Chapter 2 (The Balance Sheet) Flashcards
what is the other name for the balance sheet?
statement of financial position
what are two other terms for fiscal year?
financial year and budget year
what is the term for the period used for calculating annual “yearly” financial statements?
fiscal year
what are resources owned and controlled by the company and expected to generate future economic benefits?
assets
what are economic obligations that result from past transactions?
liabilities
what is ownership rights in assets after deductions for liabilities?
shareholder’s equity
debts payable to outsiders are called ____
creditors
what are the two types of assets?
current and long-term/non-current
describe current assets
assets which the company expects to convert to cash, sell, consume, during the next 12 months or one operating cycle, whichever is longer
describe long-term assets
assets which the company expects to hold longer than the next 12 months or one operating cycle
____ _____ is the term for the elapsed time between the start of production and the eventual receipt of cash from customers from the sale of the product
operating cycle
current assets are listed in the order of ____
liquidity
what are the 7 current asset accounts?
- cash and cash equivalents
- A/R
- inventory
- supplies
- prepaid expenses
- notes receivable
- other
give examples of “other” current assets
advances paid to suppliers or employees
what is the difference between A/R and notes receivable?
notes receivable are a written pledge that the customer will pay by a certain date. –> usually involves interest, longer term than A/R
why is the inventory account so important?
- how a merchandising company earns there revenue
- don’t want too much or too little
what are cash equivalents?
- highly liquid short term assets
- marketable securities, short term govn’t bonds
non-current assets are listed in the order of ____
permanency
the other term for depreciation (IFRS) is___
amortization (ASPE)
which long-lived asset is NOT depreciated?
land
____ is the allocation of the cost of plant and equipment over their estimated useful life
depreciation
what is the account that shows the total amount of depreciation taken to date?
accumulated depreciation
what are intangible assets?
assets without physical substance and represent a privilege or right held by the company
what are examples of intangible assets?
- goodwill
- patents, copyright, license, trademark
describe goodwill
- excess price paid on acquisition of another company
- generate future value to company
what are the two types of liabilities?
current and non-current
describe current liabilities
obligations that need to be paid within the next year or operating cycle
what are examples of current liabilities
band indebtedness, A/P, unearned revenue, bank loan/notes payable
describe non-current assets
debts to be paid after 1 year
what are examples of non-current assets?
lease obligations, bank loan, pension and benefit obligations
what is included in shareholder’s equity?
share capital and retained earnings
_____ measures short-term ability to pay its maturing obligations and to meet its unexpected needs for cash
liquidity
____ measures a company’s ability to survive over a long period of time
solvency
*the higher the percentage of debt to total assets, the greater the risk that debts cannot be repaid when they’re due
describe the going concern assumption
- business will continue operating in foreseeable future
- provides foundation for accounting
- provides justification for using cost as value of certain assets
- reason we distinguish current and non-current
