Accounting Chapter 2

Accounting Chapter 2 - Chapter 2 The Classified Balance...

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Chapter 2 The Classified Balance Sheet What it is and the Components The classified balance sheet groups similar assets and similar liabilities together, helping determine whether the company has enough assets to pay its debts. It consists of the following groups: * Current assets o Expected to be converted into cash and/or used in the business within a year from statement date + Examples include cash, receivables, and prepaid expenses. + Listed in order of liquidity * Long-Term Investments o Not expected to realize within the year and not intended for use within the business o Examples include investments of stocks and bonds * Property, Plant, and Equipment o Assets that are used in operating the business. o Listed in order of permanency o Examples include land, buildings, and furniture. + Some of these assets are recorded at cost and depreciated over their useful life. + Depreciation means allocating the cost of an asset to a number of years. + Accumulated Depreciation is the total amount of depreciation that has been expensed since the asset was used. * Intangible Assets o Items that have no physical substance o Examples are copyrights, patents, and franchises * Current Liabilities o Obligations that are to be paid within the coming year o Examples include Accounts Payable, and current maturities of long-term bank
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Accounting Chapter 2 - Chapter 2 The Classified Balance...

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