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CFA Level I > Vol. 3 LM2 Cash and Cash Equivalents > Flashcards

Vol. 3 LM2 Cash and Cash Equivalents Flashcards

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1
Q

Accounting standards require that certain specific line items, which have this quality, be shown on a balance sheet

Components of the Balance Sheet

A

Materiality

Components of the Balance Sheet

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2
Q

Define

Cash equivalents

Components of the Balance Sheet

A

Highly liquid, short-term investments that are close enough to maturity that the risk is minimal that their value will change significantly with interest rates.
Interest rate-insensitive assets
Duration of 3 or less

Components of the Balance Sheet

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3
Q

Duration

Maturities of short-term investments included in cash and cash equivalents

Components of the Balance Sheet

A

Three months or less

Components of the Balance Sheet

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4
Q

Fill in the blank

Cash and cash equivalents are _____ assets

Components of the Balance Sheet

A

Financial (assets)

Components of the Balance Sheet

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5
Q

Define

Amortized cost

Components of the Balance Sheet

A

The historical cost (initially recognized cost) of the asset adjusted for amortization and impairment

Components of the Balance Sheet

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6
Q

list examples

cash equivalents

Components of the Balance Sheet

A

US Treasury bills
Commercial paper
Money market funds

Components of the Balance Sheet

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7
Q

Define

Marketable securities

Components of the Balance Sheet

A

are financial assets and include investments in debt or equity securities that are:
(1) traded in a public market, and
(2) whose value can be determined from price information in a public market

Components of the Balance Sheet

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8
Q

Classification

Trade receivables are also called

Components of the Balance Sheet

A

Accounts receivable

Components of the Balance Sheet

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9
Q

define

trade receivables

Components of the Balance Sheet

A

These are amounts owed to a company by its customers for products and services already delivered.

Components of the Balance Sheet

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10
Q

Measurement and reporting

Trade receivables

Components of the Balance Sheet

A

Typically reported at net realizable value, an approximation of fair value, based on estimates of collectability

Components of the Balance Sheet

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11
Q

Define

Allowance for doubtful accounts

Components of the Balance Sheet

A

Reflects the company’s estimate of the amount of receivables that will ultimately be uncollectible

Components of the Balance Sheet

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12
Q

Make the adjustment

When specific receivables are deemed to be uncollectible, they are written down by

Components of the Balance Sheet

A

Reducing accounts receivable
Reducing the allowance for doubtful accounts

Components of the Balance Sheet

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13
Q

Account classification

Allowance for doubtful accounts

Components of the Balance Sheet

A

Contra account

Components of the Balance Sheet

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CFA Level I (64 decks)

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