Chapter_5_Balance_Sheet_And_Statement_Of_Cash_Flows_Course_Notes

Chapter_5_Balance_Sheet_And_Statement_Of_Cash_Flows_Course_Notes

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 5 – BALAN CE SHEET AND STATEMENT OF CASH  FLOWS 1. Usefulness 2. Limitations 3. Classification 4. Additional information reported 5. Techniques of disclosure Note: Our coverage will omit Section 2 Statement of Cash Flows  coverage (pages 197-205) 1. Usefulness of the Balance Sheet Evaluating the capital structure. Assess risk and future cash flows. Analyze the co mpany’s:  o Liquidity,  o Solvency, and  o Financial flexibility. 2. Limitations of the Balance Sheet Most assets and liabilities are reported at historical cost. Use of judgments and estimates. Many items of financial value are omitted. 3. Classification in the Balance Sheet Three General Classifications  Assets, Liabilities, and Stockholders’ Equity Co mpanies further divide these classifications:
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
CHAPTER 5 – BALAN CE SHEET AND STATEMENT OF CASH  FLOWS Assets Current assets Long-term investments Property, plant and equipment Intangible assets Other assets Liabilities and Owners’ equity Current liabilities Long-term debt Owners’ equity o Capital stock o Additional paid-in capital o Retained earnings Elements of the Balance Sheet Asset – Probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or event. Liability – Probable future sacrifice of economic benefit arising from a present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. Equity – Residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise, the equity is the ownership interest. Current Assets
Background image of page 2
CHAPTER 5 – BALAN CE SHEET AND STATEMENT OF CASH  FLOWS Cash and other assets a company expects to convert into cash, sell, or  consume either in one year or in the operating cycle, whichever is  longer.  Item Basis of Valuation Cash and cash equivalents Fair value Short-term investments Generally fair value Receivables Estimated amount collectible Inventories Lower of cost or market Prepaid expenses Cost Cash Generally any monies available “on demand.” Cash equivalents  are short-term highly liquid investments that will  mature within three months or less. Any restrictions or com mitments must be disclosed. 
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/12/2012 for the course ACCT 3001 taught by Professor Moffitt during the Spring '08 term at LSU.

Page1 / 14

Chapter_5_Balance_Sheet_And_Statement_Of_Cash_Flows_Course_Notes

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online