Balance Sheet

Usefulness of Balance Sheet– Liquidity– Financial flexibility

Limitations of Balance Sheet– Values are not current value– Estimates are used– Valuable resources and claims are not

included

Balance Sheet

Current Assets - cash and other assets expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.– Cash– Short term Investments– Accounts Receivable– Receivables– Inventory– Prepaid Expenses

Balance Sheet

Long-Term Investments Property, Plant, & Equipment Intangibles Other Assets

Balance Sheet

Current Liabilities - obligations reasonably expected to be liquidated either through the use of current assets or the creation of other current liabilities

Long-Term Liabilities Financial Instruments

Balance Sheet (cont)

Owners’ Equity– Capital stock– Additional paid in capital– Retained earnings

Classified Balance Sheet Format

Additional Information

Contingencies– Gain not recorded until contingency is

resolved– Loss recorded if probable and amount can

be reasonably estimated• if reasonably possible, then disclose the

existence of the contingency

Valuations & Accounting Policies Contracts & Negotiations

Additional Information (cont.)

Subsequent Events– Events that provide additional evidence about

conditions that existed at the balance sheet date, affect the estimates used in preparing financial statements, and, therefore, result in needed adjustments

– Events that provide evidence about conditions that did not exist at the balance sheet date, but arise subsequent to that date and do not require adjustment of the financial statements

Additional Information (cont.)

Techniques of Disclosure– Notes– Cross reference and contra items– Supporting schedules

Terminology

Statement of Cash Flows

Purpose Content & Format

– Operating activities– Investing activities– Financing activities

Preparation Usefulness of the Statement of Cash

Flows