Introduction to Accounting Preparing for a User’s Perspective Introduction to Accounting Preparing for a User’s Perspective Free Jan. 2014.

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Introduction to Accounting Preparing for a User’s Perspective Introduction to Accounting Preparing for a User’s Perspective Free Jan Free Jan How is a classified balance sheet prepared and how do the classifications help users? Available on the Google Play Store with support from By Kevin C. Kimball, CPA Debits and Credits Trainer

Most liquid Least liquid Convert to cash within one year Convert to cash after one year Current Assets Non-current Assets or Long-term Assets Classified Balance Sheet – Assets are classified based on their “liquidity” “liquidity” = nearness to cash

< 1 year Possibly several years

Payment due <= one year To be paid within one year To be paid after one year Current Liabilities Non-current Liabilities or Long-term Liabilities Classified Balance Sheet – Liabilities are classified based on how quickly cash will be needed to pay off the liabilities Payment due > one year Liquid Solvent

Current assets= Short-term assets Non-current assets= Long-term assets Current liabilities= Short-term liabilities Non-current liabilities= Long-term liabilities

$.11 of current asset per each $1 of current liability $9 of current asset per each $1 of current liability Not very liquid Very liquid

Most liquid Least liquid Convert to cash within one year Convert to cash after one year Current Assets Non-current Assets or Long-term Assets Classified Balance Sheet – Assets are classified based on their “liquidity” “liquidity” = nearness to cash

Inflows From asset conversions Outflows to pay off liabilities

Classified balance sheets are classified based on liquidity Liquidity represents a company’s ability to make timely payments on its current liabilities In the US, the most liquid assets and the liabilities to be paid off soonest, are listed first (current <= 1 year) Classified balance sheets can be used to predict a company’s future cash flows, its liquidity and short-term credit worthiness Equity is classified by its source, either contributed or internally generated

Introduction to Accounting Preparing for a User’s Perspective Introduction to Accounting Preparing for a User’s Perspective Free Jan Free Jan Available on the Google Play Store with support from By Kevin C. Kimball, CPA Debits and Credits Trainer How is a classified balance sheet prepared and how do the classifications help users?