Financial Statements Flashcards
What is the purpose of the statement of cash flows?
To explain the change in cash and cash equivalents that has occurred during the past accounting year.
What are cash equivalents?
Short-term investments that are convertible into a known and fixed amount of cash and have an original maturity to the purchaser of three months or less.
How are long-term assets and liabilities defined?
By exclusion from current assets and current liabilities.
What are the categories that are listed on the statement of cash flows?
- Operating
- Investing
- Financing.
How is owner’s equity presented on the balance sheet?
In order of permanence.
How are assets presented on the balance sheet?
Assets are presented in order of decreasing liquidity. The most liquid assets (such as cash) are shown first, and less liquid assets are shown last (such as property, plant and equipment).
What are current liabilities?
Liabilities that are due in the upcoming year or the operating cycle of the business, whichever is longer and which will be met through the transfer of a current asset or the creation of another current liability.
Where and how are prior period adjustments shown?
Statement of Retained Earnings as adjustments to the beginning balance of retained earnings in the year that the error is discovered.
What approach is used when financial statements are prepared?
The all-inclusive approach.
How are liabilities presented on the balance sheet?
Liabilities are shown in order of maturity. Current liabilities are presented first, and then, long-term liabilities are presented.
How are assets presented on the balance sheet?
Assets are presented in order of decreasing liquidity. The most liquid assets (such as cash) are shown first, and less liquid assets are shown last (such as property, plant and equipment).
Where and how are prior period adjustments shown?
Statement of Retained Earnings as adjustments to the beginning balance of retained earnings in the year that the error is discovered.
