Common Current Assets

Question 1

the most liquid asset of an enterprise; thus, it is the first item presented in the current asset section of the Balance Sheet. It includes cash on hand, undeposited checks at the date of the balance sheet, cash in banks, and checks in transit to banks.

Answer 1

Cash

Question 2

Represent short-term, highly liquid investments that are both (a) readily convertible into known amounts of cash and (b) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Examples include treasury bills, commercial paper, and money market funds.

Answer 2

Cash Equivalents

Question 3

Short-term investments of surplus cash in equity and debt securities.

Answer 3

Marketable Securities

Question 4

Represents claims against customers generated by credit sales of goods or services for amounts still due to the company. The account balance includes only billings for services performed or products sold on or before the balance sheet date. The amount presented is net of the company’s estimated losses from uncollectible accounts. Receivables not arising from normal operations, such as amounts due from stockholders, officers, or employees, are reported separately from trade accounts receivables.

Answer 4

Accounts Receivable

Question 5

Amounts owed to the reporting company that are evidenced by a formal note. The account balance is net of the company’s estimated uncollectible amounts. Notes receivables are claims usually not arising from sales in the ordinary course of business. Typically, notes receivable result from dispositions of operating assets, special arrangement concerning overdue accounts receivable, loans to stockholders, employees, and others.

Answer 5

Notes Receivable

Question 6

Items of tangible personal property that are held for sale in the ordinary course of business, in the process of production for sale, or which are to be consumed in the production of goods or services to be available for sale. The inventory account may include three types of inventory: a finished goods inventory, consisting of products ready for sale; a work-in-process inventory, consisting of products in various stages of production; and a raw material and supplies inventory, consisting of items that will enter directly or indirectly into the production of finished goods. Inventories are carried at cost, unless their utility is no longer as great as their cost, in which case the lower-of-cost-or-market rule requires the carrying value of the inventory to be written down below cost.

Answer 6

Inventories

Question 7

Amounts paid to vendors, such as a three-year insurance policy with two years to expiration that will benefit accounting periods beyond the current period.

Answer 7

Prepaid Expenses