Week 1 balance sheet

Question 1

example’s (assets, liabilities, equity, income, costs)

Answer 1

• Money that you borrow from your mom (L)
• Loan that you take from ING (L)
• Cash in your wallet (A)
• Starbucks receives a payment for a Latte (I)
• Funds you and your friends put together to found a company (E)
• Wages to employees (C)
• Petrol used by a car (C)
• Company shares you buy from an online broker (E)
• Bills outstanding to a supplier (L)

Question 2

assets =

Answer 2

liabilities + equity

Question 3

short-term vs long-term

Answer 3

• liabilities
• assets
  non-current assets (>one year)
  current assets (< one year)

*kunnen short term of long term zijn

Question 4

what is cash and cash equivalents

Answer 4

• cash in hand + short term investments
• most liquid asset, low risk
• also generate low returns
• current asset on balance sheet

Question 5

accounts receivable (or trade receivables)

Answer 5

• invoices not yet paid bij customers
• will be converted to cash upon payment
• net of doubtful accounts

*not good to accumulate a large amount of receivables

• current asset on balance sheet

Question 6

inventories (is it good to have a large amount of them?)

Answer 6

• Finished goods held for sales, or raw materials used in the
  manufacturing
• Recorded at history costs, or market value if MV < history costs
• pros and cons but cons win
• current asset on balance sheet

Question 7

property, plant and equipment

Answer 7

• Also called tangible assets: a long-term item
• Recorded at historical costs, but should be depreciated periodically
• Value at end of period = Value at beginning – Depreciation
• Amount of yearly depreciation is expensed in income statement

*non current asset on balance sheet

Question 8

intangible assets

Answer 8

• Patents, copyrights, trademarks, licenses, etc.
• Goodwill: difference in purchase price and book value of an asset
• Recorded at historical costs, but should be amortized periodically
• Amount of amortization is expensed in income statement
• Also requires annual impairment tests (similar to amortization)

*non current asset on balance sheet

Question 9

short-term debt

Answer 9

Any short-term borrowings, and the proportion of long-term debt due within one year

• current liability on balance sheet

Question 10

accounts payable (or trade payables)

Answer 10

• Payments not yet made to suppliers of goods or services

Question 11

long-term liabilities

Answer 11

Debt with a maturity longer than one year

• non-current liabilities