Chapter 5 Balance Sheet - CashFlows Chapter5 Balance Sheet...

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Balance Sheet and Statement of
Cash Flows
Chapter 5

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Balance Sheet Statement of Cash
Flows
Usefulness
Limitations
Classification
Additional information
reported
Techniques of
disclosure
Purpose
Content and format
Preparation
Usefulness
Balance Sheet and Statement of Cash Flows

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Evaluating thecapital structure.
Assess risk and future cash flows.
Analyze thecompany’s:
Ø
Liquidity,
Ø
Solvency, and
Ø
Financial flexibility.
Balance Sheet
Usefulness of the Balance Sheet
LO 1 Explain the uses and limitations of a balance sheet.

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Most assets and liabilities arereported at historical cost.
Use of judgments and estimates.
Many items of financial value areomitted.
Limitations of the Balance Sheet
Balance Sheet
LO 1 Explain the uses and limitations of a balance sheet.

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ThreeGeneral Classifications
Assets, Liabilities, and Stockholders’ Equity
Companies further dividetheseclassifications:
Classification in the Balance Sheet
LO 2 Identify the major classifications of the balance sheet.
Balance Sheet
Illustration 5-1

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Review
Thecorrect order to present current assets is
a. Cash, accounts receivable, prepaid items, inventories.
b. Cash, accounts receivable, inventories, prepaid items.
c. Cash, inventories, accounts receivable, prepaid items.
d. Cash, inventories, prepaid items, accounts receivable.
Balance Sheet
LO 2 Identify the major classifications of the balance sheet.

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Accounts Receivable – Presentation Options
LO 2 Identify the major classifications of the balance sheet.