Financial Accounting - Balance Sheet & Assets

Flashcards covering key vocabulary related to the Balance Sheet, Asset Classification (Current vs. Non-current), Asset Valuation methods, and Depreciation concepts.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and owner's equity at a specific point in time, following the equation: Assets = Liabilities + Owner's Equity.

Assets

Measurable resources that provide future economic benefit to a business.

Current Assets

Assets that are liquid (easily converted to cash) or will be used or converted to cash within the next year, such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, and Marketable Securities.

Non-current Assets

Assets that will be used in the business for longer than one year and are usually not liquid.

Property, Plant & Equipment (PP&E)

A category of non-current assets including tangible items like Buildings, Land, Machinery, Vehicles, and Furniture & Fixtures.

Intangibles

Non-current assets that lack physical substance, such as Patents, Copyrights, and Goodwill.

Historical Cost (Acquisition Cost)

An asset valuation method primarily used for Property, Plant & Equipment (PP&E) and Intangibles, recording them at their original purchase price.

Net Realizable Value

An asset valuation method used for Accounts Receivable, representing the amount expected to be collected.

Mark to Market

An asset valuation method used for Marketable Securities and Investments, adjusting their value to current market prices.

Lower-of-cost-or-market

An asset valuation method used for Inventory, valuing it at the lower of its historical cost or its current market value.

Depreciation

The systematic and rational allocation of the cost of property and equipment to the periods in which it is used to generate revenue.

Straight-line Depreciation

A depreciation method calculated as (Acquisition Price - Salvage/Residual Value) / Useful Life.