Ch05 - 5-11.Explain the uses and limitations of a balance sheet.2.Identify the major classifications of the balance sheet.3.Prepare a classified

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Unformatted text preview: 5-11.Explain the uses and limitations of a balance sheet.2.Identify the major classifications of the balance sheet.3.Prepare a classified balance sheet using the report and account formats.4.Indicate the purpose of the statement of cash flows.5.Identify the content of the statement of cash flows.6.Prepare a statement of cash flows.7.Understand the usefulness of the statement of cash flows.8.Determine which balance sheet information requires supplemental disclosure.9.Describe the major disclosure techniques for the balance sheet.Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives5-2Balance Sheet, also referred to as the statement of financial position:1.Reports assets, liabilities, and equity at a specific date.2.Provides information about resources, obligations to creditors, and equity in net resources.3.Helps in predicting amounts, timing, and uncertainty of future cash flows.Balance SheetBalance SheetBalance SheetBalance SheetLO 1 Explain the uses and limitations of a balance sheet.5-3Computing rates of return on assets or equity.Evaluating the capital structure.Assess risk and future cash flows.Analyze the company’s: ►Liquidity►Solvency►Financial flexibilityBalance SheetBalance SheetBalance SheetBalance SheetUsefulness of the Balance SheetLO 1 Explain the uses and limitations of a balance sheet.5-4Most assets and liabilities are reported at historical cost.Use of judgments and estimates.Some items of financial value are omitted.Limitations of the Balance SheetBalance SheetBalance SheetBalance SheetBalance SheetLO 1 Explain the uses and limitations of a balance sheet.5-5ClassificationLO 2 Identify the major classifications of the balance sheet.Balance SheetBalance SheetBalance SheetBalance Sheet5-6Illustration 5-1In practice you usually see little departure from these major subdivisions.Balance SheetBalance SheetBalance SheetBalance SheetClassificationLO 2 Identify the major classifications of the balance sheet.5-7Cash 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. Current AssetsClassification in the Balance SheetClassification in the Balance SheetClassification in the Balance SheetClassification in the Balance SheetIllustration 5-2LO 2 Identify the major classifications of the balance sheet.5-8Generally any monies available “on demand.”Cash equivalents- short-term highly liquid investments that mature within three months or less.Restrictions or commitments must be disclosed. CashLO 2Illustration 5-3Balance Sheet – “Current Assets”Balance Sheet – “Current Assets”Balance Sheet – “Current Assets”Balance Sheet – “Current Assets”5-9PortfoliosTypeValuationClassificationHeld-to-MaturityDebtAmortized CostCurrent or NoncurrentTradingDebt or EquityFair ValueCurrentAvailable- for-SaleDebt or EquityFair ValueCurrent or NoncurrentShort-Term InvestmentsLO 2 Identify the major classifications of the balance sheet.Identify the major classifications of the balance sheet....
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This note was uploaded on 03/18/2012 for the course ACC 321 taught by Professor Staff during the Spring '08 term at Miami University.

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Ch05 - 5-11.Explain the uses and limitations of a balance sheet.2.Identify the major classifications of the balance sheet.3.Prepare a classified

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