Classified Financial Statements Unit 10

The Balance Sheet Balance Sheet—two forms: Balance Sheet—two forms: –Account form two sides two sides assets on the left and liabilities and owner’s equity on the right assets on the left and liabilities and owner’s equity on the right Report form Report form –all three elements are vertically placed (page 180)

Current Assets A current asset is cash or some other asset that, in the normal course of operations, will be converted to cash or sold or consumed within one year. A current asset is cash or some other asset that, in the normal course of operations, will be converted to cash or sold or consumed within one year. Some examples: Some examples: –Cash –Government bonds –Marketable securities –Accounts receivable –Prepaid expenses

What are pre-paid expenses? Expense payments made in advance. Expense payments made in advance. They represent the value of of the unused proportions of insurance policies owned by the company and rental leases for which payment has been made in advance. They represent the value of of the unused proportions of insurance policies owned by the company and rental leases for which payment has been made in advance.

Fixed Assets They have a long life. They have a long life. Not usually consumed within one year, like Land and Buildings. Not usually consumed within one year, like Land and Buildings. Recorded after the current assets on the balance sheet. Recorded after the current assets on the balance sheet.

Current Liabilities Refers to liabilities which must be paid within the year. Refers to liabilities which must be paid within the year. Examples include: Examples include: –Accounts payable –taxes payable –Salaries payable –Loans payable

Long-Term Liabilities Long Term liabilities are liablities that are not due within one year. Long Term liabilities are liablities that are not due within one year. Examples include: Examples include: –Mortage payable –Bank loans with terms greater than one year

Supporting Statements Other statements used to provide financial information which may accompany the balance sheet statement. Other statements used to provide financial information which may accompany the balance sheet statement. –Statement of Owner’s Equity –Schedule of account receivable