Accounting & auditingLesson 3 of 4 in the course Using Financial Information and Accounting

Balance Sheet Structure: Asset, Liability, and Equity Classification

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

Unlike a report that summarizes activity over a period, a balance sheet is a snapshot taken on a particular date. For example, a balance sheet dated December 31 reports the organization’s financial position as of that date.

The balance sheet helps owners, managers, lenders, and other readers assess the organization’s resources and obligations at that moment.

All flashcards

What does a balance sheet show?
An organization’s financial position—its assets, liabilities, and owners’ equity—on a specific date.
What are current assets?
Assets expected to be converted to cash within 12 months.
What is accumulated depreciation?
The total depreciation recorded on an asset to date, shown as a reduction from its cost.
What are current liabilities?
Obligations due within a year of the balance sheet date.
What are retained earnings?
Profits kept in a corporation rather than distributed to stockholders as dividends.

Quiz questions

  1. Which item is classified as a current asset because it is expected to be converted to cash within 12 months?Answer: Inventory held for sale
  2. What does accumulated depreciation represent on a balance sheet?Answer: The total depreciation recorded on an asset to date
  3. Which item is an intangible asset?Answer: A copyright
  4. When is a liability generally classified as current?Answer: When it is due within a year of the balance sheet date
  5. Which statement describes retained earnings in a corporation?Answer: They are profits kept in the business instead of distributed as dividends.

Based on Introduction to Business 2e by Lawrence J. Gitman, Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, James C. Hyatt (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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