Balance Sheet and Financial Reporting Under U.S. GAAP

A set of vocabulary flashcards covering the components, structure, and limitations of the Balance Sheet based on U.S. GAAP standards.

Full Set of Financial Statements

Under U.S. GAAP, general purpose financial reporting includes the statement of financial position (balance sheet), statement of earnings (income statement), statement of comprehensive income, statement of cash flows, and statement of owners' equity.

Balance Sheet

A cumulative report that shows the financial position of an entity "as of" a particular date.

Balance Sheet Formula

$$Assets = Liabilities + Equity$$

Current Assets

Cash and other assets that are expected to be converted into cash or consumed within one year.

Investments and Funds

Non-current assets that are not directly used in operations, such as available-for-sale or held-to-maturity securities.

Property, Plant, and Equipment (PP&E)

Tangible, long-lived assets used in operations, including land, buildings, and equipment, typically shown net of accumulated depreciation.

Intangible Assets

Long-lived assets with no physical substance used in operations, such as goodwill and patents (net of amortization).

Other Non-current Assets

Items providing probable future economic benefit not classified elsewhere, such as pension assets or deferred income tax assets.

Current Liabilities

Obligations expected to be satisfied using current assets, representing short-term financial risk.

Long-term Liabilities

Obligations expected to be satisfied beyond one year, representing long-term solvency risk.

Equity (Residual Interest)

The interest in the assets of an entity that remains after deducting its liabilities, calculated as $Assets - Liabilities = Equity$.

Treasury Stock

A contra-equity account that reduces total stockholders' equity, representing the entity's own shares held at cost.

Contributed Capital

The portion of equity derived from owner investments, including preferred stock, common stock, and paid-in capital in excess of par.

Earned Capital

The portion of equity representing profits kept by the business, primarily consisting of retained earnings.

Liquidity

An entity's ability to meet its short-term obligations, often evaluated via the current ratio or quick ratio by comparing current assets to current liabilities.

Solvency

The ability of an entity to meet its long-term financial obligations.

Historical Cost

A measurement basis used for many assets and equity issuances on the balance sheet, which serves as a limitation since it does not reflect current market value.

Accumulated Other Comprehensive Income (AOCI)

A component of stockholders' equity that tracks the cumulative change in equity from non-owner sources excluding net income.