Balance Sheets Flashcards
What are 4 examples of assets (asset classes)?
Current assets
Long-term investments
Property, plant, and equipment
Intangible assets
What are some examples of “current assets”?
Cash
Accounts receivable
Inventory
What catagories fall under Stockholders’ Equity?
Common stock
Retained Earnings
What factor gives the balance sheet its name?
because the economic resources of a company (assets) must always equal, or be in balance with, the claims against those resources (liabilities and stockholders’ equity)
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What is a balance sheet?
report the financial position of a company (its assets, liabilities, and stockholders’ equity) at a specific point in time
What are some examples of “long-term liabilities”?
Notes payable
Bonds payable
How do you prepare a balance sheet?
Header (Name of Company, Type of Statement, Time Period Covered)
Assets in order of liquidity (Should use proper classifications (Current assets, Property, plants, and equipment, and Intangible assets))
Add the assets and double underline
Liabilities in order of when they’re due (Should use proper classifications (Current liabilities, Long-term liabilities, Stockholders’ Equity)
Add the liabilities and double underline
What does the relationship between current assets and current liabilities provide investors?
Insight into a company’s liquidity; their ability to pay obligations as they come due
What is the underlying formula of the balance sheet?
The fundamental accounting equation:
Assets = Liabilities + Stockholders’ Equity
What are some examples of “current liabilities”?
Accounts payable
Salaries payable
Unearned revenue (been paid for something not completed)
How do “current assets” differ from other types of assets?
Current assets consists of cash and assets that can be expected to turn into cash within 1 year or 1 operation cycle (whichever is longer)
What is a function of the balance sheet?
conveys important information about the structure of assets, liabilities, and stockholders’ equity
