WSP Accounting Crash Course (The
Balance Sheet) Exam Q&A 100% Correct
Balance Sheet def - reports the company's resources (assets) and how
those resources were funded (liabilities and shareholders equity) on a
particular date (end of the quarter, end of the year)
fundamental equation: A = L + ...
Balance Sheet def - ✔✔reports the company's resources (assets) and how
those resources were funded (liabilities and shareholders equity) on a
particular date (end of the quarter, end of the year)
fundamental equation: A = L + E
Assets - ✔✔represent the company's resources
requirements: company must own the resource
The resource must be of value
The resource must have a quantifiable measurable cost
Going down in order of liquidity
-Cash= most basic asset
, -Marketable securities (also known as investments) = like cash, less liquid
-A/R = money that is coming in to the company
-Inventories includes the direct coats associated with production of goods
-Prepaid expenses is a bit less intuitive and more tricky
-PP&E is straightforward
-Intangibles & Goodwill: things acquired at some point by the company in
the past and now have value based on the company's rights on the thing
Assets, liabilities, equity relationship - ✔✔A = L + E
Assets are a use of funds, L+E are sources of funds (how it pays for
assets)
Liabilities - ✔✔represent what the company owes to others (source of
funds)
They must be measurable
Their occurrence is probable
current liab: due within 1 yr
LT liab: due >1 yr
common liabilities:
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