Accounting Assets Overview

Questions and Answers

List current assets in order of liquidity.

Cash, Debt Investments, Accounts Receivable, Notes Receivable, Inventory, Supplies, Prepaid Insurance.

List long term investments (asset).

Stock investments, Investments in Real Estate.

List Property, Plant, and Equipment (PPE) (asset).

Land, Equipment, Less: Accumulated Depreciation - equipment.

List intangible assets.

Patents, Goodwill. Signup and view all the answers

List current liabilities.

Notes Payable, A/P, Unearned sales revenue, Salaries and wages payable, Interest Payable. Signup and view all the answers

List long term liabilities.

Mortgage Payable, Notes Payable, Bonds Payable, Lease liabilities, Pension Liabilities. Signup and view all the answers

Long term investments are simply?

Investments. Signup and view all the answers

Intangible assets are also known as?

Other assets. Signup and view all the answers

What is working capital?

The difference between the amounts of current assets and current liabilities. Signup and view all the answers

What is liquidity?

The ability to pay obligations expected to become due within the next year or operating cycle. Signup and view all the answers

What are liquidity ratios?

Measure the short-term ability to pay maturing obligations and to meet unexpected needs for cash. Signup and view all the answers

What is a helpful hint for evaluating solvency?

Using a ratio of liabilities divided by stockholders' equity. Signup and view all the answers

What is solvency?

The ability to pay interest as it comes due and to repay the balance of a debt due at its maturity. Signup and view all the answers

What means faithful representation?

Information accurately depicts what really happened. Signup and view all the answers

What is the economic entity assumption?

States that every economic entity can be separately identified and accounted for. Signup and view all the answers

What is the monetary unit assumption?

Requires that only those things that can be expressed in money are included in the accounting records. Signup and view all the answers

What is the periodicity assumption?

States that the life of a business can be divided into artificial time periods. Signup and view all the answers

What is the going concern assumption?

The business will remain in operation for the foreseeable future. Signup and view all the answers

What is the historical cost principle?

Dictates that companies record assets at their cost. Signup and view all the answers

What is the fair value principle?

Indicates that assets and liabilities should be reported at fair value. Signup and view all the answers

What is the full disclosure principle?

Requires that companies disclose all circumstances and events that would make a difference to financial statement users. Signup and view all the answers

Study Notes

Current Assets

Cash is the most liquid asset, used for immediate transactions.
Debt investments represent short-term interest in other entities.
Accounts Receivable includes amounts owed by customers for goods/services sold.
Notes Receivable are written promises for amounts to be received.
Inventory consists of goods available for sale by a business.
Supplies are items used in the operation of the business.
Prepaid Insurance represents insurance payments made in advance.

Long-Term Investments

Long-term investments encompass stock investments in other companies.
Investments in real estate classify as long-term due to their held duration.

Property, Plant, and Equipment (PPE)

Land is a long-term asset not subject to depreciation.
Equipment refers to machinery and tools used to produce goods/services, subjected to accumulated depreciation.

Intangible Assets

Patents grant exclusive rights to inventions or processes for a specific period.
Goodwill arises from favorable business attributes, such as brand reputation.

Current Liabilities

Notes Payable indicates formal written obligations to pay a specified sum.
Accounts Payable (A/P) represents current obligations to suppliers.
Unearned Sales Revenue is money received in advance for services/goods not yet delivered.
Salaries and Wages Payable consist of obligations for employee compensation.
Interest Payable reflects amounts owed for borrowed funds.

Long-Term Liabilities

Mortgage Payable is a loan secured by real estate.
Notes Payable can also be long-term formal debts.
Bonds Payable represent issues of debt securities to investors.
Lease Liabilities are financial obligations from leasing agreements.
Pension Liabilities denote obligations for employee retirement plans.

Financial Concepts

Long-term investments refer to assets held with the intent not to sell in the short term.
Intangible assets may also be termed "other assets" due to their non-physical nature.
Working Capital is the calculation of current assets minus current liabilities, indicating liquidity position.
Liquidity defines the capability to meet short-term financial obligations.

Ratios and Measures

Liquidity ratios are used to assess the capacity to cover short-term debts and unexpected cash needs.
Solvency ratios evaluate long-term financial stability, often using the debt-to-equity ratio for analysis.

Principles of Accounting

Solvency indicates the ability to pay interest as it becomes due and to settle debt balances at maturity.
Faithful representation requires accurate depiction of financial information, ensuring completeness, neutrality, and error-free records.
Economic Entity Assumption states that entities maintain distinct financial records.
Monetary Unit Assumption limits accounting records to transactions expressible in monetary terms.
Periodicity Assumption allows businesses to report financial results in distinct time frames.
Going Concern Assumption anticipates continuous business operations in the future.
Historical Cost Principle mandates recording assets at their purchase cost.
Fair Value Principle suggests that assets/liabilities reflect their current market value.
Full Disclosure Principle compels companies to reveal all relevant information impacting financial statements.

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Description

This quiz covers the different types of assets in accounting, including current assets, long-term investments, property, plant, equipment (PPE), and intangible assets. Test your knowledge on cash, inventory, equipment, patents, and more. Understand how each category plays a role in a company's financial health.