Topic 3 The Balance Sheet Flashcards
Balance Sheet
listing of an organization’s assets and of its liabilities at a certain time.
Equity
difference between assets and liabilities
Current Assets
current means one year or less.
Most common- cash account receivable, and inventory
Cash
coins and currency as well as the balances in company checking and saving accounts
Accounts Receivable
amounts owed to a business by its credit customers and usually collected in cash within 10 to 60 days
Inventory
name given to goods held for sale in the normal course of business
Prepaid Expenses
payments in advance for business expenses
Two common examples are insurance and rent.
Investment Securities
composed of publicly traded stocks and bonds
used to earn the highest possible return on this temporarily idle cash
Long-term investments
those assets that you expect to still be around next year when preparing the balance sheet again
companies make these investments to earn income and/or to exercise influence on the companies in which they invest
Property, plant, and Equipment
land, buildings, machinery, tools. furniture, fixtures, and vehicles used by a company in conducting its business activities
Accumulated Depreciation
reflects the wear and tear, or depreciation, of these items since they were originally purchased
Intangible assets
assets that have no physical or tangible characteristics
agreements, contracts, or rights that provide economic benefits to a company by permitting the use of a certain production process, trade name, or similar item.
Examples: patents, trademarks, copyrights, franchises, and goodwill.
Other assets
Long-term assets that are not suitable for reporting under any of the previous classifications
Current Liabilities
those obligations expected to be paid within one year. the most common being accounts payable.
Accounts Payable
the flip side of accounts receivable- when one company sells on credit, creating for itself an account receivable, the company on the other side of the transaction is buying on credit, creating an account payable
Short-term loans payable
formal, interest-bearing loans that are expected to be paid back within one year.
Current portion of long-term debt
some liabilities, such as mortgages, are payable in equal monthly installments over a specified number of years. The portion of these liabilities that is payable within 12 months from the balance sheet date.
Unearned revenue
not a revenue at all but a liability to be reported in the balance sheet
Long-term debt
long-term notes, bonds, mortgages, and similar obligations on the balance sheet.
Capital Lease obligations
long-term liability in the balance sheet
-some leases of property, plant, and equipment are financially structured so that they are economically the same a debt-financed purchases.
Deferred Income Tax Liability
the income tax expected to be paid in future years on income that has already been reported in the income statement but which because of tax law, has not yet been taxed
Stockholders’ Equity
difference between assets and liabilities (in a corporation)
- the residual amount of assets that would remain if all liabilities were satisfied.
Common Stock
stockholders’ equity investment
Par Value
the market value of shares at issuance
Additional Paid-in capital
Invested by stockholders that exceed the par value of issued shared
Preferred Stock
stockholders’ equity investment
Retained Earnings
the cumulative amount of a corporation’s profits that have been reinvested on behalf of the stockholders
Treasury Stock
the repurchased shares when a company buys back its own shares
Accumulated other comprehensive income
the grouped together changes which companies experience increased and decreased in equity each year because of the movement of market prices or exchange rates
Foreign Currency Translation Adjustment
arises from the change in equity of foreign subsidiaries that occurs as a result in foreign currency exchange rates.
Derivative
a financial instrument, such as an option or a future, that derives its value from the movement of a price, an exchange rate, or an interest rate associated with some other item.
Working Capital
non-US balance sheets
list current assets and current liabilities together and label the difference between the two as net current assets.
Current Assets listed on balance sheet
in decreasing order of liquidity
Asset
probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events
Liability
probable future scrafice of economic benefit arising from a pressent obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events
Equity
Residual interest in the assets of an entity that remains after deducting its liabilities
Recognition
Boil down all the estimates and judgments into one number and report that one number in formal financial statements
Process of formally recording an item in the accounting records so that it will be reflected in the financial statements
Preferred method of financial reporting
Valuation
Once it has been determined that an item should be recognized in financial statements. the question then arises about what dollar amount to assign to the item
Historical Cost
has long been used in accounting because it is reliable
Disclosure
sometimes down in place of recognition when the effects of an event cannot be quantified with any degree of certainty
Transaction Analysis
the process of determining how an economic event impacts the financial statements
Asset Mix
proportion of total assets in each asset category, is determined to alrge degree by the industry in wich the company operates
determined by dividing each asset item on the balance sheet by total assets
Banks have a lot of loans receivable
Retailers have lots of inventory
Manufacturers have lots of property, plant, and equipment
Financing Mix
percentage of total financing (liabilties plus equity) in each individual category.’ equity
measyre of the degree to which a company finances assets using liabilties or owners
