Chapter 1 - balance_sheet TO KNOW Flashcards
What is an Asset in a company
Assets that the company owns.
What is Cash in a company
Money available in the bank or on hand.
Example: A bakery has $10,000 in its bank account.
What is Accounts Receivable
Money customers owe the business for sales made on credit.
Example: The bakery sold $5,000 worth of cakes but hasn’t been paid yet.
What is Inventory
Goods ready to be sold.
Example: The bakery has $2,000 worth of ingredients.
Total Current Assets
+ parts
**✅ Cash & Cash Equivalents **– Physical cash, bank balances, and highly liquid investments.
**✅ Accounts Receivable (AR) **– Money owed by customers for sales made on credit.
**✅ Inventory **– Raw materials, work-in-progress, and finished goods available for sale.
**✅ Prepaid Expenses **– Payments made in advance for expenses like rent, insurance, or subscriptions.
**✅ Short-Term Investments **– Marketable securities or investments that can be sold quickly for cash.
**✅ Other Receivables **– Refunds, advances, or loans expected to be received within a year.
Example: $10,000 + $5,000 + $2,000 = $17,000.
Gross Fixed Assets
The total cost of long-term assets.
Example: The bakery bought ovens and furniture for $50,000.
Accumulated Depreciation
The decrease in asset value over time.
Example: The bakery’s ovens lose $5,000 in value per year.
Net Fixed Assets
Gross Fixed Assets - Depreciation.
Example: $50,000 - $5,000 = $45,000.
Total Assets
Current Assets + Net Fixed Assets.
Example: $17,000 + $45,000 = $62,000.
What are Liabilities
Money the company owes.
Other word for “Current Liabilities”
Short-term debts.
Accounts Payable
Money owed to suppliers.
Example: The bakery owes $3,000 for ingredients.
Accrued Expenses
Recorded expenses that haven’t been paid.
Example: The bakery owes $2,000 in wages.
Notes Payable
Short-term loans.
Example: The bakery borrowed $5,000 from a bank.
Total Current Liabilities
+ all assets in that
- Accounts Payable
- Short-Term Debt
- Accrued Expenses
- Deferred Revenue (Short-Term)
- Income Tax Payable
- Other Current Liabilities
Example: $3,000 + $2,000 + $5,000 = $10,000.
Long-Term Liabilities
+ parts
Debt payable after one year.
- Long-Term Debt
- Deferred Revenue (Long-Term)
- Pension Liabilities
- Deferred Tax Liabilities
- Other Non-Current Liabilities
Example: A $20,000 loan payable over five years.
Equity (Owner’s Investment and Profits)
Owner’s investments and profits.
Common Equity
Money invested by owners.
Example: The bakery’s owner invested $25,000.
Retained Earnings
Profits kept instead of paying out to owners.
Example: The bakery saved $7,000 in profits.
Total Liabilities and Equity
Total: Current Liabilities + Long-Term Liabilities + Common Equity + Retained Earnings.
Example: $10,000 + $20,000 + $25,000 + $7,000 = $62,000.
