STATEMENT OF FINANCIAL POSITION Flashcards
A statement of financial position, conventionally called a___________, reports the financial position of an
entity at a particular date. It is a summary of an entity’s economic resources (assets), economic obligations
(liabilities), and equity, and their relationships to each other at a moment in time.
balance sheet
This account includes the balance of all sales revenue still on credit, net of any allowances for doubtful accounts (which generates a bad debt expense).
Accounts Receivable (AR)
A business may sell goods or services and receive a promissory note. A promissory note is a written pledge that the customer will pay a fixed amount of money and interest on a certain date.
Notes Receivable.
It is the amount a company owes suppliers for items or services purchased
on credit.
Accounts Payable (AP)
Inventory includes amounts for raw materials, work-in-progress goods, and finished goods.
The company uses this account when it reports sales of goods, generally under the cost of goods sold
in the income statement.
Inventory
A business often pays certain expenses such as rent and insurance, in advance.
A_________e is considered an asset because the prepayment provides a future benefit.
prepaid expense
It includes non-AP obligations that are due within one (1) year or within the normal operating cycle of the company (whichever is LONGER). Notes payable can also be non- current if the maturity is more than one (1) year
Short-term Notes Payable.
It is specifically the portion of long-term debt due within the current year.
Current portion of long-term debt.
These are revenues collected or received in advance for the future sale of inventory or performance of services. These revenues are not yet earned but already collected by the business.
Unearned revenues.
These are expenses already incurred but not yet paid, and is, therefore, still unrecorded at year-end.
Accrued expenses.
Format of the Statement of Financial Position
Report Form
Account Form
Assets, liabilities, and equity are shown in vertical order. Thus, liabilities and equity follow immediately
below the asset presentation.
Report Form
This form follows the T-account format where assets are shown on the left side, whole liabilities are
shown on the right side
Account Form
