Vol. 3 LM2 Cash and Cash Equivalents Flashcards
Accounting standards require that certain specific line items, which have this quality, be shown on a balance sheet
Components of the Balance Sheet
Materiality
Components of the Balance Sheet
Define
Cash equivalents
Components of the Balance Sheet
Highly liquid, short-term investments that are close enough to maturity that the risk is minimal that their value will change significantly with interest rates.
Interest rate-insensitive assets
Duration of 3 or less
Components of the Balance Sheet
Duration
Maturities of short-term investments included in cash and cash equivalents
Components of the Balance Sheet
Three months or less
Components of the Balance Sheet
Fill in the blank
Cash and cash equivalents are _____ assets
Components of the Balance Sheet
Financial (assets)
Components of the Balance Sheet
Define
Amortized cost
Components of the Balance Sheet
The historical cost (initially recognized cost) of the asset adjusted for amortization and impairment
Components of the Balance Sheet
list examples
cash equivalents
Components of the Balance Sheet
US Treasury bills
Commercial paper
Money market funds
Components of the Balance Sheet
Define
Marketable securities
Components of the Balance Sheet
are financial assets and include investments in debt or equity securities that are:
(1) traded in a public market, and
(2) whose value can be determined from price information in a public market
Components of the Balance Sheet
Classification
Trade receivables are also called
Components of the Balance Sheet
Accounts receivable
Components of the Balance Sheet
define
trade receivables
Components of the Balance Sheet
These are amounts owed to a company by its customers for products and services already delivered.
Components of the Balance Sheet
Measurement and reporting
Trade receivables
Components of the Balance Sheet
Typically reported at net realizable value, an approximation of fair value, based on estimates of collectability
Components of the Balance Sheet
Define
Allowance for doubtful accounts
Components of the Balance Sheet
Reflects the company’s estimate of the amount of receivables that will ultimately be uncollectible
Components of the Balance Sheet
Make the adjustment
When specific receivables are deemed to be uncollectible, they are written down by
Components of the Balance Sheet
Reducing accounts receivable
Reducing the allowance for doubtful accounts
Components of the Balance Sheet
Account classification
Allowance for doubtful accounts
Components of the Balance Sheet
Contra account
Components of the Balance Sheet
