Chapter 5 - Balance Sheet Flashcards
what is balance sheet?
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)
what is current ratio formula?
Current Asset / Current Liabilities
what are the 4 limitations of balance sheet?
- Does not reflect current value of some assets, such as property and equipment.
- Fail to reflect many elements of value to hospitality operations
- Limited by their static nature - they reflect the financial positions for only a moment
- Not exact
what are the 4 formats of balance sheet?
- Current Format
- Report Format
- Horizontal Analysis (Comparative Balance Sheet) -
- Vertical Analysis (Common-Size Balance Sheet)
what is current format?
- Assets on the left side, Liabilities on the right side
what is report format?
- Asset on top, Liabilities at bottom
what is horizontal analysis (comparative balance sheet)?
Shows 2 years of balance sheet along with change in $ and %
what is vertical analysis (Common-size balance sheet)?
- Shows 2 years of balance sheet along with % of total Asset / Liability section. i.e.. (Cash is 1 % of total asset)
what is current assets?
Can be converted to cash within 1 year (A/R, Inventory, Cash)
what is current liabilities?
Obligations that are expected to be paid with 1 year (Notes payable, A/P, Accrued Taxes, Advance Deposits)
what is current equipment?
(China, glassware, silver and uniforms), expected to used within 1 year - expense over it’s life, not exceeding 1 year
what is non-current receivable?
- Investments - Debt or equity securities and ownership interests that are expected to be held on a long-term basis
- 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)
what is other assets?
Intangible Assets - Goodwill Cash Surrender value of life insurance Deferred charges Deferred income taxes Other Assets (organization costs, security deposit, etc)
what is long-term liabilities?
Expected to be paid beyond the next 12 month
what are the 4 accounts of owner’s equity?
- Capital Stock - Common stock / Preferred Stock
- Additional Paid in Capital - Additional Capital
- Retained Earnings - Earnings generated
- Treasury Stock - Property’s own capital stock that has been repurchased but not retired