Intermiate Accounting Chapter 5 Balance Sheet and Statement of Cash Flows

Flashcards on Balance Sheet and Statement of Cash Flows

What does a Balance Sheet report?

Assets, liabilities, and equity at a specific date.

What are the limitations of the Balance Sheet?

1. Most assets and liabilities are reported at historical cost. 2. Use of judgments and estimates. 3. Many items of financial value are omitted.

Define Assets.

Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.

Define Liabilities.

Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.

Define Equity.

Residual interest in the assets of an entity that remains after deducting its liabilities.

What are current assets?

Cash and other assets a company expects to convert into cash, sell, or consume either in one year or in the operating cycle, whichever is longer.

How are equity securities recorded?

At fair value with changes reported in net income unless accounted for under equity method or not practicable to determine fair value.

What are the three classifications for debt securities?

Held-to-maturity, Trading, and Available-for-sale.

How are debt investments classified as available-for-sale reported?

At fair value.

How are held-to-maturity debt investments reported?

At amortized cost.

How are equity investments reported?

At fair value or by using the equity method.

What are tangible, long-lived assets used in the regular operations of the business?

Property, plant, and equipment.

What happens to limited life intangibles?

They are amortized.

What happens to indefinite-life intangibles?

They are tested for impairment.

What are current liabilities?

Obligations a company reasonably expects to liquidate either through the use of current assets or the creation of other current liabilities.

What are long-term liabilities?

Obligations that a company does not reasonably expect to liquidate within the normal operating cycle.

What are the components of the Stockholders' Equity Section?

1. Capital Stock. 2. Additional Paid-in Capital. 3. Retained Earnings. 4. Accumulated Other Comprehensive Income. 5. Treasury Stock. 6. Noncontrolling Interest (Minority Interest).

What are the forms of a Classified Balance Sheet?

Account form and Report form.

What are the components of Notes to the Financial Statements?

Explain in qualitative terms information related to specific financial statement items and Provide supplemental data of a quantitative nature to expand information in financial statements.

What should the first footnote generally be?

Summary of Significant Accounting Policies.

Define Contingencies.

Existing situation involving uncertainty as to possible gain (gain contingency) or loss (loss contingency).

Define Financial Instruments.

Cash, an ownership interest, or a contractual right to receive or obligation to deliver cash or another financial instrument.

What are the three levels of Fair Value Hierarchy?

Level 1 (least subjective), Level 2 (more subjective), and Level 3 (most subjective).

What are the major types of financial ratios?

Liquidity Ratios, Activity Ratios, Profitability Ratios, and Coverage Ratios.