ACCT 327 Chapter 4 - The Balance Sheet

Current assets definition

cash and other assets to be converted to cash within ONE YEAR or operating cycle (whichever is longer)

CA are listed in order of

Liquidity

Cash Equivalents

highly liquid investments with maturity of 3 months or less

Current Assets

• Cash

• Cash equivalents

• Short term investments

• Receivables

• Inventory

• Prepaid expenses

Exception to CA

Rule includes equipment that will be “used up” during the year/operating cycle - still NOT a CA

Non-current assets

• Long terms investments

• PP&E

• Intangible assets

• Long term prepaid

• Non current receivables

• deferred income taxes

• restricted cash

• property held for sale

Current Liabilities definition

obligations expected to liquidate through use of current assets or creation of other current liabiltiies

Current Liabilities

• Payables

• Unearned revenue

• Current portion of long term bonds

Long term liabiltiies

• bonds payable

• notes payable

• some deferred taxes

• lease obligations

• pension obligations

• warranties and contingencies

• generally require a lot of disclosures on the note

Equity

• capital stock

• APIC

• Retained earnings

• AOCI

• Treasury stock

Balance sheet disclosures

1) Contingencies

2) Accounting policies

3) Contractual obligations, particularly related to liabilities

4) Fair values of assets and liabilities

Contingencies

important events with an uncertain outcome, such as taxes or litigation

Accounting policies

valuation methods used, assumptions made in assigning value to inventory, depreciation, investments used in subsidiaries, and risks and uncertainties related to industry, etc. 

Contractual Obligations

Contractual obligations primarily related to liabilties (pensions, leases, stock options)

Fair values of assets and liabilities

FV of financial instruments such as cash, investments, receivables, payables, etc. (Level 1, 2, or 3)

Is more disclosure generally better or worse?

Better! But sometimes there is information overload

Disclosures can be tedious and expensive