0324227329_46637.ppt - Chapter 4 The Balance Sheet...

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Chapter 4 The Balance Sheet
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Individual Balance Sheet Accounts
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3 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Current Assets Current assets include assets that are expected to be used within one year or the operating cycle, if longer The operating cycle involves the use of cash to buy inventories, selling the inventory to create accounts receivable, and the collection of those receivables In practice, one year is the common definition
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4 Financial Accounting, 7e Stice/Stice, 2006 © Thomson The Operating Cycle Cash Cash Inventories Inventories Receivables Receivables Collections Purchases Sales
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5 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Current Assets Cash includes coins and currency on hand; bank accounts; and short-term securities Accounts receivable are amounts owed by customers An estimate of uncollectible accounts is deducted
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6 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Current Assets Inventory represents goods held for sale in the normal course of business Prepaid expenses are payments in advance for operating expenses, e.g., insurance and rent Investment securities are publicly- traded stocks and bonds held with the intent to sell within a year
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7 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Current Assets Current assets are listed on the balance sheet in the order of their liquidity , with the most liquid assets listed first
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8 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Long-Term Assets Expected to last longer than one year Common categories include Investments Property, plant, and equipment Intangible assets Other assets
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9 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Long-Term Assets Long-term investments include ownership of stocks and bonds to Exercise influence over other companies (stocks) Earn income from Interest (bonds) Dividends (stocks)
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10 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Long-Term Assets Property, plant, and equipment (PP&E) are fixed assets that benefit more than one accounting period They include land, buildings, machinery, tools, furniture, and vehicles Accumulated depreciation reflects the wear and tear since the original purchase and decreases PP&E
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11 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Long-Term Assets Intangible assets have no physical existence, but have some intrinsic value, generally from contract rights Patents Trademarks Copyrights Franchises Goodwill only recorded when one company buys another and pays more than the fair value of the identifiable assets
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12 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Long-Term Assets The other assets category contains long-term assets not reportable under the previous categories e.g., a deferred tax asset occurs when a loss or expense is recognized for financial reporting purposes, but will be deducted on the tax return in a later year
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13 Financial Accounting, 7e Stice/Stice, 2006 © Thomson Current Liabilities Obligations expected to be paid out of current assets within one year
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  • Fall '19
  • Balance Sheet, Current Assets, Generally Accepted Accounting Principles

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