Chapter 7: Financial Statements Flashcards
What is the accounting equation?
Total assets = total liabilities plus total shareholders’ equity
What provides information about company’s financial position at a specific point in time?
Balance sheet
What is actual cost of acquiring the asset minus any cost expenses to date?
Historical cost
What reflects amount the asset could be sold for in a transaction between willing and unrelated parties called an arm’s length transaction?
Fair value
Do most companies choose to report assets at historical or fair value cost?
Historical
What includes cash, inventories and accounts receivables and are expected to be converted into cash, used up or sold within current operating period?
Current assets
What are also called fixed or long term assets that include tangible assets and intangible assets?
Non current assets
What is calculated as gross value of asset minus accumulated depreciation?
Net book value
What is it called for a capitalized long term asset, when the company allocates the cost of that asset over the assets estimated useful life?
Depreciation
What is process of expensing costs of intangible assets over their useful lives?
Amortization
What arises if a company purchased another company but laid more than fair value of net assets of the company it purchased?
Goodwill
What is money that has been borrowed and must be repaid at some future date?
Debt
What represents the shareholders’ or owners’ investment in the company?
Equity
What occurs when revenues are recorded when revenues are earned rather than when they are received in cash and that related expenses may be recognized before or after they are paid out in cash?
Accrual basis
What is net profit margin?
Net income divided by revenues
