Chapter 5 - Balance Sheet Flashcards

1
Q

what is balance sheet?

A

The balance Sheet reflects the financial position of the hospitality operation - it’s assets, liabilities, and owner’s equity - at the given date. It is the financial statement that reflects or tests and proves, the fundamental accounting equation. (Asset = Owner’s Equity + Liabilities)

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2
Q

what is current ratio formula?

A

Current Asset / Current Liabilities

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3
Q

what are the 4 limitations of balance sheet?

A
  1. Does not reflect current value of some assets, such as property and equipment.
  2. Fail to reflect many elements of value to hospitality operations
  3. Limited by their static nature - they reflect the financial positions for only a moment
  4. Not exact
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4
Q

what are the 4 formats of balance sheet?

A
  1. Current Format
  2. Report Format
  3. Horizontal Analysis (Comparative Balance Sheet) -
  4. Vertical Analysis (Common-Size Balance Sheet)
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5
Q

what is current format?

A
  • Assets on the left side, Liabilities on the right side
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6
Q

what is report format?

A
  • Asset on top, Liabilities at bottom
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7
Q

what is horizontal analysis (comparative balance sheet)?

A

Shows 2 years of balance sheet along with change in $ and %

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8
Q

what is vertical analysis (Common-size balance sheet)?

A
  • Shows 2 years of balance sheet along with % of total Asset / Liability section. i.e.. (Cash is 1 % of total asset)
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9
Q

what is current assets?

A

Can be converted to cash within 1 year (A/R, Inventory, Cash)

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10
Q

what is current liabilities?

A

Obligations that are expected to be paid with 1 year (Notes payable, A/P, Accrued Taxes, Advance Deposits)

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11
Q

what is current equipment?

A

(China, glassware, silver and uniforms), expected to used within 1 year - expense over it’s life, not exceeding 1 year

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12
Q

what is non-current receivable?

A
  1. Investments - Debt or equity securities and ownership interests that are expected to be held on a long-term basis
  2. Property and Equipment - Fixed Assets including land, building, furnishing and equipment, construction in progress, and leasehold improvements (Exception of land, all property and equipment is written off to expense (depreciation expense)
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13
Q

what is other assets?

A
Intangible Assets - Goodwill
Cash Surrender value of life insurance
Deferred charges
Deferred income taxes
Other Assets (organization costs, security deposit, etc)
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14
Q

what is long-term liabilities?

A

Expected to be paid beyond the next 12 month

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15
Q

what are the 4 accounts of owner’s equity?

A
  1. Capital Stock - Common stock / Preferred Stock
  2. Additional Paid in Capital - Additional Capital
  3. Retained Earnings - Earnings generated
  4. Treasury Stock - Property’s own capital stock that has been repurchased but not retired
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