Chapter_2

Chapter_2 - 2-1A FURTHER LOOK AT FINANCIAL Fourth...

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Unformatted text preview: 2-1A FURTHER LOOK AT FINANCIAL STATEMENTSAccounting, Fourth Edition22-21.Identify the sections of a classified balance sheet.2.Identify and compute ratios for analyzing a company’s profitability.3.Explain the relationship between a retained earnings statement and a statement of stockholders’ equity.4.Identify and compute ratios for analyzing a company’s liquidity and solvency using a balance sheet.5.Use the statement of cash flows to evaluate solvency.6.Explain the meaning of generally accepted accounting principles.7.Discuss financial reporting concepts.Study Objectives2-3The Classified Balance SheetSO 1 Identify the sections of a classified balance sheet.uPresents a snapshot at a point in time.uTo improve understanding, companies group similar assets and similar liabilities together.Illustration 2-1Standard Classifications2-4Illustration 2-2The Classified Balance SheetSO 12-5Illustration 2-2The Classified Balance SheetSO 12-6The Classified Balance SheetSO 1 Identify the sections of a classified balance sheet.uAssets that a company expects to convert to cash or use up within one yearor theoperating cycle, whichever is longer.uOperating cycleis the average time it takes from the purchase of inventory to the collection of cash from customers.Current Assets2-7The Classified Balance SheetSO 1 Identify the sections of a classified balance sheet.Companies list current asset accounts in the order they expect to convert them into cash.Current AssetsIllustration 2-32-8The Classified Balance SheetSO 1 Identify the sections of a classified balance sheet.uInvestments in stocksand bondsof other companies that are held for more than one year. uInvestments in long-term assetssuch as land or buildings not currently being usedin operating activities.Long-Term InvestmentsIllustration 2-42-9Property, Plant, and EquipmentThe Classified Balance SheetSO 1 Identify the sections of a classified balance sheet.uLong useful lives.uCurrently usedin operations.uDepreciation- allocating the cost of assets to a number of years.uAccumulated depreciation- total amount of depreciation expensed thus far in the asset’s life.2-10The Classified Balance SheetSO 1 Identify the sections of a classified balance sheet.Illustration 2-5Property, Plant, and Equipment2-11Intangible AssetsThe Classified Balance SheetSO 1 Identify the sections of a classified balance sheet.uAssets that do not have physical substance.Illustration 2-62-12The Classified Balance SheetSO 1 Identify the sections of a classified balance sheet.uObligations the company is to pay within the coming year.uUsually list notes payable first, followed by accounts payable. uOther items follow in order of magnitude.Current Liabilities2-13The Classified Balance SheetSO 1 Identify the sections of a classified balance sheet....
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This note was uploaded on 01/19/2012 for the course ACCT 2000 taught by Professor Holmes during the Fall '08 term at LSU.

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Chapter_2 - 2-1A FURTHER LOOK AT FINANCIAL Fourth...

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