FAR - Framework, Overview & Statements - General-Purpose Financial Statements - Balance Sheet 1

Question 1

What is a valuation account used for?

Answer 1

Used to increase or decrease the book value of an item to a measure of current value.

Question 2

Describe the formula for quick or acid test ratio.

Answer 2

(Cash + Short-term Investments + A/R) / Current Liabilities

Question 3

How are current assets listed on the balance sheet?

Answer 3

Decreasing order of liquidity.

Question 4

Define “current liability”.

Answer 4

A liability expected to be extinguished through the use of current assets or by the incurrence of other current liabilities.

Question 5

Define “measurement basis”.

Answer 5

The attribute of an account being measured and reported.

Question 6

What is another name for the balance sheet?

Answer 6

The statement of financial position.

Question 7

What is the operating cycle?

Answer 7

The period of time from the purchase of inventory, to payment of the payable on inventory purchase, to the sale of goods, to the collection of receivable, and then to purchasing inventory all over again.

Question 8

Define “net realizable value”.

Answer 8

The amount the firm expects to receive from the sale or collection of an item.