Accounting Chapter Three
Terms
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- FASB Statement of Concepts No. 5
- Recommends that a full set of fianancial statements should show financial position at end of period,net income for the period,comprehensive income for the period,cash flows for the period and investments by and distributions to owners for the period.
- Balance Sheet Abilities
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Provides Info about accounts, liabilities, and owners equity
Assists in the con. of liquidity and financial flexibility, aids in assessing risk of predicting future cash flows - Balance Sheet Limitations
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Doesn't reflect current value
Many estimates and judgements
Omits many items of financial value - Assets On the Balance Sheet include
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Current Assets
Short Term Investments
Receivables
Inventories
Prepaid Expenses - Liabilities on the Balance Sheet Include
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Current Liabilties
Short Term Debt
Accounts Payable
Advances from customers
Income Taxes Payable
Current portion of long term debt - The Operating Cycle
- Cash...Inventories....Receivables....Cash...etc
- Contigencies-When to Report
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Never show a gain until Win
Never assume-may be placed in notes
Follows Conservatism - Treasury Stock
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Investment
Contra Account to Owner's Equity - Income Tax Payable Qualities
- take more deductions on IRS return
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Investments In Debt and Equity
Securities -
Trading-Current Assets-FMV
Available for Sale-Current or long term-FMV
Held to Mature-Current or long term-Historical Cost - Three Basic Formats for Balance Sheets
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Reprot form-Vertical
Account-Horizontal
Financial Position