Cash and Cash Equivalents and Balance Sheet

Question 1

Define: Current Asset

Answer 1

An asset that will be used up or converted into cash within one year or one operating cycle, whichever is longer. An Asset is an economic resource with a probable future economic benefit that the entity obtained or controls as a result of an event or transaction that has already occurred.

Question 2

Define: Current Liability

Answer 2

A liability that will be settled within one year or one operating cycle, whichever is longer, or will require the use of current assets. A Liability is an economic obligation that is probable that will require the entity to transfer assets or provide services in the future as a result of an event or transaction that has already occurred.

Question 3

Define: Cash Equivalent

Answer 3

A security easily converted into cash with an original maturity of 90 days or less.

Question 4

Define: Financial Instrument

Answer 4

Cash; a security, such as stock, representing ownership in another entity; a contract that requires one entity to transfer cash or another financial instrument to another party and gives the other party the right to receive the cash or other financial instrument; or a contract that requires one entity to exchange financial instruments on potentially unfavorable terms while giving another entity the right to exchange financial instruments on potentially favorable terms.

Question 5

Define: Financial Asset

Answer 5

Cash; a security, such as stock, representing ownership in another entity; a contract that gives the entity the right to receive the cash or other financial instrument; or a contract that gives the entity the right to exchange financial instruments on potentially favorable terms.

Question 6

Define: Financial Liability

Answer 6

A contract that requires the entity to transfer cash or another financial instruments to another party; or a contract that requires the entity to exchange financial instruments on potentially unfavorable terms.