MGMT-026 Chapter 04 Slides - Kids in Prison Program · Income Summary account. Identify accounts for closing. Record and post closing entries. Prepare post-closing trial balance.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
Current assets are expected to be sold, collected, or used within one year or the
company’s operating cycle.
C 3
4 - 32
Long-term investments are expected to be held for more than one year or the operating cycle.
C 3
4 - 33
Plant assets are tangible long-lived assets used to produce or sell products and services.
C 3
4 - 34
Intangible assets are long-term resources used to produce or sell products and services
and that lack physical form.
C 3
4 - 35
Current liabilities are obligations due within the longer of one year or the company’s operating cycle.
C 3
4 - 36
Long-term liabilities are obligations not due within the longer of one year or the company’s
operating cycle.
C 3
4 - 37
Equity is the owner’s claim on the assets.
C 3
4 - 38
GLOBAL VIEW
The definition of an asset is similar under U.S. GAAP and IFRS and involves three basic criteria: (1)the company owns or controls the right to use the item, (2)the right arises from a past transaction or event, and (3)the item can be reliably measured.
Both systems define the initial asset value as historical cost for nearly all assets.
The definition of a liability is similar under U.S. GAAP and IFRS and involves three basic criteria: (1) the item is a present obligation requiring a probable future resource outlay, (2) the obligation arises from a past transaction or event, and (3) the obligation can be reliably measured.
4 - 39
CURRENT RATIO
Helps assess the company’s ability to pay its debts in the near future
Current Ratio = Current Assets
Current Liabilities
$ in millions 2009 2008 2007 2006
Current assets $ 2,867 $ 2,919 $ 2,771 $ 2,784
Current liabilities 1,225 1,374 1,709 1,575
Current ratio 2.3 2.1 1.6 1.8
Industry current ratlo 2.0 2.1 2.3 2.4
Limited Brands, Inc.
A 1
4 - 40
P 4
4A – REVERSING ENTRIES Reversing entries are optional. They are recorded in
response to accrued assets and accrued liabilities that were created by adjusting entries at the end of a reporting period. The purpose of reversing entries is to simplify a company’s
recordkeeping.
Let’s see how the accounting for our payroll accrual will be handled with and without