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ACTG 2P31 Midterm: Midterm 2 Summary

4 Pages
Winter 2014

Course Code
Parunchana Pacharn
Study Guide

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Chapter 5 Summary
 
 
 !"
  # $
 %
 &
 '
 
 (
 %
 &#
 (
 %
 *
 +
 , "
 -
 
 './ 
 '0&)&
 ')
 ("&&1.0
 '
 ("..
 '1
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Chapter 5 Summary 1. Statement of Financial Position a. Provides info about company’s liquidity and solvency to assess risk of investing in the company, financial flexibility b. Provides details about company’s financial structure (financed by debt or equity) c. Liquidity c.i. Amount of time for an asset to be converted into cash or until liability has been paid c.ii. Current ratio, turnover rations d. Solvency d.i. Enterprise’s ability to pay its debts and related interest e. Limitations e.i. Assets and liabilities are stated at historical cost (higher reliability but less relevant) e.ii. Estimates are used e.iii. Leaves out items that are relevant to business but cannot be recorded objectively f. Nonmonetary assets f.i. Inventory, property, plant, equipment, intangibles f.ii. Value in terms of monetary unit is not fixed f.iii. Recorded at historical cost g. Financial instruments g.i. Contracts between 2 parties that create financial assets for one party and a financial liability or equity for the other h. Contra/Adjunct Accounts h.i. Contra decreases account, adjunct increase h.ii. Ex. Acc. Amortization, discount on bonds payable, allowances
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