FABM 2 Reviewer Lesson #1.pdf

FABM 2 Reviewer Lesson #1 Current Liabilities - Obligations are due within 12 Statement of Financial Position months - Also known as Balance Sheet - Accounts Payable, Unearned - A most...

FABM 2 Reviewer Lesson #1 Current Liabilities - Obligations are due within 12 Statement of Financial Position months - Also known as Balance Sheet - Accounts Payable, Unearned - A most comprehensive picture of Income an organization’s financial situation Non-current Liabilities - Includes total assets, liabilities, and - Obligations not due within 12 OE months - Long-term notes payable Elements of SFP A statement of financial position is Assets presented either as: - Resources that the business owns and control Classified - A classified balance sheet - Example: Cash, Furniture, shows info about current and non-current Equipment assets and liab Liabilities Unclassified - An unclassified balance - A sum of money that the business sheet does not show distinction between owes current and non-current assets and liab - Example: Lease obligation, Payables, Loan, Mortgages Users of Accounting Information Owner’s Equity External Users - Result of original, additional - Creditors investments made by the owner to - Investors the business - Tax Authorities - Customer/Consumer Classification of Assets - Competitors Internal Users Current Assets - Owners - Realized within 12 months - Managers - Realized means convertible into - Employees and Trade Unions cash - Cash, Receivable, Prepaid Assets Accounting Cycle Non-current Assets - Not convertible into cash in 12 1. Analyze transactions months 2. Journalize the transactions - Land, Building, Equipment 3. Post to ledger accounts 4. Prepare a trial balance Classification of Liabilities 5. Journalize and post adjusting entries 6. Prepare an adjusted trial balance 7. Prepare financial statements 8. Journalize and post closing entries  9. Prepare closing trial balance Complete set of Financial Statements Trade Liabilities - obligations from purchases of Statement of Financial Position inventory. - AKA balance sheet - Presented as current liab even past - Reports assets, liab, and oe due 12 months Statement of Profit and Loss Non-trade Liabilities - AKA income statement or SCI - Presented as current liab only if (Statement of Comprehensive payable within 12 months Income) - Info about income and expenses Statement of Changes in Equity - Reports the changes in OE - Info about how cash was generated and used Notes to Financial Statements - Provides narrative disclosures and other info but were not presented in the different financial statements Trade Receivable - Receivables from sales of goods - Include trade accounts receivable and trade notes receivable - Presented as current assets even if past due 12 months. Non-trade Receivable - when someone owes the company money unrelated to providing a service or goods. - Presented as current assets only if collectible within 12 months The Normal Operating Cycle - The time between the acquisition of assets for processing and their realization in cash. - If not identifiable, it is assumed to be 12 months.