Balance Sheet Flashcards
What is the definition of assets?
An item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.
What is the definition of liabilities?
A company’s legal debts or obligations that arise during the course of business operations.
What is the definition of current assets?
A balance sheet account that represents the value of all assets that can reasonably expected to be converted into cash within one year.
What is the definition of current liabilities?
A company’s debts or obligations that are due within one year.
What is the formula of net current assets?
Current assets minus current liabilities.
List some examples of current assets
Cash Cash equivalents Accounts receivable Inventory Marketable securities Prepaid expenses and other liquid assets that can be readily converted to cash
List some examples of current liabilities
Short term debt
Accounts payable
Accrued liabilities and other debts.
What happens if net current assets are negative?
If net current assets are negative, the company may have difficulty financing its day-to-day operations. also called working capital or current capital.
How are liabilities settled?
Liabilities are settled over time through the transfer of economic benefits including money, goods or services.
List 6 current assets
Cash and cash equivalents, Accounts receivable
Inventory
Marketable securities,
Prepaid expenses
Other liquid assets that can be readily converted to cash.
Where do current liabilities appear?
Current liabilities appear on the company’s balance sheet.
