firm faced during the period.
What is the classification for an asset that is held for trading?
Current Asset
Do IFRS allow the term “reserve” on the balance sheet?
Yes, the term reserve is allowed.
What type of balance sheet is required under IFRS?
Statement of financial position items must be classified as current and non-current.
What do control accounts report?
The aggregate balance of several subsidiary accounts.
What are the steps of the accounting cycle?
(1) Analyze source documents
(2) Post to ledger
(3) Make adjusting entries
(4) Prepare trial balance
(5) Prepare income statement, balance sheet, and cash flow statements
(6) Close temporary accounts
