Balance Sheet Flashcards
Contra Accounts
Account that is subtracted from associated account for purposes of reporting net book value. Can be Debit or Credit
Adjunct Account
Account added to associated account for purposes of reporting net book value. Can be Debit or Credit
Current Ratio
Current Assets/Current Liabs
Quick or Acid Test Ratio
(Cash + short term investments + AR) / Current Liabs
Current assets
Cash, cash equivalents, short-term investments, accounts receivable, other receivables, inventories, prepaids
Noncurrent assets
Long-term investments, property, plant and equipment, intangibles, “other“ assets (including long-term prepaids), Goodwill
Goodwill
the excess of the purchase price paid for another business over the market value of its net assets. Only when a firm is purchased by another is goodwill recognized in the balance sheet of the purchaser. Internally, generated goodwill is expensed.
Current liabilities
Accounts payable, accrued liabilities, unearned revenue, income tax payable, notes payable, current portion of long-term debt (the portion due within one year of the balance sheet date).
Noncurrent liabilities
Notes payable, bonds payable, lease liabilities, pension liabilities, postretirement healthcare liabilities, deferred taxes
Owners’ equity
Contributed capital (common stock, preferred stock, contributed capital in excess of par), treasury stock (a contra account), Retained earnings (total net income to date less total dividends to date)
Measurement Bases for Balance Sheet Valuation
Historical cost, Depreciated, amortized, or depleted historical cost, Market value, Net realizable value, Present value, Aggregate of more than one valuation basis
Historical cost
Some accounts are measured and reported at a fixed, unchanging historical amount. (Examples include land, some investments, cash, prepaids, many current liabilities, contributed capital accounts, and treasury stock.)
Depreciated, amortized, or depleted historical cost
Other accounts reflect the remaining portion of a fixed unchanging historical amount. In some cases, the original cost or other relevant amount is maintained in one account, with a contra or adjunct account being subtracted from or added to that account for the purpose of reporting net book value (carrying value).
(Examples include property, plant and equipment; intangibles; natural resources.)
Market value
a type of current value, fair value, often used synonymously with market value, is the selling price for assets and amount currently required to retire a liability. These are exit values rather than entry values.
(Examples include investments in marketable securities (stocks and bonds) for which the holding firm does not have significant influence and does not intend to hold to maturity (in the case of bonds))
Net realizable value
a type of current value the amount the firm expects to receive from the sale or collection of the item.
(Examples include accounts receivable and inventories.)
