Week 2 - Statement Of Financial Position

Question 1

This is also known as balance sheet, is a formal
statement presenting the three accounting elements which are the assets,
liabilities and equity.

Answer 1

Statement of financial position

Question 2

This is one of four business documents a public
company must file every year in order to retain their status.The other three are an
income statement, a statement of retained earnings, and a cash flow statement.

Answer 2

Statement of financial position

Question 3

Most often these are called ‘balance sheets.’ However,
when a company is a government or non-profit organization, the original term
‘________’ is used.

Answer 3

Statement of financial position

Question 4

Most often this statement is prepared and released as one of the last events for the
specific accounting period. This means that all the transactions in the three
sections listed above are given on a single document and posted to a general
ledger

Answer 4

Statement of financial position

Question 5

This is a single picture of a
company’s entire financial position for a given period of time. Its goal is to
summarize the changes in financial activity

Answer 5

Statement of financial position

Question 6

This is the first component of the balance sheet. It is extremely important
since it tells the readers of the balance sheet three important pieces of
information:
1. The company name;
2. The type of statement to follow (Balance Sheet);
3. The date at which account value applies.

Answer 6

Heading

Question 7

These are a company’s resources—things the company owns. These are
economic resources of the business.

Answer 7

Assets

Question 8

These are resources owned and/or controlled by the enterprise.

Answer 8

Assets

Question 9

These are acquired by an enterprise as a result of a past transaction or
event.

Answer 9

Assets

Question 10

What are the characteristics of assets

Answer 10

a. Assets are resources owned and/or controlled by the enterprise.
b. Assets are acquired by an enterprise as a result of a past transaction or
event.
c. The enterprise should have the capacity to restrict or prevent other
entities from enjoying the economic benefits arising from the use of the
resource or item.

Question 11

These are a company’s obligations—amounts the company owes to other
business, government, shareholders, employees, and others.

Answer 11

Liabilities

Question 12

This is a present obligation arising out of past event.
Examples of events are a purchase transaction, or a borrowing
transaction

Answer 12

Liability

Question 13

This is required to be settled in the future.

Answer 13

Liability

Question 14

What are the characteristics of liabilities

Answer 14

a. A liability is a present obligation arising out of past event.
Examples of events are a purchase transaction, or a borrowing
transaction.
b. A liability is required to be settled in the future.

Question 15

Liabilities can be viewed in two ways:

Answer 15

1. as claims by creditors against the company’s assets, and
2. a source—along with owner or stockholder equity—of the company’s
   assets.

Question 16

This is the amount left over after liabilities are deducted
from assets:

Answer 16

Capital or owners equity

Question 17

What is the equation for owners equity

Answer 17

Assets - Liabilities = Owner’s (or Stockholders’) Equity.

Question 18

the original and additional investments of the owner of the business
is recorded in

Answer 18

entity or Capital.

Question 19

Any amount of money or other assets withdrawn by the
owner of the business for personal use are reflected in the ______ account

Answer 19

Withdrawals

Question 20

Other accounting references use the term “drawings” or “personal”
instead of “withdrawals”

Answer 20

Withdrawals

Question 21

this is also known as residual assets since they are what are left of the asset after the company pays
all of its liabilities..>

Answer 21

capital

Question 22

These are classified in the balance sheet as current and noncurrent. It is
considered as current if it is expected to be used for the next 12 months.

Answer 22

Assets

Question 23

Examples of noncurrent assets are:

Answer 23

1. Property, plant and equipment
2. Long-term investments
3. Intangible assets
4. Others

Question 24

These are recognized at fair value when they are acquired and
amortized over their useful lives except goodwill which has unlimited useful
life. They are periodically tested for impairment. These are fixed assets that
have no physical existence such as copyright, patents, goodwill, etc.

Answer 24

Intangible assets

Question 25

(also called tangible fixed assets) are those
fixed assets that have some physical existence. They are grouped into
different classes such as land, land improvements, buildings, vehicles, etc.
based on their function and depreciated over their useful lives except land
which has unlimited useful life (unless it is a land obtained on lease).

Answer 25

Property, Plant and Equipment

Question 26

Property, plant and equipment are presented on balance sheet net of
accumulated depreciation and accumulated impairment losses.

Answer 26

–read–

Question 27

These are investments which are not expected to be
realized (sold or otherwise converted to cash) within next 12 months. These
include investments in common stock of companies, purchases of bonds
issued by companies, etc.

Answer 27

Long-term Investments

Question 28

These are also classified in the balance sheet as current and noncurrent.
It is considered as current if it shall be paid or due within the next 12 months.

Answer 28

Liabilities

Question 29

These comes either from the use of current assets such as cash on hand
or from the current sale of inventory.

Answer 29

Settlement

Question 30

Settlement can also come from
swapping out one current liability for another.

Answer 30

–Read–

Question 31

At present, most liabilities show up on the balance sheet at historic cost
rather than fair value. And there’s no GAAP requirement for the order in
which they show up on the balance sheet, as long as they are properly
classified as current.

Answer 31

–read–

Question 32

Notes due in full less than 12 months
after the balance sheet date are short term. For example, a business
may need a brief influx of cash to pay mandatory expenses such as
payroll. A good example of this situation is a working capital
loan, which a bank makes with the expectation that the loan will be
paid back from collection of accounts receivable or the sale of
inventory.

Answer 32

Short term notes payable

Question 33

This account shows the amount of money the
company owes to its vendors.

Answer 33

Accounts payable

Question 34

Payments due to shareholders of record after the
date declaring the dividend.

Answer 34

Dividends payable

Question 35

Most companies accrue payroll and related payroll
taxes, which means the company owes them but has not yet paid
them.

Answer 35

Payroll liabilities

Question 36

: If a short-term note
has to be paid back within 12 month of the balance sheet date, you’ve
probably guessed that a long-term note is paid back after that 12-
month period. However, you have to show the current portion (that
which will be paid back in the current operating period) as a current
liability.

Answer 36

Current portion of long-term notes payable

Question 37

This category includes money the company
collects from customers that it hasn’t yet earned by doing the
complete job for the customers but that it anticipates earning within
12 months of the date of the balance sheet

Answer 37

Unearned revenue

Question 38

Those liabilities which will not fall in the above criteria are considered as
noncurrent Examples of noncurrent liabilities are:

Answer 38

1. Noncurrent portion of long-term debt
2. Capital or finance lease liability
3. Deferred tax liability
4. Long-term obligations to company officers
5. Long-term deferred revenue

Question 39

: Long-term lending agreements between borrowers
and lenders. For a business, it’s another way to raise money besides
selling stock

Answer 39

Bonds payable

Question 40

Capital leases (you record the rental arrangement
on the balance sheet as an asset rather than the income statement as
an expense) that extend past 12 months of the date of the balance
sheet. Because the rental arrangement is recorded as an asset, the
related lease obligation must be recorded as a liability.

Answer 40

Long term leases

Question 41

Report as noncurrent when the company
expects to make good on repairing or replacing goods sold to
customers and the obligation extends beyond 12 months from the
balance sheet date.

Answer 41

Product warranties

Question 42

These are a company’s own resources.

Answer 42

Assets

Question 43

These are a company’s obligations or debt

Answer 43

Liabilities

Question 44

also known as Equity, are the residual amounts from assets after a company pays
all of its liabilities.

Answer 44

Capital

Question 45

: assets or liabilities which are expected to be used or paid
within the next twelve months.

Answer 45

Current Assets or Liabilities:

Question 46

assets or liabilities which are expected to be used or
paid longer than the next twelve months.

Answer 46

Noncurrent Assets or Liabilities