Balance Sheet-Accounting

What is a balance sheet?

A balance sheet is a listing of an organization's assets and liabilities as of a certain point in time.

How are balance sheet itemes usually classified?

Balance sheet items are usually classified as current (or short term) items noncurrent ( or long term) items.

What is the definition of current assets and what assets are included in this section of the balance sheet?

Current items are assets expected to be converted into cash withing a year. Current assets include cash, recieivables, inventories, prepaid expenses, inverstiments, trading securites, in certain curiites.

What is an asset?

Probable future economic benefit obtained or controlled by a particilar entity as a resul of past transactions or events.

In regards to measuremnt, how is property, plant, and equiptment reported on the balance sheet?

Tangible properties, except land are usually reported at cost less depreciation. If the current value of the tangible property is less than the deprciated cost, the asset is said to be impaired.

What is the definition of intangible assets and what assets are included in this category of the Non-current asset section of the balance sheet?

The long-term rights and privledges of a non-physical nature acquired for use in business operations are often reported under the heading Intagible Assets. Inluded in this class are items such as goodwill, parents, trademarks, franchises, copyrights,formulas, leaseholds, and cusomer list.

What is the balance sheet order?

The order of the balance sheet is as follows: Current Asset, Non-Current Assets, Current Liabilities, Non-Current Liabilites, Owner's Equity, Offsets on the Balance Sheet and also in the order of their liquidy, with the most liquid terms (those closest to cash) first.

What does "post transactions or events" mean in the definition of assets and liabilities?

Assets and liabilities arise from transactions or events that have already happened.

The reported amounts for current assets are measured in a variety of ways. What are they?

Cash and recievables are report at their net realizable values. Thus current recievable balances are reduced by allowances for estimated uncollectable accounts. Investments in debt and equity are securites are reported , in most cases, at current market value. Inventories are reported at cost or on lower of cost or market basis. Prepaid expenses are reported at their historical cost.

When should an asset catergoized under the property, plant, and equiptemnt category be reported under the heading property, plant, and equiptment?

If an asset , such as land is being held for speculation , it should be classifed as an investment rather then under the heading property, plant, or equiptment.

What is the definition of an Investment and what assets are included in this category of ihe Non-current asset section of the balance sheet?

Investments held for such long purposes as regular income, appreciation, or ownership control are reported under the headings Investments. Debt and equity securites purhcased as investments that management does not intend to sell in the coming year are classified as long-term investments. Acquisitions of the stock of other companies made in order to exert influence or control over the action of those companies are accounted for using the equity method; These investments are classifiied as long term investments. The investments heading also includes other miscelaneous items not directly used in the operations of the business, such as land held for investment purposes.

In regards to measurement, how are long-term assets reported?

Many long-term investments are reported at cost. However, more and more longterm assets are being reported at current market values.

What is the definition of a Non-Current assets and what assets are included in this section?

Non-current items are assets not expected to be converted into cash within a year. Non-current assets include Investements, Property Plant and Equiptment, Intangible Assets, and Other Non Current Assets.

What is a liabiltiy?

Probable future sacrifice of economic benefit arising from a present obligation or a particular entity to transfer assets or provide services to other entities in the future as a result of past transaction or event.

What is the definition of property plant and equiptment and what assets are included in this category of the Non-current asset section of the balance sheet?

Properties of a tangible and relatively permanent character that are used in the normal business operaations are reported under Property, Plant, and Equiptment or other appropriate headings such as Land, Buildings, and Equiptment. Land, Buildings, Machinery, tools, furniture, fixtures, and vehicles are all included in this section of the balnce sheet.

What does future economic benefit in the definition of assets and liabilities?

The balance sheets primary purpose is to help forecast the future. Hence, the only assets included as assets and liabilities are those with implications for the future.

What is equity?

The diference between assets and liabilities is called equity. Equity can be thought of as the amount of the assets that the owners of the organization can really call their own, the amount that would be left over if all liabilities were paid.

What does obligation mean in the definition of a liability?

The term includes legal commitments as well as moral, social, and implied obligations. Again, the phrase "substance over form" applies.

What does "transfer assets or provide services" mean in the definition of liabilities?

Most liabilities involve an obligation to transfer assets in he future. However, an obligation to provide a service is also a liability.

What is the definition of equity?

Residual interest in the assets of an entity that remains after deducting its liabilities. In the business enterprise, the equity is the ownership interest.

What there compononents make up the normal operating cycle?

The normal operating cycle invlovles the use of cash to purchase inventories, the sale of recievables resulting in inventories, and ultimatley the cash collection of those recievables.

What is the definiition of other non-current assets in the non-current assets section of the balance sheet.

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What is the definition of Current Liabilites and what liabilities are included in this section?

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The balance sheet is an expression of the basic accounting equation. What is the accountig equation?

Assets=Liabilities+Owner's Equity

How long is current?

Current means one year or less. Accodingly, assets expected to be used and liabilities expected to be paid or otherwise satisfied within a year are current items.

What is the definition of working capital?

Working capitial is the difference between current assets and current liabilities or the liquid buffer available in meeting financial demands and contingies of the near future.

What does obtained or controlled mean in the definition of an asset and liabilities?

Accountants have a phrase meaning, "substance over form," meaning that financial statements should reflect the underlying economic substance, not the superficial legal form. If a company economically controls the future economic benefits associated with an item, that item qualifies as an asset whether it is legally owned or not.

What does probable mean in the definition of assets and liabities?

Accounting is not exact science. Buisness is full of uncertainty.