Wiley - Financial Statements Flashcards
What approach is used when financial statements are prepared?
The all-inclusive approach
Where and how are prior-period adjustments shown?
They are shown on the statement of retained earnings as adjustments to the beginning
balance of retained earnings in the year that the error is discovered
What are the items in other comprehensive income?
Unrealized gains and losses on investments in securities available for sale, certain pension
cost adjustments, foreign currency translation adjustments, and unrealized gains and losses
on certain hedging activities
Name the two different formats of presentation for the balance sheet.
- Account form
2. Report form
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).
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 is owner’s equity presented on the balance sheet?
In order of permanence
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
How are long-term assets and liabilities defined?
By exclusion from current assets and current liabilities
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
What are the categories that are listed on the statement of cash flows?
Operating
Investing
Financing
