Balance sheet

Question 1

What is a balance sheet?

Answer 1

It is an overview of what a company owns and what a company owes at a point of time. It is one of 3 very useful financial statements that a company puts together.

Question 2

What are the 2 other financial statements?

Answer 2

Income statement and Cash flow statement

Question 3

What are the other 2 financial statements described as compared to a balance sheet?

Answer 3

A period of time e.g. a month, compared to balance sheet which is like a snapshot.

Question 4

What is the balance sheet split into?

Answer 4

What we own ( Assets) on the left or first of a vertical balance sheet and What we owe ( Liabilities) on the right of a balance sheet or below assests in a vertical line. It also contains equity or is below.

Question 5

What are 2 main categories in Assets?

Answer 5

Currens Assests

Non current Assets

Question 6

What are Current Assets?

Answer 6

These are cash and other assets that are excepted to be converted into cash within a year.

Question 7

What are Non-Current Assets?

Answer 7

Are longer term investments that cannot be converted into cash quickly.

Question 8

What are the main 3 categories in liabilities?

Answer 8

Current liabilities
Non-current liabilities
Equity

Question 9

What are Current liabilities?

Answer 9

Cash payments due to be paid to creditiors within twelve months e.g. money owed to suppliers.

Question 10

What are non- current liabilities?

Answer 10

Are amounts owed that are to be paid after the period of a year.

Question 11

What is Equity?

Answer 11

Represents the shareholders stake in the company ( total company assets - total liabilities(after liabilities have been paid )

Question 12

In each section of the balance sheet how they ordered?

Answer 12

In chronological order from most liquid to least liquid.

Question 13

What is the Equation of balance sheets?

Answer 13

Assets = liabilities + Equity

Question 14

Finish off the sentence ‘money doesn’t magically appear or disappear’

Answer 14

For money to go into one account, it has to come from another.

Question 15

In to Asset section from Most liquid to least liquid, what are the most common current Assets?

Answer 15

Cash and Cash Equivalents 
Short term investment 
Account receivables
Inventory 
Prepaid expenses.

Question 16

What is Cash and Cash Equivalents?

Answer 16

The value of cash the company has on hand; the cash it has in the registers and cash in banks etc.

Question 17

What are Short-term investments?

Answer 17

The value of investments the company has that can be easily sold and converted into cash within a year e.g. Stocks and bonds.

Question 18

What are Account receivables?

Answer 18

The Value of money that customers owe the company but not yet paid.

Question 19

What is Inventory?

Answer 19

The value of the company’s products waiting to be sold ( in warehouse)

Question 20

What are Prepaid expenses?

Answer 20

Represents the value of product and services that have been paid for but not received or used yet by the company.

Question 21

What are the 4 most common non- current assets?

Answer 21

Long term investments
Property Plants & Equipments(PP&E)
Intangible Assets
Goodwill

Question 22

What are long term investments?

Answer 22

Investments the company has made that cannot be sold and converted into cash within one year

Question 23

What is Property, Plants & Equiqments?

Answer 23

Physical assets the company controls other than inventory such as land, factory buildings and machines etc.

Question 24

What are intangible assets?

Answer 24

Assets that the comapany control without a physical substance such as brand, copyrights, patents etc

Question 25

What is Goodwill?

Answer 25

goodwill is the difference between what a company pays to buy an accquistion target, and what the accquired company is worth on paper

Question 26

What are main current liabilities?

Answer 26

Current portion of long term debt 
Deffered revenue 
Account payable 
Accured expenses
Income taxpayble
Capital lease

Question 27

What is Current portion of long term debt?

Answer 27

The amount of money the company owes to lenders that has to be repaid within the year( the company may have borrowed more but its a current position in that year)

Question 28

What is Deffered revenue?

Answer 28

The value of goods and services that the company uses owes to the customers ( customers have purchased, but not yet delieverd)

Question 29

What is Accountable payable?

Answer 29

The amount of money the company owes to suppliers and other vendors that have provided goods and services to the company.

Question 30

What is Accured expenses?

Answer 30

The value of money that the company owes that has accured over time ( hasn’t paid for it yet so like wages and rent.

Question 31

What is Income tax payable?

Answer 31

The value of money the government owes the government in taxes

Question 32

What is Capital lease?

Answer 32

The value of future lease (rent) payments that the company has to make to a owner of whatever asset the company is leasing e.g. like office space, factory etc.

Question 33

What the footnotes in the Liabilites section of a balance sheet?

Answer 33

Commitments

Contingencies

Question 34

What are commitments?

Answer 34

They are obligations of a company to perform something in the future ( e.g. if a company signed a contract to buy $100 mil of goods from a supplier in 5 years)

Question 35

What are Contingencies?

Answer 35

They are possible obligations that can take place based on uncertain future ( company be sewed for $20 million dollars.