Balance Sheet Flashcards
What is the balance sheet also known as?
Statement of financial position
What does the balance sheet report?
Assets, liabilities, and stockholders’ equity
What is the accounting equation reflected in the balance sheet?
Assets = Liabilities + Stockholders’ Equity
What are the major sections of a balance sheet?
- Current assets
- Investments
- Property, plant and equipment
- Intangible assets
- Other assets
- Current liabilities
- Noncurrent liabilities
- Stockholders’ equity
What principles must U.S. companies follow when preparing financial statements?
Generally Accepted Accounting Principles (GAAP)
What method of accounting does US GAAP require for financial statements?
Accrual method of accounting
What does the accrual method of accounting report?
Liabilities when incurred and assets when earned
What is one limitation of US GAAP regarding asset reporting?
Internally developed brand names, trademarks, and patents are not included as assets
What does the balance sheet heading typically include?
- Company name
- Name of the financial statement
- Date
True or False: The balance sheet reflects a period of time.
False
What does a comparative balance sheet allow the reader to see?
Changes in amounts from an earlier date
What are current assets?
Cash and assets expected to be converted to cash within one year
Fill in the blank: Assets are recorded in the general ledger at their _______.
Cost when acquired
What is the purpose of accumulated depreciation?
To reduce the reported amount of long-term assets
What is the definition of a current asset?
Cash and assets expected to turn to cash within one year or operating cycle
What type of balance sheet format displays assets on the left and liabilities and equity on the right?
Account form
What is the total assets amount in the example balance sheet?
$770,000
What is included in the stockholders’ equity section?
- Common stock
- Retained earnings
- Accumulated other comprehensive income
- Treasury stock
What does the report form of a balance sheet emphasize?
Presentation of assets at the top followed by liabilities and equity
What is the significance of the date on a balance sheet?
It indicates a specific point in time for the reported amounts
What is the typical format for the balance sheet date?
Final day of the accounting period
What does the term ‘interim financial statements’ refer to?
Financial statements issued between end-of-year statements
What is a common example of a current asset?
Cash, Accounts Receivable, Inventory
What does the term ‘noncurrent liabilities’ refer to?
Liabilities that are not due within one year