Chapter 2 (The Balance Sheet)

Question 1

what is the other name for the balance sheet?

Answer 1

statement of financial position

Question 2

what are two other terms for fiscal year?

Answer 2

financial year and budget year

Question 3

what is the term for the period used for calculating annual “yearly” financial statements?

Answer 3

fiscal year

Question 4

what are resources owned and controlled by the company and expected to generate future economic benefits?

Answer 4

assets

Question 5

what are economic obligations that result from past transactions?

Answer 5

liabilities

Question 6

what is ownership rights in assets after deductions for liabilities?

Answer 6

shareholder’s equity

Question 7

debts payable to outsiders are called ____

Answer 7

creditors

Question 8

what are the two types of assets?

Answer 8

current and long-term/non-current

Question 9

describe current assets

Answer 9

assets which the company expects to convert to cash, sell, consume, during the next 12 months or one operating cycle, whichever is longer

Question 10

describe long-term assets

Answer 10

assets which the company expects to hold longer than the next 12 months or one operating cycle

Question 11

____ _____ is the term for the elapsed time between the start of production and the eventual receipt of cash from customers from the sale of the product

Answer 11

operating cycle

Question 12

current assets are listed in the order of ____

Answer 12

liquidity

Question 13

what are the 7 current asset accounts?

Answer 13

1. cash and cash equivalents
2. A/R
3. inventory
4. supplies
5. prepaid expenses
6. notes receivable
7. other

Question 14

give examples of “other” current assets

Answer 14

advances paid to suppliers or employees

Question 15

what is the difference between A/R and notes receivable?

Answer 15

notes receivable are a written pledge that the customer will pay by a certain date. –> usually involves interest, longer term than A/R

Question 16

why is the inventory account so important?

Answer 16

• how a merchandising company earns there revenue

- don’t want too much or too little

Question 17

what are cash equivalents?

Answer 17

• highly liquid short term assets

- marketable securities, short term govn’t bonds

Question 18

non-current assets are listed in the order of ____

Answer 18

permanency

Question 19

the other term for depreciation (IFRS) is___

Answer 19

amortization (ASPE)

Question 20

which long-lived asset is NOT depreciated?

Answer 20

land

Question 21

____ is the allocation of the cost of plant and equipment over their estimated useful life

Answer 21

depreciation

Question 22

what is the account that shows the total amount of depreciation taken to date?

Answer 22

accumulated depreciation

Question 23

what are intangible assets?

Answer 23

assets without physical substance and represent a privilege or right held by the company

Question 24

what are examples of intangible assets?

Answer 24

• goodwill

- patents, copyright, license, trademark

Question 25

describe goodwill

Answer 25

- excess price paid on acquisition of another company | - generate future value to company

Question 26

what are the two types of liabilities?

Answer 26

current and non-current

Question 27

describe current liabilities

Answer 27

obligations that need to be paid within the next year or operating cycle

Question 28

what are examples of current liabilities

Answer 28

band indebtedness, A/P, unearned revenue, bank loan/notes payable

Question 29

describe non-current assets

Answer 29

debts to be paid after 1 year

Question 30

what are examples of non-current assets?

Answer 30

lease obligations, bank loan, pension and benefit obligations

Question 31

what is included in shareholder's equity?

Answer 31

share capital and retained earnings

Question 32

_____ measures short-term ability to pay its maturing obligations and to meet its unexpected needs for cash

Answer 32

liquidity

Question 33

____ measures a company's ability to survive over a long period of time

Answer 33

solvency | *the higher the percentage of debt to total assets, the greater the risk that debts cannot be repaid when they're due

Question 34

describe the going concern assumption

Answer 34

- business will continue operating in foreseeable future - provides foundation for accounting - provides justification for using cost as value of certain assets * reason we distinguish current and non-current