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Balance Sheet

1) Key Things To Know 5) Medium Practice Test
2) Self Test 6) Hard Practice Test
3) Practice as You Learn 7) On Your Test
4) Easy Practice Test 8) Quick Study Sheet



Key Things to Know

 Accounts Receivable:       Amounts customers owe the company for goods or services
                                              provided; normally collected in 30 to 90 days
Inventory:                             Items held only for sale to the customer
Prepaid Expenses:              Paid in advance before the service is provided;
                                              gives future benefit (rent, insurance)
Supplies:                              Items that are used up in day to day operations
Notes Receivable:              Amounts owed to the company; normally interest is
                                              charged and the note is repaid in longer than 3 months
Investments:                       The company takes their excess cash and invests it
                                              in stocks or bonds to earn a return.
                                              Investments can be short term or long term
Property/Plant/Equipment:          Assets used long-term to generate revenues;
                                                        they have physical substance
                                                        (Buildings, Equipment, Autos, Land, Computers)
- Accumulated Depreciation:    The total amount for all prior years (cumulative) of
                                                     depreciation expense for all prior periods.  This is a
                                                      contra account subtracted from plant, and equipment
Intangible Assets:        No physical substance - used long-term to generate revenues
                                       The company has the exclusive right to do something;
                                        Includes trademarks, copyrights, patents, franchises, goodwill
                                                                Cash paid to purchase a company
                                                 less   Fair market value of net assets acquired
                                                            =   Goodwill
Accounts Payable:          Amounts owed to suppliers, normally paid in 30-60 days
                                          Suppliers are those who provide inventory or goods and
                                          services over and over again
Accrued Expense:             Both of these are expenses that have not yet been paid
Accrued Liabilities:           that the company owes – examples are:  employee taxes,
                                            legal, advertising, bonuses, retirement plans
_________ Payable:          Expenses incurred that have not yet been paid
                                            (Salaries, Rent, Interest, Taxes)
                                            If an amount is large enough, it gets its own line.  If it is not
                                            large enough it will be included in accrued expenses.
Unearned Revenues:        Cash received from customers before the good or service is
                                             provided.  The company owes the customer a good/service
Current Maturities of         The portion of long –term debt that will be repaid
   Long Term Debt:                within 1 year
L/T Notes Payable and        Amounts owed to banks and other financing companies
  Long-term Debt:                that will be paid later than one year from now
                                              Amounts due within a year are reported as current
                                              maturities of long term debt
Bonds Payable:                  Amounts borrowed from investors; normally long-term
Common Stock or:             Funds received from investors in exchange for
Contributed Capital:          ownership – common stock is reported at par value
Additional Paid in Capital:   Amounts over and above par raised from investors
                                               from the sale of stock (ownership)
Retained Earnings:            Total of all (cumulative) profits and losses less dividends
                                              paid to owners
Treasury Stock:                  The company buys and holds its own stock
Operating cycle           the time it takes a company to spend cash to do business and get the                                                   cash back again (buy inventory, pay expenses, sell to the customer and                                                collect from the customer).   Usually less than one year.
The balance sheet is listed in the order of liquidity – how soon it will impact cash
Current means the cash is expected to be collected or paid in 1 year or less
Long term/Non-current means the cash is expected to be collected or paid
   in longer than 1 year
The balance sheet is reported at historical cost; fair market value on the date of
   the transaction (buy the asset or borrow money)
    Assets are not reported at fair market value - unless fair market value is reliable
     (investments) or there has been a permanent decrease in value
Internally generated goodwill is not reported on the balance sheet (i.e. a good management team, a good location, name brand recognition developed over time.)
   It is too difficult to determine a reliable value so it is not reported.
The Format of the Balance Sheet: 
Assets:                                                                      Liabilities:
Current:                                                         Current:
            Cash                                                          Accounts Payable
            Accounts Receivable                                 Accrued Expenses (Liabilities)
            Inventory                                                    Unearned Revenues
            Prepaid Expenses                                       “_______” Payables                                   
            Short-term Investments                              Income Taxes Payable
            Short-term Notes Receivable                     Short-term Notes Payable
           Supplies                                                      Current Portion of Long-term Debt
                 Total Current Assets                                    Total Current Liabilities
            Long-term Investments                              Bonds Payable
            Long-term Notes Receivable                     Long-term Debt
                                                                              Long term Notes Payable              

                                                                              Total Liabilities
            Property/Plant/Equipment (P/P/E):
                 Less Accumulated Depreciation
                       Net P/P/E                                            Stockholder’s Equity:
            Intangible Assets                                         Common Stock
            Goodwill                                                       Additional Paid in Capital
            Patents, net                                                 Retained Earnings
            Trademarks, net                                              less Treasury Stock
             Copyrights, net                                                                                          
                Total Intangible Assets                              Total Stockholder’s Equity
            Other Assets                                    
            Total Assets                         must =     Total Liabilities & Stockholder’s Equity






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